State-owned Bank of Baroda doubled its standalone net profit to Rs 2,197 crore in the fiscal third quarter ended December amid strong growth in net interest income (NII), lower provisions and improvement in asset quality.

Net profit in the year-ago quarter stood at Rs 1,061 crore.

“NII rose double-digit despite facing a challenging growth environment. This has been due to improvement in margins. Fee income has also grown, Bank of Baroda managing director and CEO Sanjiv Chadha said.

While NII rose 14.38% year-on-year to Rs 8,552 crore in the December quarter, fee income increased 15.5% to Rs 1,557 crore. Net interest margins (NIM) widened to 3.13% from 2.77%.

Gross non-performing assets (NPAs) ratio declined to 7.25% (Rs 55,997 crore) in the quarter from 8.48% (Rs 63,182 crore) a year ago. Net NPA fell to 2.25% from 2.39%.

“This improvement is likely to continue particularly because the challenges that came from Covid are largely behind us. Therefore, the secular improvement which we are seeing in the credit cycle should manifest itself more decisively in terms of gross NPAs and net NPAs, going forward," Chadha said.

The bank's fresh slippages in the third quarter was at Rs 2,830 crore compared to Rs 5,223 crore a quarter ago and Rs 3,986 crore a year ago. Recoveries and upgrades from NPAs were at Rs 2,032 crore and Rs 1,272 crore,  respectively. In the year-ago period, the recovery was at Rs 1,966 crore and the upgrade at Rs 2,106 crore. Write-offs for the December quarter were at Rs 3,694 crore compared to  Rs 5,213 crore a quarter ago and Rs 4,708 crore a year ago.

Provisions and contingencies fell 27.33% from the year-ago period  to Rs 2,507.04 crore. Provision coverage ratio (PCR) stood at 85.95%.

“During the December quarter, we had a significant write back in a government guaranteed account. We have tried to use that write back for some advanced provisioning, which is over and above what is required as per the RBI norms,” Chadha said. He, however, did not name the account.

 “There have been some headwinds for all banks in terms of treasury income wherein the gains we had been seeing for the last few quarters have begun to peter out," he added.

While the growth in retail loans improved in the October-December period after a blip in the preceding quarter, growing the corporate loan book continued to be a challenge. However, the bank is optimistic of reporting double-digit credit growth in the next financial year when the economy starts shrugging off the pandemic-led challenges.

 “The corporate book has been a bit of a challenge in terms of growth and margins. So, the fact that we saw a muted growth is also because we were very sensitive about the margins at which we do business. Going ahead, it should be possible to grow our corporate loan book and protect our margins as well," Chadha said.

Advances grew 4.75 % over the previous year to Rs 7.32 trillion as on December 31, 2021. Of this, the retail loan portfolio increased 11.13% to Rs 1.28 trillion. The bank's corporate loan book was flat from the year-ago quarter at Rs 2.91 trillion. Home and auto loans grew 6.57% sequentially and 20.54% over the year-ago period. Small business loans rose marginally by 2.39% while gold loans increased 28%. 

Deposits, on the other hand, increased 5% over the previous year to Rs 8.76 trillion, with domestic low-cost deposits being up 12.86% over the previous year. Yield on advances improved sequentially to 6.92 % at the end of the December quarter, from 6.5% a year ago.

“We believe that next year we should be looking at double-digit credit growth and as of now our prognosis is, the market should grow by 10–12%. Our stance is that we would grow at the market rate or better than it, without compromising on margins. In the current fiscal, the growth will come from retail. I believe there is a secular trend in terms of retail growing faster than corporate. But, nevertheless, next year should be a much better year in terms of corporate loan growth," Chadha said.