Bank of Baroda

We had an inkling of what to expect from BoB way back in Q3 where its performance had been affected by falling asset quality. A 30 bps (QoQ) rise in bad loans had rung the warning bells. Things just worse in Q4. As expected, the bank did not post a great set of numbers for Q4FY13; not quite a howler like PNB but bad nevertheless. Deterioration in asset quality due to restructuring of loans has badly hit the sentiments on this counter. Provisions for bad loans rose to Rs. 1,598 crore against Rs. 1,029 crore on YoY. But it was a tax write back of Rs.483 crore which stemmed the decline of net profit to 32% at Rs.1029 crore. Had this tax reversal not been there, the fall would have been steeper. Talking about asset quality, Gross NPA on a YoY, rose significantly from 1.53% to 2.4% and Net NPA also rose drastically from 0.54% to 1.28%.

Net interest income, the difference between interests earned on advances and paid on deposits, was almost flat at Rs. 2,814 crore, up less than 1% (YoY). Its loans during the quarter rose 14% at Rs.3.28 lakh crore but the growth in deposits was much better, up 23% at Rs.4.74 lakh crore. In a way it is good that banks are cleaning up their books but this pain, especially for BoB is not restricted to Q4 alone. In current Q1FY14 some more pain is expected as it is facing restructuring to the tune of Rs.2500 crore. Thus getting optimistic about a cleanup is good but be ready to face some more pain from this, at least till end of Q1.