Bank of Baroda disappoints in Q3FY20.
Bank of Baroda (BoB) released their third-quarter results for the period of October – December of the financial year 2020(FY20). The bank which is headquartered in Gujarat is one of India’s largest state-owned bank with a strong domestic presence. Besides having services in India: BoB also operates internationally across 21 countries. Under the governments direction, Vijaya Bank and Dena Bank has been merged with Bank of Baroda. BoB also owns six subsidiaries to diverse its financial services across various categories.
The state-owned bank surprised stakeholders by posting a massive loss of Rs 1,407 crore. However, according to the bank, the loss came amidst an increase in provisions by 54.0%. If compared with the same quarter of the previous financial year, the bank had posted a consolidated profit of Rs 436 crore.
BoB slippage for the quarter under review stood at Rs 10,387 crore out of which Rs 4,509 crore came as the Reserve Bank of India (RBI) had directed BoB to take into account those accounts that BoB had not recorded as NPA’s during the previous financial year.
However, besides the these NPA’s, BoB witnessed a rise in slippages from three non-banking finance company (NBFC) accounts amounting to Rs 2,900 crore. Slippages in two power sector accounts amounted to Rs 1,000 crore and from one account under the chemical industry amounted to Rs 2,700 crore. These slippages reported along with from the retail sector, agriculture and SME sector bring a total slippage figure close to Rs 7,000 crore. Increased in slippages resulted in the bank to increase its provisions to 54.0% at Rs 6,621 crore for the December ended quarter as compared to QFY18 numbers at Rs 4,505 crore.
According to the bank, the steep increase in the provision is mainly because of divergence after the central bank inspection. BoB’s Net NPA increased to 4.05% after the provisions were made for the December ended quarter. In comparison, NNPAs of the previous quarter stood lesser at 3.90%.
The bank posted a strong growth in domestic CASA ratio with a sharp increase of 38.8% overlapping the previous quarter growth of 37.9%. On a YoY basis CASA ratio growth stood at 8.8%. BoB also witnessed a slight increase in global deposits on a YoY basis during the third quarter at 1.1%. Retail loans during the period under review grew by 15.31% on a YoY basis for the December ended quarter bringing a slight growth to overall domestic advances to 0.67% YoY.
Net Interest income (NII) of the bank increased to Rs 7,128 crore a growth of 9.0%. While Net Interest Margins (NIM) increased to 2.80% from Q3FY19 figures which stood at 2.62%. BoB’s standalone operating profit for Q3FY20 stood at Rs 4,958 crore showing a year on year (YoY) increase of 8.5%.
Capital Adequacy Ratio (CAR) stood at 13.48% for Q3, against previous quarter CAR which stood at 12.98%. Domestic deposits for the third quarter is reported at Rs 7,82,070 crore showing a slight growth of 1.3% from Rs 7,72,133 crore reported in the previous year December ended quarter.
While domestic advances remain stable at Rs 5,44,726 crore as on Q3FY20 in comparison to Q3FY19 which stood at Rs 5,41,103 crore. The growth in retail loan by the bank is driven mainly by the robust growth in vehicles loan during the festive season at 42.9% alongside home loans which stood at Rs 10.2%.
Management Commentary is positive.
The Bank has assured its stakeholders that its international operation is growing with strong growth in Australia and the USA besides other countries. BoB is expected to grow much better in the coming quarters in retail loans, corporate lending and lending towards MSME.
BoB’s credit card business has not seen that much success as compared to SBI card but BoB is planning to partner up with various brands to build up its credit card business. According to the management, the credit card business has seen a little traction in the past two quarters with a size of half a million customers but is expected to grow.