More money set aside towards bad loans and higher operating expenses weighed on Bank of Baroda’s bottom line in the July-September 2013 quarter.
The public sector bank reported a 10 per cent drop in net profit at Rs 1,168 crore in the reporting period against Rs 1,301 crore in the year ago period.
Growth in net interest income (the difference between interest earned and expended) was almost flat at Rs 2,895 crore (Rs 2,862 crore in the year ago period).
The bank set aside Rs 838 crore (Rs 725 crore) towards bad loans. Further, it set aside more (Rs 89 crore vs Rs 41 crore in the year-ago period) by way of provision for standard advances.
Operating expenses, including employee costs, rose 33 per cent at Rs 1,744 crore (Rs 1,308 crore).
During the quarter, bad loans (in gross terms) increased by Rs 1,125 crore to Rs 10,888 crore as on September-end 2013.
Restructured loans increased by Rs 1,485 crore in the reporting quarter to Rs 22,155 crore.
According to BoB Chairman and Managing Director S.S. Mundra, while accretion to the bad loans portfolio is gradually slowing, there is no let up in enterprises seeking loan restructuring.
Given the challenging economic environment, he expects more borrowers to seek loan restructuring in the next two quarters. “(Loan) Restructuring is still a fact of life….,” he said.
So far, 13-14 per cent of the restructured loans have turned non-performing. But going forward, this quantum could go up to 17-18 per cent, said Mundra.
In the reporting quarter, the bank’s net interest income (net interest income divided by average interest bearing assets) or NIM edged lower to 2.32 per cent against 2.71 per cent in the year-ago period.
Five principles
Mundra said the bank’s business focus will continue to be guided by five principles – retail focus, margin protection, adequate provisioning, improvement in asset quality, and capacity building.
Rupa Rege Nitsure, Chief Economist, BoB said, her bank would like to avoid aggression as the economy is still in the recovery mode.
But it will still grow a tad higher than the industry average to maintain its market share.
The bank will improve its NIM to 3 per cent through realignment in the loan book (giving more loans to the retail and micro, small and medium enterprise segments) and increase low-cost current and savings bank deposits.
Mundra said BoB will maintain status quo on deposit and lending rates.
Shares of BoB closed 10.76 per cent up at Rs 643.20 per share on the BSE.