Mumbai: State-owned Bank of Baroda (BoB) on Monday posted a 172% jump in net profit for the latest quarter, aided by robust growth in net interest income and treasury gains, and forecast at least a 20% rise in profit in 2009-10.
The lender also expects to maintain consolidated net interest margin above 3% in 2009-10, chairman and managing director M.D. Mallya told reporters. This margin is the gap between what a bank spends on its deposits and earns on loans.
“We need to work on the numbers as far as overall profit plan is concerned...we would be able to maintain good growth...over 20% at least we should be able to do,” Mallya said about the bank’s profit growth estimate for 2009-10.
For the three months to 31 March, the country’s fourth largest public sector bank said net profit increased to Rs752.69 crore from Rs276.44 crore a year ago. Net interest income, or income earned as interest from loans minus interest paid out on deposits, rose 43% to Rs1,471 crore. Treasury income, or profit on sale of investments, derivatives, foreign exchange and other items, rose 130% to Rs387 crore.
BoB had cut its key lending rate by 150 basis points, or 1.5 percentage points, between November and January. It cut its deposit rates, but this takes time to reflect in the balance sheet, but the effect of lower lending rates is immediate.
The bank’s global net interest margin (NIM) improved to 3.17%, from 2.73% a year earlier. In India, NIM improved to 3.38% from 2.83%. Its core fee-based income, or earnings through fees and commissions on sale of third-party products, rose 40% to Rs384 crore.
“As far as credit and deposit growth is concerned, we would like to outperform RBI’s (Reserve Bank of India) projection this year,” Mallya said without elaborating. RBI has projected a 20% credit growth and an 18% deposit growth for banks in fiscal 2010.
For the year to 31 March, the bank’s loans rose 35% and deposits increased 26.6%. Its business for 2008-09 grew 30% to Rs3.36 trillion.
Net non-performing assets (NPA), or post-provisioning bad debts as a percentage of advances, went down to 0.31%, from 0.47% a year ago.
The bank has so far restructured around 40,000 accounts worth Rs2,650 crore. An additional 1,500 accounts worth Rs1,600 crore will be restructured by June.
“We continue to like Bank of Baroda results because of improved performance on core operation. The restructuring done is also within acceptable level and there is no surprise in that,” said Abhijit Majumder, an analyst with brokerage Prabhudas Lilladher Pvt. Ltd.
The bank’s low-cost current and savings account deposit, as a percentage of its total deposits, dropped to 34.87% against last year’s 35.67%, which bank officials attributed to the challenging business environment.
BoB’s stock rose 2.89% to close at Rs313.70 on the Bombay Stock Exchange on Monday. Bankex, BSE’s banking index, rose 2.41% to 5,726.59 points. The stock touched its 52-week high of Rs338 on 19 September and marked its low on 9 March at Rs180.50.
Reuters contributed to this story.