 "Higher interest income lifts Bank of Baroda net 17% in Q1; bad loans rise marginally")
Government-owned Bank of Baroda (BoB) on Monday posted a better-than-estimated 17 percent jump in its net profit for the quarter ended 30 June, backed by growth in net interest income and lower provisions but reported a marginal rise in the bad loans.
Net profit of the bank rose to Rs 1,362 crore, up 17%, in the June quarter, compared with Rs 1,168 crore in the corresponding quarter last year, beating a CNBC-TV18 poll estimate of Rs 1,195 crore.
Provisions of the bank almost halved to Rs 527 crore from Rs1,018 crore in the same period last year. This, coupled with a 15 percent jump in the net interest income, the core income of the bank to Rs3,328 crore, aided the earnings.
S S Mundra, chairman and managing director of BoB, said the lender has been focusing on improving the quality of growth by curtailing bad loans. Gross bad loans of the bank, during the quarter, rose marginally to 3.11% of total loans from 2.99% in the year-ago quarter.
For BoB, besides lower provisions on bad loans, decline in the provisions on other segments such as treasury too helped, Mundra said.
Fresh slippages during the quarter stood at Rs 1881 crore, compared with Rs 1,294 crore in the year ago quarter. The lender has also reduced the amount of restructured loans in the quarter, Mundra said. This chunk came down to Rs 986 crore in Q1 as against Rs 1,157 crore on sequential basis, Mundra, said
Net non-performing assets (NPAs) of the bank showed a marginal decline to 1.58 percent from 1.69 percent in the year-ago quarter. Shares of BoB fell 0.64% in the intra-day but recovered some lost ground.
Bad loan worries
State-run banks that reported earnings so far have posted muted earnings on account of pressure arising out of higher bad loans and resultant provisions. According to the norms, banks need to set aside up to 100 percent of the loan amount as provisions depending upon the quality of the loan. They also need to make provisions on depreciation on investments.
For instance, Punjab National Bank, the second largest state-run lender, last week reported gross NPAs of 5.48 percent of total loans compared with 4.84 percent in the year-ago quarter and 5.25 percent in the March quarter.
The chunk of bad loans on PNB’s books, in absolute terms, grew to Rs 19,603 crore during the quarter from Rs 15,091 crore in the corresponding quarter last year. At 5.48 percent, the gross NPA figure of PNB is the highest among the large banks.
Indian Bank, another state-run bank, too reported stickiness in its asset quality, with the lender’s gross NPA rising to 4.01 percent from 3.41 percent a year ago and 3.67 percent in the March quarter.
Besides a slow recovery in the economy, the fact that several infrastructure projects for which banks have lent money are still stuck due to absence of various clearances, too have caused stress on the books of government banks, analysts said. One of the key promises made by the Modi-government is to remove structural bottlenecks.
Private sector banks that declared earnings so far have shown an improvement in their asset quality trend.