But for the boost from its treasury income, the earnings for Bank of Baroda would have slipped even lower. With loan book continuing to shrink, leading to a decline in core interest income, the bank’s performance in the latest December quarter draws comfort from the dismal show during the same quarter last year.
From a loss of ₹3,342 crore in the same period last year, the bank reported a meagre ₹253 crore profit in the latest December quarter. Fresh slippages, which were a steep ₹15,600 crore in the year-ago period, have fallen to about a fifth in the December quarter, leading to a sharp fall in bad loan provisioning.
After the bank posted huge losses in the second half of last fiscal, this is the third consecutive quarter when the bank has managed to report profit. But the pain for the leading state-owned lender may not yet be over. For one, while slippages in the December quarter have come down sharply year-on-year, on a sequential basis, there has been a marginal uptick. From ₹2,252 crore in the September quarter, slippages have gone up to ₹3,073 crore in the December quarter.
While this is not a sharp jump, consistency in the containment of slippages is critical, particularly as the bank had disappointed investors in the March and June quarters. For now, asset quality remains stable with gross non-performing assets at 11.4 per cent of loans as of December-end.
Overall stressed assets (bad loans plus restructured assets) have also been stable at 15 per cent of loans. But given the ageing of bad loans, increase in incremental provisioning cannot be ruled out in the coming quarters. While net interest income grew by 15.8 per cent during the December quarter, it was mainly driven by a fall in interest expenses. Interest income remained muted as advances (net) fell by 9 per cent year-on-year . The bank has been consolidating its loan book and rebalancing its portfolio to reduce risk. This has impacted its loan growth.
During the December quarter, trading gains trebling led to a 59 per cent jump in non-interest income. With bond yields spiking, the windfall from treasury gains may not be substantial in the coming quarters. A recovery in loan growth will be critical for a substantial pick up in earnings.