Bank of Baroda Q4 Net Growth Curbed by First Exposure, Pension Provisions

Bank of Baroda's net profit rose 2.3% to Rs 4,886 crore for the March quarter, impacted by an exposure to Go First and pension liabilities. Consolidated net profit declined slightly. Core net interest income increased 2.3%, supported by an increase in advances. Non-interest income rose 20.9%. The bank recognized Go First as a non-performing asset and provisioned fully for it, leading to higher provisioning. The bank targets credit growth of 12-14% and deposit growth of 10-12% for FY25, and aims to maintain NIMs at 3.15%. Gross non-performing assets ratio improved, and capital adequacy remained strong. The bank has been investing in technology and expects to increase spending in this area.

State-run Bank of Baroda on Friday reported a 2.3 per cent growth in its standalone net profit of Rs 4,886 crore for the March quarter, restricted by a hit due to its exposure to the grounded airliner Go First and also setting aside money towards pension liabilities.

On a consolidated basis, the lender's net profit declined to Rs 5,132 crore from Rs 5,255 crore in the year-ago period. For 2023-24, the same rose to Rs 18,767 crore from the Rs 14,905 crore in the year-ago period.

For the reporting quarter, the core net interest income rose 2.3 per cent to Rs 11,793 crore on the back of a 12.5 per cent increase in advances, and a 0.26 per cent decline in net interest margin to 3.27 per cent.

The non-interest income rose 20.9 per cent to Rs 4,191 crore on the back of an increase in treasury income and fee income, and supported the overall profit growth.

Without naming Go First, its Chief Executive and Managing Director Debadatta Chand said the bank recognised an aviation account with a Rs 1,700-crore exposure as a non-performing asset during the quarter, and also decided to provide for it fully within a single quarter leading to a huge jump in provisioning for NPAs to Rs 1,485 crore from the Rs 320 crore in the year-ago period.

A senior official said the bank has been making provisions on the aviation account for some time now but in this quarter, it decided to take full provisions, including the one-third portion which enjoys government guarantee.

When asked about the lack of securities with the lessors being allowed to take possessions of the aircraft, Chand said the bank has security beyond the aircraft as well and there will only be an upside on the account from here.

It may take up to two years for the recoveries to come in, depending on the legal outcomes, he added.

Another senior official said the bank made an accelerated provision of Rs 550 crore on the aviation account, while another Rs 400 crore hit was taken because of the pension liabilities.

He explained that the bank had been making provisions on wage hikes previously, but added that the money was yet to be set aside pending the outcome of the final negotiations.

Chand said in FY25, the bank will target a credit growth of 12-14 per cent, backing it up with a deposit growth of 10-12 per cent and aspires to keep the NIMs at 3.15 per cent.

Apart from the Rs 1,700-crore aviation account, a UAE-based hospitality account with a Rs 500 crore exposure also slipped during the quarter due to liquidity challenges being faced by the company, an official said, adding that the overall slippages stood at over Rs 2,800 crore.

The gross non-performing assets ratio improved to 2.92 per cent as against 3.08 per cent three months ago.

Chand declined to share details of the bank's project loan exposures and also to comment on the proposed changes in project finance made by the RBI, pointing out that there will be more engagements between the industry and regulator on it going ahead.

He said the bank has been spending aggressively on the technology front, including around Rs 2,000 crore investments on infrastructure alone, and will up the spends as the area comes under increased focus going ahead.

To a question on the impact of the RBI restriction on BoB World, Chand said the hit can be seen in challenges faced on the accretion of low cost current and saving account deposits, while overall transaction volumes were down 10 per cent.

The overall capital adequacy was 16.31 per cent with the core buffer at 12.54 per cent as on March 31, 2024. Chand said the buffers are comfortable at present, but the bank is cognizant of factors like the transition to the expected credit loss system of provisioning.

A senior official said the bank's personal loan growth has come down to 51 per cent in the March quarter from the over 100 per cent in the first half of the fiscal and will temper down further to 35-50 per cent going ahead, given the regulatory concerns.

The bank has a target to recover Rs 10,000 crore in FY25, including Rs 2,500 crore it expects from the accounts being resolved through the bankruptcy process.

The bank scrip closed 2,67 per cent down at Rs 255.65 apiece on the BSE on Friday, as against gains of 0.36 per cent on the benchmark.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)