Bank of Baroda, the last to report March quarter numbers among the larger PSU banks, has more or less played to the script, reporting sharp slippages and huge losses.
The RBI’s new framework for stressed assets, which essentially does away with all the old restructuring schemes, has led to bad loan provisioning treble from the previous year to ₹7,053 crore.
The report on RBI’s risk-based supervision for FY17 has revealed a bad loan divergence of ₹2,918 crore.
While on the loan-growth front, the bank seems to have put up a decent show, higher provisioning requirement has led to the bank reporting a huge loss of ₹3,102 crore in the March quarter.
Bank of Baroda’s gross non-performing assets are 12 per cent of loans as of March 2018. In absolute terms, ₹56,480 crore of GNPAs is likely to keep provisioning elevated for the bank in the coming quarters.
That aside, the bank has made use of the RBI’s dispensation on provisioning norms for IBC cases.
Hence, there could be some additional provisioning kicking in for these accounts in the June quarter. Provisioning for the secured portion of the large accounts (from the RBI’s first and second lists) up to March 31, 2018, has been brought down to 40 per cent from 50 per cent.
As a result, BoB has made an additional provisioning of ₹309 crore for NCLT 1 and NCLT 2 cases against an earlier mandate of ₹829 crore.
The leeway has offered little respite to the state-owned bank. The bank’s exposure to accounts under NCLT 1 list is ₹7,158 crore, and for NCLT 2 list it is ₹3,830 crore as on March 31, 2018.
Core performance
While asset quality concerns persist, the bank’s core performance has been relatively better than its peers in the latest March quarter. SBI’s net interest income fell by 5 per cent Y-o-Y in the March quarter on the back of muted 4.8 per cent growth in domestic advances.
PNB’s net interest income fell by 17 per cent in the March quarter.
For Bank of Baroda, its net interest income grew by 11.7 per cent Y-o-Y in the March quarter, with domestic advances growing by 18 per cent on the back of strong traction in retail loans. However, the sustainability of this trend will be critical.
As such, the increase in provisions can eat into the bank’s operating profit.