BackBank of Baroda Q3 net profit drops 68%
Profit for the quarter ended 31 December was at Rs333.98 crore, compared with Rs1,047.84 crore in the year-ago quarter
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Mumbai: State-owned Bank of Baroda on Friday reported 68.13% drop in its third-quarter net profit, as it set aside more funds to take care of bad loans and tax liability in its Dubai operation.
Profit for the quarter ended 31 December was at ₹ 333.98 crore, compared with ₹ 1,047.84 crore in the year-ago quarter.
Analysts polled by Bloomberg were expecting the bank to post a net profit of ₹ 1,263.10 crore for the quarter.
The bank’s profit was hit by a tax provision of ₹ 410 crore, asked by the Dubai authorities pertaining cumulatively to certain transactions by the bank’s customers from 2007.
Share prices of the bank tumbled on the bourses, closing 11.08% down at ₹ 193.35 apiece on BSE. The benchmark Sensex fell 1.68% to 29,182.95 points.
Bank of Baroda had challenged the tax claim by the Dubai authority and it will continue to do so, including using government channels, executive director Ranjan Dhawan said. The tax claim, according to the bank’s management, was unjust.
“We will continue to pursue it. It is not that we will give up. But it is a kingdom and there are limitations," Dhawan said at the bank’s media briefing. It could have spread out the payment outgo, but decided to take the hit in this quarter itself as an one-off item. Dhawan said.
However, he acknowledged that the bank’s asset quality has worsened in the quarter, largely due to cash flow problem with customers due to the sluggish economy.
“The asset quality improved in June quarter but deteriorated September quarter onwards. In December quarter, the bad debt accretion was particularly sharp and we expect to experience similar pressure in the March quarter as well," Dhawan said.
Analysts termed the results as bad and blamed the performance on the structural problem in the bank. The bank has been without a chairman since July and key decisions could be suffering, said Rakesh Shinde, analyst with Bonanza Portfolio Ltd, a stockbroker. However, he also said the impact of a slowing economy is evident on all banks that have announced their results so far. All have reported a drop in profit and a rise in bad debt.
Even as sentiment is improving, the economy is not picking up pace. There has been no fresh proposal from the bank’s customers in the quarter, he said. The customers are overleveraged and thus it doesn’t want to extend extra loans to them. This will make the bank go slow in business expansion, Dhawan said.
On an operating profit level, or at the core level of operation, the bank fared better.
Operating profit, before provisions and contingencies, rose 6.44% year-on-year to ₹ 2,339.04 crore in the quarter.
Total income rose 11.16% to ₹ 11,808.34 crore against ₹ 10,622.80 crore in the year ago period. Net interest margin, or difference between yields on advances and cost of deposits, a key parameter of the bank’s profitability, fell to 2.2% from 2.37% in the year ago period.
The bank’s gross bad debt ratio, or bad debt as a percentage of loans, was at 3.85% for the December quarter, compared with 3.32% in the year ago quarter. In the second quarter ended September, the bank’s gross non-performing asset (NPA) ratio was also at 3.32%.
Total provision in the December quarter was at ₹ 12,62.25 crore, against ₹ 761.87 crore in the year ago period and ₹ 888.04 crore in the September quarter.
Post provisioning, the net NPA ratio was at 2.11%, compared with 1.88% in the year-ago quarter and 1.74% in the September quarter.
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