Riding on a healthy growth in non-interest income, Bank of Baroda posted a 24% jump in its fiscal second quarter standalone net profit to Rs 2,087.85 crore.

The state-owned bank, which had reported a net profit of Rs 1,678.6 crore a year ago, also gained from lower provisioning and bad loan recoveries of Rs 1,996 crore in the quarter ended September 30, 2021. 

Bank of Baroda expects to recover Rs 4,000 crore in the third quarter, which will continue to boost the bank’s profitability in the second half of the fiscal. In the first half, recovery was about Rs 8,000-9,000 crore due to the resolution of some large NCLT accounts. The recovery target for the full fiscal is Rs 14,000 crore.

“A robust growth in the second-quarter net profit was led by good recovery in the written off accounts. The margins are also steady and we have maintained a disciplined growth in our deposits. We did not let the deposit growth march way ahead of the loan growth, thereby keeping our credit-to-deposit ratio almost constant. We also got good returns from treasury operations,” Bank of Baroda managing director and CEO Sanjiv Chadha said in a media call.

The bank’s non-interest income rose 23% to Rs 3,579 crore from Rs 2,910 crore in the year-ago quarter. This was led by treasury gains of Rs 1,221 crore, which was higher than the year-ago period by 21.37%. Commissions grew 5.90% to Rs 709 crore while incidental charges rose 23.43% to Rs 288 crore.

Net interest income (NII) rose 2.11% year-on-year to Rs 7,566 crore as cost of deposits fell to 3.52% in September from 3.99% a year ago, and made up for a 6% fall in total interest earned.

Net interest margins (NIM) improved to 2.90% in the September quarter, from 2.88% a year ago. 

“Despite the fall in yields, we managed to maintain our NIM due to the growth in our low-cost deposits and fall in bulk deposits,” Chadha explained.

The bank was able to contain the cost of deposits by improving its CASA (current account savings account) ratio, which constituted 43.46% of its total deposit base at the end of the reporting quarter. CASA was at Rs 3,75, 766 crore, growing by 13.01%. 

The bank shed its high-cost bulk deposits, which actually degrew 23.62% to Rs 83,009 crore. The retail term deposits of the bank grew 2.81% to stand at Rs 4,88,837 crore.

The dip in bulk deposits and the growth in low-cost CASA helped the bank keep down its deposit cost. The cost of deposits fell to 3.84% from 4.42% in the year-ago period.  The fall in interest rates also kept the yields down to 7.36% at the end of the reporting quarter, lower than the 7.99% the bank earned in the year-ago quarter. 

Domestic deposits grew 3.43% to Rs 8.64 lakh crore at the end of September quarter. Current account deposits rose 15% to Rs 60,098 crore while domestic savings bank deposits grew 12% to Rs 3.15 lakh crore.

Provisions fell 2% year-on-year to Rs 2,754 crore from Rs 2,811 crore a year ago, contributing to the bank’s bottom line.

On the asset quality side, the bank’s gross non-performing assets (NPAs) narrowed to Rs 59,504 crore in Q2 of FY22, from Rs 65,698 crore a year ago. Gross NPAs constituted 8.11% of total advances in September, down from 9.14% a year ago. 

The corporate loans contributed to Rs 18,769 crore of bad loans, while MSME (micro, small and medium enterprises) had gross NPA of Rs 13,989. Agricultural loans contributed to Rs 9,234 crore of NPAs and retail to Rs 3,781 crore of bad loans.

The net NPA ratio stood at 2.83%, higher than 2.51% in Q2FY21. Provision coverage ratio (PCR) of the bank stood at 83.42%.

The bank wrote off Rs 5,213 crore of bad loans while fresh additions were at Rs 5,223 crore. The bank upgraded Rs 2,106 crore of loans.

Gross advances grew by just 2.99% to be at Rs 6,23,368 crore. Retail loans grew 10.25% to Rs 1,23,424 crore. Personal loans surged 33.12% to Rs 5,615 crore and auto by 23.17% to Rs 21,904 crore. The gold loan book grew 147.35% to Rs 1,306 crore but from a low base. 

Bank of Baroda, however, underperformed in home loans, which as a segment grew 5.09% to Rs 74,308 crore. The bank is working on improving growth in this asset portfolio.

“We have underperformed in our growth of home loans. We have a good product and a competitive interest rate, but there were a number of takeovers. We are working on this and assessing how to prevent the takeovers,” said Chadha.

Bank of Baroda is looking to grow its loan book by 7-10%. The corporate loan book has been impacted by Covid-19, low capacity utilisation and liquidity overhang in the system but Chadha is hopeful that certain segments will open up with the various steps taken by the government.