The high loan growth and robust growth in fee income was offset to a large extent by much lower treasury income and lower recoveries, compared with the year-ago period.

But lower staff costs helped the bank post a rise in operating profit of 32.7%, around the same year-on-year (y-o-y) rate of growth as in the June quarter.

The spoiler for Bank of Baroda during the quarter was an enormous rise in provisions, from Rs98 crore in the year-ago period to Rs242 crore. High mark-to-market provisions on the bank’s overseas exposure to credit-linked notes as well as on domestic investments, together with provision for an expected wage revision, ate into profits and the bank’s profits after tax were up 20.8% y-o-y, which was, however, better than its 12% y-o-y growth rate in the June quarter.

Also, provisions were lower than in the June quarter.

The bank’s international loans have grown more rapidly than its domestic loan book and now constitute 24% of total loans.

Looking ahead, it may be more prudent for the bank not only to focus on its domestic business but also to prune its hectic pace of loan growth. During the September quarter, Bank of Baroda’s incremental credit-deposit ratio was 134%, a rate of increase that needs to be tempered if the bank is to keep up the improvement in its non-performing assets.

The stock, which has outperformed the Bombay Stock Exchange’s Bankex index in the past month, is still quoting well below its book value of Rs282.88 on 30 September.

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