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Higher provision for bad loans coupled with drop in non-interest income weighed on Bank of Baroda’s profitability in the October-December 2012 quarter.
In the reporting quarter, the public sector bank reported a net profit of Rs 1,012 crore, down 21.6 per cent, compared with Rs 1,290 crore in the year-ago period.
Net interest income (the difference between interest earned and expended) nudged up 7 per cent at Rs 2,841 crore (Rs 2,656 crore in the year-ago period).
However, non-interest income declined by 27 per cent at Rs 841 crore (Rs 1,149 crore).
Provisions for bad loans, an expense that is set aside as an allowance, was higher at Rs 817 crore (Rs 509 crore). During the quarter, bad loans, in gross terms, rose by Rs 1,442 crore to Rs 7,321 crore.
Non-interest income was impacted mainly on account of drop in trading gains and decline in profit on exchange transactions.
Calibrated growth
“We are mindful of the economic scenario, which will be challenging in the next two-three quarters. Going forward the pace of business growth will be calibrated.
“Our growth will be in tandem with the industry average,” said the new Chairman and Managing Director S. S. Mundra.
Though reduction in bad loans did not keep pace with slippages in the first nine months of the current financial year, Mundra said containing slippages and stepping up recoveries will be a priority.
Bank of Baroda will end the financial year with a credit and deposit growth of 16-17 per cent and 15-16 per cent, respectively.
The bank will be able to maintain a net interest margin (domestic) of around 3 per cent despite the cut in lending rates, said Mundra.
The is because the bank is cutting down high-cost deposits, focussing on garnering more low-cost current account and savings account (CASA) deposits, and banking on re-pricing of maturing deposits at a lower rate.
As at December-end 2012, BoB’s NIM (domestic) was lower at 3.08 per cent (3.51 per cent as at December-end 2011). Overseas NIM was at 1.58 per cent (1.64 per cent).
Capital infusion
The public sector lender is expecting a capital infusion of Rs 850 crore from the Government.
The capital infusion, which will increase the government’s stake by about 80 basis points, and retained earnings could push up the core capital (Tier-I) of the bank to over 10 per cent by March-end 2013, said S. K. Jain, Executive Director.
As at December-end, the Government had 54.31 per cent stake in the bank.
On Monday, the share price of BoB closed at Rs 802.10, down 7.50 per cent over the previous close, on the BSE.
Ramkumar.k@thehindu.co.in
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