In the September quarter, Bank of Baroda’s net income increased by 59% year over year to Rs 3,313 crore, helped by improved asset quality and margin expansion. The second-largest state-run lender’s management exuded confidence that the good performance would continue throughout the year, particularly in terms of asset quality and credit costs, though it did acknowledge that the high double-digit loan growth of 21% in the reporting quarter is unavoidably going to slow down moving forward.
The city-based bank’s total revenue increased from Rs 20,271 crore a year earlier to Rs 23,080 crore in the reporting period. The bank’s primary profitability statistic, net interest income, or what it made after paying interest on its funds, increased by 48 basis points to 3.33 percent, propelling a 34.5 percent increase in that figure. The institution improved the quality of its assets; gross non-performing assets (NPAs) decreased from 8.11% of total assets to 5.31 percent, or Rs 46,374 crore, during the reporting period.
In a similar vein, net non-performing assets (NPAs) more than halved from 2.83 percent, or Rs 19,000 crore, to 1.16 percent, or Rs 9,672 crore. As a result, provisions for bad loans and contingencies decreased from Rs 2,753.6 crore in the same period last year to Rs 1,627.5 crore this year. Sanjiv Chadha, the managing director and chief executive of the bank, said there are basically four pillars to the Q2 figures, attributing the strong set of numbers to overall solid performance. Firstly, the loan growth for the quarter was extraordinarily strong at 19%, and secondly, the margins saw a record increase to 3.33 percent. Thirdly, the bank was able to keep costs overall tightly in check (salary costs increased by just 4%); and finally, in an environment of rising interest rates, credit costs typically increase, but the bank’s credit costs decreased, Chadha said in response to a PTI question during its earnings call. Costs typically increase when sales increase.
Regarding the growth in advances of 19%, he claimed that retail advances, which are the bank’s primary area of concentration, surged 28.4%, driven by home loans, which are growing at 19%, 172.8%, 29.2%, and 23.2%, as well as personal loans, vehicle loans, and education loans. Domestic advances climbed by 15% to Rs 7,16,737 crore from the overall advances of Rs 8,73,496 crore, while international advances decreased by 41.7%. Total deposits increased 13.6% to Rs 10,90,172 crore; domestic deposits increased 10.9% to Rs 9,58,967 crore; and foreign deposits increased 38.3% to Rs 1,31,205 crore. The portfolio of agricultural loans increased by 14.1% to Rs 1,14,964 crore, while the portfolio of gold loans (including retail and agro) increased by 27.8% to Rs 33,502 crore. A 13.4% increase brought the MSME portfolio to Rs 1,01,278 crore. Domestic savings deposits increased 9.4% to Rs 3,45,278 crore, while domestic current account deposits increased 7.9% to Rs 64,873 crore.
Recovery and write-backs of Rs 5,360 crore, as opposed to a net slippage of Rs 4,465 crore, were the primary contributors to profit. According to Chadha, the bank has not designated any accounts for transfer to the national bad bank or NARCL since it is more at ease using the NCLT and other recovery models. Regarding the sustainability of credit growth, he predicted that overall, it will moderate at the level of the industry, but added that the bank would outperform the sector as a whole. He claimed that the steel, green energy, and road industries dominated the corporate book. The provision coverage ratio increased to 79.14 percent as a result of the capital adequacy ratio declining from 15.55 percent at the end of September 2021 to 15.25 percent. Net profit rose to Rs 3,400 crore from Rs 2,168 crore on a consolidated basis.