Bank of Baroda Turns Profitable, Shares Slump On Rising Bad Loans

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Bank of Baroda on Thursday bounced back into profitability, following back-to-back quarterly losses. However, continued rise in bad loans disappointed investors, leading to nearly 10 per cent fall in Bank of Baroda’s shares.

India’s second biggest state-run lender by assets posted a net profit of Rs. 424 crore and net interest income of Rs. 3,372 crore in the June quarter.

Net interest income is the difference between interest earned on advances and interest paid on deposits. Analysts polled by NDTV Profit expected Bank of Baroda to report a net profit of 528 crore and NII of Rs. 3,146 crore.

Bank of Baroda said its operating profit rose to a five-quarter high of Rs. 2,669 crore, while net interest margin on domestic operations improved from 2.70 per cent to 2.80 per cent sequentially.

However, gross non-performing assets (NPA) or total bad loans jumped to Rs. 42,992 crore in Q1, a sharp 6 per cent rise from Rs. 40,521 in Q4. Gross non-performing assets, as percentage of advances, rose to 11.15 per cent in Q1 versus 9.99 per cent at the end of March quarter.

Bank of Baroda set aside Rs. 1,986 crore as provisions for bad loans in Q1. Net NPA (gross NPA minus provisions) inched up to 5.73 per cent in Q1 versus 5.06 per cent in March quarter.

The lender’s total restructured assets stood at Rs. 14,164 crore at the end of June quarter. Together with gross NPA, the total stressed assets were 14.83 per cent of advances, Bank of Baroda said.

Commenting on Bank of Baroda’s Q1, G Chokkalingam of Equinomics Research said “it’s not a bad result”.

“The increase in NPA is less than many other banks and 5 per cent net NPA is the new normal for the banking sector. Going forward, there will not be any escalation in net NPA for Bank of Baroda,” he added.

As of 10.35 a.m., Bank of Baroda shares traded 9.5 per cent lower at Rs. 145.