Public sector lender Bank of Baroda (BoB) on Tuesday reported a net profit of ₹507 crore for the three months to March, owing to lower provisions for bad assets.
The state-owned lender was expected to post a net loss of ₹161 crore in the March quarter of FY20, according to an average of estimates by 11 analysts polled by Bloomberg.
On 1 April, 2019, Bank of Baroda merged with two other state-owned banks, Dena Bank and Vijaya Bank. The bank provided comparable numbers for FY19's March quarter by adding individual numbers for the three individual banks. The loss for the amalgamated entity stood at ₹8,875 crore in Q4 FY19.
BoB's provisions declined 36% on a year-on-year (y-o-y) basis to ₹6,844 crore. Its provisions for bad loans also declined 69% on a y-o-y basis to ₹3,190 crore. The bank's gross bad loan ratio or total bad loans as a percentage of total advances, fell 103 basis points (bps) sequentially to 9.4%. Loans worth ₹3,050 crore turned non-performing in the March quarter, the bank said.
Bank of Baroda’s total special mention account (SMA) category of loans stood at ₹79,589 crore as on 1 March. Of this ₹4,053 crore was in SMA-2 category (overdue between 61-90 days).
“There was an amount of ₹4,053 crore which would have slipped into non-performing asset (NPA) category had the standstill clause not been allowed by RBI. As per the RBI norm, we were to make a 5% provision in this quarter and another 5% in the next quarter. Instead of providing that 5% in the March quarter, we have gone ahead and provided 20% because as per our policy, we anyway provide 20% for substandard assets, 5% more than what RBI prescribes," said Sanjiv Chadha, chief executive, Bank of Baroda.
Its net interest income, or the difference between the interest earned on loans and paid on deposits, increased 5% y-o-y to ₹6,798 crore in Q4 FY20. The bank's domestic net interest margin (NIM), a measure of profitability, stood at 2.78%.
The public sector lender's domestic advances grew 4.7% sequentially to ₹5.7 trillion, led by retail loan growth of 16.05%. Its domestic deposits grew 1.8% quarter-on-quarter (q-o-q) to ₹8.08 trillion.
On the impact of covid-19 on the bank’s asset quality, Chadha said that at this point in time, the situation is still evolving so it is very difficult to be specific.
“An account-wise analysis of all large accounts has found that in the base case scenario, unlike last year, the number of these accounts which could slip is relatively small. Therefore, despite the fact that we expect stress to be elevated, particularly in the retail segment, but on an aggregate basis, the total slippages may not exceed what it was last year," said Chadha.
The bank's capital adequacy ratio under Basel III norms stood at 13.3% at the end of the March quarter.
On Tuesday, shares of the bank gained 2.13% to close at ₹50.45, while the benchmark Sensex index gained 1.49% to close at 35,430.