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After a poor show by Punjab National Bank which declared its results last week, the market seems to be breathing a sigh of relief at Bank of Baroda’s relatively better performance on the asset quality front. The stock zoomed 17 per cent on Monday.
While net profit for the March quarter was down 48 per cent, and slipped 25 per cent for the full fiscal FY15, the bank’s asset quality improved marginally. Gross non-performing assets (GNPA) as a proportion of loans stood at 3.7 per cent, down from 3.85 per cent in the December quarter.
Fresh slippages There has been substantial reduction in fresh slippages. Fresh slippages had zoomed to ₹3,042 crore in the December quarter from ₹1,758 crore in the September quarter. During the March quarter, however, slippages fell significantly to ₹1,359 crore.
In contrast, Punjab National Bank’s GNPA as a percentage of loans rose to 6.55 per cent in the March quarter from 5.97 per cent in the December quarter.
The market cheer for Bank of Baroda appears to be led by a relatively better performance when compared to its peers, rather than its solo performance.
Aside from lower slippages, the bank has missed on several counts.
Slow growth For one, the bank’s net interest income growth has been muted at 1.5 per cent during the March quarter. Net interest margin has consistently fallen in the last three quarters.
Growth in domestic advances at 7 per cent was lower than the industry credit growth of 10 per cent during the same period.
Two, muted net interest income growth and sharp rise in provisions for bad loans impacted returns. The return on assets has fallen to 0.35 per cent in the March quarter from 0.74 per cent last year.
Three, incremental restructuring, which has been trending higher since the September quarter, shot up to ₹4,083 crore in the March quarter (from ₹1,598 crore in the previous quarter).
The bank’s domestic restructured book is 8 per cent of loans. The stock of Bank of Baroda had lost 17 per cent last week on the back of the market sell-off and concerns over Punjab National Bank’s performance.
With the rally on Monday, the stock has recouped most of its losses over the past week.
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