Erstwhile Dena and Vijaya banks were merged into BoB effective April 2019 and profit last year has been consolidated to reflect the amalgamated entity.
Mumbai: State-owned Bank of Baroda (BoB) slid into a surprise net loss in the third quarter due a rise in provisions after its own assessment of bad loans diverged from that by the banking regulator.
The bank reported a loss of Rs 1,407 crore in December 2019 compared to a consolidated profit of Rs 436 crore in December 2018. Erstwhile Dena and Vijaya banks were merged into BoB effective April 2019 and profit last year has been consolidated to reflect the amalgamated entity.
A Bloomberg poll of 18 analysts had penciled in net profit of Rs 683 crore.
Out of the Rs 10,387 crore of fresh slippages during the quarter, Rs 4,509 crore came because the central bank inspection forced the lender to recognise accounts that the bank has not recognised as NPAs in fiscal year ended March 2019. The Reserve Bank of India (RBI) inspection was completed during the quarter.
Besides these new NPAs, the bank also saw an increase in slippages from three non-banking finance company (NBFC) accounts (Rs 2,900 crore), two power sector accounts (Rs 1,000 crore), and one from the chemical industry (Rs 2,700 crore). These, together with some slippages in the retail, SME and agriculture sectors, totaled close to Rs 7,000 crore.
As a result, the bank had to make a Rs 6,621-crore provision for NPAs during the quarter, up 47% from Rs 4,505 crore a year earlier, denting profits.
“The rise in provisions is mainly due to divergence after the RBI inspection. The RBI wanted us to increase provisions on some value of securities we have, and also due to some asset classifications we had made. We are hopeful that these accounts will be upgraded after recovery,” said SL Jain, executive director at the bank.
Former SBI executive Sanjiv Chadha was earlier this week appointed CEO of the bank. He said that the bank has done well on other parameters such as deposit growth and fee income.
“This has been a rough quarter because of the divergence in NPAs but results of BoB on a standalone basis are good,” Chadha said.
After provisions, the bank’s net NPA increased to 4.05% at the end of December, from 3.90% at the end of September 2019. Jain said the bank expects to end the fiscal year with net NPAs below 4%.
On the business side, domestic advances grew a miniscule 0.67%, with growth underpinned by 15% expansion in retail loans. Corporate loan growth was flat because of large repayments of Rs 9,955 crore during the quarter, out of which Rs 2,400 crore was from NBFCs.
Net interest margin improved to 2.80% from 2.62% in December 2018. Fee income increased 10% year-on-year.
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