Mumbai: Public sector lender Bank of Baroda registered a 28.4% rise in its third-quarter net profit, aided by rising interest income.
For the quarter ended December, the bank’s net profit climbed to Rs1,068.88 crore from Rs832.49 crore in the corresponding quarter a year ago.
Bank of Baroda’s net interest income, or the interest earned over the interest expended, rose a healthy 43.16% to Rs2,292.26 crore. This lifted its operating profit by 46.35% to Rs1,851.20 crore.
Net interest margin (NIM), or the difference between yields on advances and the cost of deposits, rose to 3.82% from 3.40% a year ago.
NIM, a key gauge of a bank’s profitability, was good for most banks in the quarter as they raised their lending rates along with their deposit rates.
A deposit rate hike takes time to reflect on the balance sheet while a lending rate hike takes effect immediately.
The bank’s net non-performing assets (NPAs) or bad debts after provisioning stood at 0.36% of its loans, up from 0.31% a year ago.
The bank’s chairman and managing director M.D. Mallya said provisions for bad debts in the December quarter were at Rs206 crore, against Rs243 crore a year ago.
But despite the fall in provisions for bad debts, overall provisions rose 25.39% to Rs304.06 crore. This is largely because the bank set aside Rs177.57 crore for employees’ pension.
The bank’s trading profit in the quarter fell to Rs85 crore against Rs135 crore a year ago.Depreciation on investment was at Rs53 crore against a gain of Rs20 crore in the year-ago quarter.
The bank’s advances grew 31.1% in the domestic market and deposits grew at 29.6% in the fiscal year so far. Both the figures are above the Reserve Bank of India’s projection of 20% and 18%, respectively.
Mallya expects the growth of advances in the fiscal year to be at 22-24%. This, he said, doesn’t go against RBI’s recent warning to go slow on credit.
RBI had warned banks to slow down on offering credit if the lenders were expanding their advances book with short-term funds raised from the market or from RBI.
“RBI has warned banks against lending by raising short-term money. That is not the case with us. Besides, our credit-deposit ratio is at 76%, which is what a normal distribution of credit should be,” said Mallya.
“Our deposit base is much higher than credit base and deposit accretion has been very healthy. We will continue this momentum,” Mallya said.
The bank’s stock fell 1.09% to Rs835.05 on the Bombay Stock Exchange on Friday. The exchange’s bellwether equity index, Sensex, fell 1.54% to 18,395.97 points and Bankex, the index for bank stocks, fell 1.11% to 11,986.71 points.