The Bank of Baroda (BoB) stock has been outperforming the Bombay Stock Exchange’s Bankex index and the bank’s results have easily beaten Dalal Street estimates. Net profit during the March quarter grew a huge 172% year-on-year (y-o-y).
At the operating level, profits grew by 82.5% y-o-y, higher than the 51.7% y-o-y growth in the December 2008 quarter.
There has been absolutely no slowdown in credit growth. At the end of March, y-o-y growth in advances at the bank was 34.9%, far above the industry average. The rate of growth is even higher than the 33.2% y-o-y growth in advances at end-December.
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At a time when most banks curtailed lending, BoB increased its pace.
As of 31 March, the bank’s credit-deposit ratio stood at a high 74.8%. In the March quarter, loans grew by Rs16,787 crore, while deposits grew by Rs23,781 crore, which gives an incremental credit-deposit ratio of 70.6%.
The high loan growth was primarily responsible for the 43% y-o-y rise in net interest income during the March quarter. But it was non-interest income that stole the show, growing 53.9%, with treasury income being the key. Fee growth, too, has been strong. Containment of expenses and lower provisions and contingencies also boosted the net profit.
BoB was able to lower its bad loans during the quarter, with gross non-performing assets (NPAs) coming down to Rs1,843 crore on 31 March, compared with Rs1,921 crore on 31 December. Recovery of bad loans helped. Net NPAs, already low at 0.37% on 31 December, further improved to 0.31% at end-March.
Analysts have for long been warning banks that growing the loan book too rapidly in the current environment could lead to more bad loans. But any slippage on that account is likely to be offset by aggressive loan restructuring. During the March quarter, BoB restructured Rs2,659 crore worth of loans.
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