Asset quality pain continues in 4QFY13 for Bank of Baroda
Moneylife Digital Team 14 May 2013

During the quarter there was a tax write-back of Rs4.8 billion which boosted the net profit for Bank of Baroda, points out Nomura Equity Research in its Quick Note

 
Bank of Baroda’s management expects domestic loan delinquency for the next couple of quarters to be at the level seen in 4QFY13, while international loan delinquency should improve starting 1QFY14. This means that the asset quality pain will continue for the bank from recent quarters, according to Nomura Equity Research in its Quick Note. Delinquencies came in higher at Rs20.8 billion compared to Rs20 billion in 3Q. The bank restructured loans of Rs28.4 billion versus Rs15.9 billion in the previous quarter. This takes the total impairment to Rs49.6 billion compared to Rs35.9 billion in the previous quarter. The management has further guided for a restructuring pipeline of Rs53 billion for 1QFY14F. 
 
There is healthy balance sheet growth for the bank in the recent quarter, point out Nomura analysts. Loans grew 14.2% year-on-year compared to Nomura’s estimate of 13.1% year-on-year. Loan growth was supported by 30.3% year-on-year growth in SME segment and 21.8% year-on-year growth in international book. The management has guided for 1-2% higher than industry loan growth for FY14F. The bank is looking to grow the retail and SME books more aggressively than the corporate loan book. The bank is looking at adding 600 plus branches in FY14.
 
NIMs (net interest margins) declined 14bps quarter-on-quarter during the quarter to 2.51% (2.65 in 3Q) as yields on advances declined 32bps quarter-on-quarter. Yield on domestic advances declined 26bps quarter-on-quarter, whereas cost of domestic deposits increased 8bps quarter-on-quarter.
 
During the quarter there was a tax write-back of Rs4.8 billion which boosted the net profits for Bank of Baroda, points out Nomura Equity Research.
 
According to Nomura’s analysts, the key ratios of the bank are as below:
 
 
The analysts have also summarised the asset quality position as follows:
 
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