Mumbai: Public sector Bank of Baroda’s (BoB) fourth quarter net profit rose 12.5% to Rs276.44 crore and the bank said it made a provision for nearly Rs80 crore on investments by its foreign branches.
The bank has made mark-to-market provisions of Rs50 crore and Rs28 crore on investments in credit-linked notes, or CLNs, and corporate bonds, respectively, chairman and managing director M.D. Mallya said.
With this, the bank’s total provisions for CLNs and foreign corporate bonds stand at about Rs207 crore, compared with Rs127 crore a year ago. Its exposure to CLNs as on 31 March was Rs1,276 crore.
BoB had to also provide for Rs45 crore per quarter, or Rs180 crore a year, for employee pension liabilities in its profit and loss account, a senior executive said.
The bank’s liabilities under the employee pension scheme is about Rs900 crore. Provisions and contingencies increased 14.73% to Rs1,593.03 crore in 2007-08 from Rs1,388.54 crore in 2006-07, primarily due to higher provisions on account of the liabilities.
BoB’s net non-performing assets, as a percentage of net advances, fell to 0.47% in the quarter from 0.60% a year ago.
The bank’s interest income for the quarter rose 27.09% to Rs3,331.07 crore. On a yearly basis, net interest income rose 9.34% to Rs3,911.80 crore.
Net interest margin, or NIM, a measure of a bank’s returns in its core business of borrowing and lending, fell to 2.90% for the year from 3.05% earlier as the cost of deposits rose to 5.69% from 4.77%.
“Last year was a challenging year, particularly the second half,” said Mallya.
He added that monetary tightening is expected to continue in the current fiscal year as well, but the bank would focus on increasing its low-cost deposits. BoB’s no-cost current and low-cost savings account are about 36% of the total deposits.
Mallya said his bank would focus on achieving current and savings account growth of 38% and NIM of 3% in the current fiscal year. The bank is looking for retail credit growth of 25-26% in the current financial year, he added.
“We didn’t see much default in our agri portfolio,” Mallya said reacting to State Bank of India’s decision to stop tractor and related agricutural loans.