Public sector lender Bank of Baroda (BoB) on Friday reported a net loss of ₹1,407 crore for the three months to December, owing to higher provisions for bad assets.
The bank's loss came as a surprise to the market as a Bloomberg poll of 18 analysts had estimated a profit of ₹683.4 crore.
On 1 April, 2019, Bank of Baroda merged with two other state-owned banks, Dena Bank and Vijaya Bank. The bank provided comparable numbers for FY19's December quarter by adding individual numbers for the three individual banks. The profit for the amalgamated entity stood at ₹436 crore in Q3FY20.
BoB's provisions rose 54% on a year-on-year basis to ₹6,365 crore. The bank's gross bad loan ratio, total bad loans as a percentage of total advances, fell 48 basis points (bps) y-o-y to 10.43%. Its asset quality pressures continued in the December quarter as loans worth ₹10,387 crore turned non-performing. Of this, ₹4,509 crore was owing to RBI's divergence report that found under-reporting of bad loans.
"We have had a bit of a rough quarter because of the impact of the divergence, which was there on the provision and on the profit but if you look at the yoy figure they seem to stand out well," said Sanjiv Chadha, chief executive, Bank of Baroda.
According to S.L. Jain, executive director, Bank of Baroda, majority of the fresh slippages originated in sectors of chemical, power and non-banks. While slippages from a loan in the chemical sector was about ₹2,700 crore, two power accounts and three non-banks contributed to slippages of ₹1,000 crore and ₹2,900 crore, respectively.
Its net interest income, or the difference between the interest earned on loans and paid on deposits, increased 9% y-o-y to ₹7,128 crore in Q3 FY20. The bank's net interest margin (NIM), a measure of profitability, stood at 2.8%, up 18 bps from the same period last year.
Jain said that the bank's total exposure to the telecom sector is at ₹4,100 crore. He added that most of it are in two companies that have closed operations and have "very little" loans to Vodafone-Idea.
"For the two defunct telecom companies, we have provided for 100% of our loans," said Jain.
The public sector lender's domestic advances grew 0.67% Y-o-Y to ₹5.44 trillion, led by retail loan growth of 15.31% Y-o-Y. It's domestic deposits grew 1.3% Y-o-Y to ₹7.82 trillion. Jain said that corporates have repaid ₹9,954 crore in Q3, of which non-banking financial companies (NBFCs) accounted for ₹2,399 crore.
The bank's capital adequacy ratio under Basel III norms stood at 13.48% at the end of the December quarter.
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