Bank of Baroda on Saturday logged a 59% on-year jump in net profit at ₹3,313 crore for the September quarter, boosted by improvement in asset quality along with margin expansion.

The management of the second largest state-run lender exuded confidence of continuing the good show through the course of the year, especially on the asset quality front and credit cost, though it admitted that the high double-digits loan growth at 21% in the reporting quarter is certain to temper down going forward.

The city-headquartered bank’s total income rose to ₹23,080 crore in the reporting quarter from ₹20,271 crore a year ago.

The key profitability metric net interest income, which is what the bank earned after paying interest on its funds, soared 34.5% to ₹10,714 crore, buoyed by a 48 bps expansion in margin (net interest margin in banking parlance) to 3.33%.

The lender improved its asset quality, with gross non-performing assets (NPAs) coming down to 5.31% or at ₹46,374 crore in the reporting period from 8.11% a year-ago.

Similarly, net NPAs more than halved to 1.16% at ₹9,672 crore from 2.83% or ₹19,000 crore a year ago.

As a result, provisions for bad loans and contingencies declined to ₹1,627.5 crore from ₹2,753.6 crore in the year-ago period.

Attributing the robust set of numbers to overall good performance, Sanjiv Chadha, the managing director and chief executive of the bank, said there are primarily four pillars to the Q2 numbers.

For one, the quarter was exceptionally good on the credit growth front at 19%; secondly, there was a record improvement in the margins, which rose to 3.33%.

Thirdly, as against the normal course of cost going up when sales rise, the bank could keep overall costs under tight control (its salary cost went up by just 4%); and finally in a rising interest rate regime, normally credit cost goes up but the bank’s credit cost came down, Mr. Chadha said in response to a PTI query during its earnings call.

On advances growth of 19%, he said it was led by retail advances soaring 28.4%, driven by home loans, which is a high focus area for the bank, expanding at 19%, personal loans at 172.8%, auto loans at 29.2% and education loans logging 23.2% growth.

Of the total advances at ₹8,73,496 crore, domestic advances increased 15% to ₹7,16,737 crore and international advances clipped at 41.7%.

Total deposits rose 13.6% to ₹10,90,172 crore, of which domestic deposits rose 10.9% to ₹9,58,967 crore and international deposits grew 38.3% to ₹1,31,205 crore.

The agriculture loan portfolio grew 14.1% to ₹1,14,964 crore, while the gold loan portfolio (including retail and agri) expanded 27.8% to ₹33,502 crore. The MSME portfolio climbed 13.4% to ₹1,01,278 crore.

Domestic current account deposits rose 7.9% to ₹64,873 crore, and domestic savings deposits grew 9.4% to ₹3,45,278 crore. Overall domestic CASA grew 9.2%.

Of the total income, fee-based income jumped by 12.3% to ₹1,515 crore, getting it an operating income of ₹12,000 crore, an increase of 7.7%.

The yield on its advances increased to 7.22% as against 6.55% a year ago, as the cost of deposits increased only marginally to 3.59% from 3.52%.

The swelling profit came despite the bank taking a ₹2,000-crore hit on its book from treasury operations as against a ₹1,300 crore profit in the year-ago period, Mr. Chadha said.

Profit was driven by recovery and write-backs of ₹5,360 crore as against a net slippage of ₹4,465 crore.

Chadha said the bank has not marked any accounts for transfer to the national bad bank or NARCL as it is more comfortable with the other recovery models like the NCLT.

On credit growth sustainability, he said overall it will moderate at the industry level but added that the bank will perform better than the industry average.

He said the corporate book was led mostly by roads, green energy (especially solar) and steel companies.

Capital adequacy ratio declined to 15.25% from 15.55% at the end of September 2021 and accordingly, the provision coverage ratio improved to 79.14%, he said.

On a consolidated basis, net profit increased to ₹3,400 crore from ₹2,168 crore.



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By Dipak

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