Falling bad loans and record loan sales push net BoB 59% to ₹3,313 crore in Q2

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Bank of Baroda posted a 59% jump in net profit to ₹3,313 crore for the September quarter on Saturday, boosted by improving asset quality and expanding margins.

Management at the second-largest public lender expressed confidence that the good show will continue throughout the year, particularly on the asset quality and cost of credit fronts, although it admitted that the strong double-digit loan growth at 21% in the reporting quarter is certain to moderate going forward.

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

The main indicator of profitability, net interest income, which is what the bank earned after paying interest on its funds, soared 34.5% to ₹10,714 crore, buoyed by an increase in 48 basis points of the margin (net interest margin in banking jargon) to 3.33%.

The lender improved its asset quality, with gross non-performing assets (NPA) falling to 5.31% or ₹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 debts and contingencies decreased to ₹1,627.5 crore from ₹2,753.6 crore a year ago.

Attributing the robust set of numbers to a good overall performance, Sanjiv Chadha, Managing Director and Managing Director of the bank, said the second quarter figures are mainly based on four pillars.

On the one hand, the quarter was exceptionally good on the credit growth front at 19%; on the other hand, a record improvement in margins which amounted to 3.33%.

Third, unlike the normal course of cost increases when sales increase, the bank was able to tightly control its overall costs (its labor costs only increased by 4%); and finally, in a rising interest rate regime, normally the cost of credit increases but the bank’s cost of credit has fallen, Mr. Chadha said in response to a question from PTI during his call on the results.

On advance growth of 19%, he said it was driven by retail advances which climbed 28.4%, driven by home loans, which are a priority area for the bank, expanding 19 %, with personal loans at 172.8%, car loans at 29.2% and education loans registering growth of 23.2%.

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

Total deposits increased by 13.6% to ₹10,90,172 crore, of which domestic deposits increased by 10.9% to ₹9,58,967 crore and international deposits increased by 38.3% to ₹9,58,967 crore. ₹131,205 crore.

Agricultural loan portfolio increased by 14.1% to ₹1,14,964 crore, while gold loan portfolio (including retail and agriculture) increased by 27.8% to ₹33,502 ₹ crores. The MSME portfolio soared by 13.4% to ₹1,01,278 crore.

Domestic current account deposits increased by 7.9% to ₹64,873 crore, and domestic savings deposits increased by 9.4% to ₹3,45,278 crore. Overall, the national CASA increased by 9.2%.

On total revenue, fee-based revenue jumped 12.3% to ₹1,515 crore, earning it an operating profit of ₹12,000 crore, an increase of 7.7%.

The yield on its advances rose to 7.22% from 6.55% a year ago, with the cost of deposits rising only marginally to 3.59% from 3.52%.

The inflated profit came despite the bank taking a hit of ₹2,000 crore on its treasury trading book from a profit of ₹1,300 crore a year ago, Mr Chadha said.

Profit was driven by recovery and reversals of ₹5,360 crore against a net slip of ₹4,465 crore.

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

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

He said the business book was mainly led by roads, green energy (particularly solar) and steel companies.

The capital adequacy ratio fell to 15.25% from 15.55% at the end of September 2021 and as a result 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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