Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of Baroda (BOM:532134, Financial) reported a 9.5% increase in profit after tax, rising from INR 4,070 crores to INR 4,458 crores.
- The bank's return on assets (ROA) has been consistently above 1% for the last eight quarters, with the current quarter at 1.13%.
- Gross NPA improved significantly by 63 bps, reducing from 3.51% to 2.88%, and net NPA also improved from 0.78% to 0.69%.
- The bank's CASA ratio remains strong at 40.62%, which is better than many peers in the industry.
- Provision coverage ratio is robust at 93.32%, indicating strong asset quality management.
Negative Points
- Operating profit declined by 8.5% to INR 7,161 crore, primarily due to a dip in treasury income caused by new RBI valuation norms.
- The growth in advances was muted at 8.1%, which is below the bank's guidance, with corporate loans showing a particularly low growth of 2.5%.
- The bank's net interest margin (NIM) decreased from 3.27% in Q4 to 3.18% in the current quarter.
- Other income saw a significant decline, impacting overall profitability, with recovery from written-off accounts dropping from INR 1,202 crores to INR 554 crores.
- The slippage ratio remains a concern, particularly in the retail segment, which saw an increase in slippages.
Q & A Highlights
Q: The corporate loans de-grew 6%. How will you achieve the loan growth guidance of 12% to 14%?
A: The slower growth was strategic, focusing on liability management. Excluding institutional loans, core corporate grew by 12%. We aim for 10% to 12% growth in the September quarter, with strong retail and MSME growth.
Q: What caused the increase in yields on global investments?
A: The increase was due to yield movements in international investments and new RBI valuation norms. The international investment yield aligns with expectations, and domestic yields benefited from RBI's new classification norms.
Q: Why did other income decrease significantly?
A: The decrease in other income was due to lower treasury income and fee-based income. Treasury income was impacted by new RBI valuation norms, and fee-based income declined due to lower corporate processing fees and wealth distribution income.
Q: Can we expect operating profit to return to INR8,000 crore levels in future quarters?
A: The treasury income impact is structural due to reclassification. While we don't provide specific operating profit guidance, we aim to maintain strong net profit and ROA metrics.
Q: What is the outlook for slippages in retail and MSME segments?
A: Retail slippages were seasonal and not a major concern. MSME asset quality has stabilized, and we expect growth in this segment post-budget. We aim for 14% to 15% growth in MSME with stable asset quality.
Q: How will the bank manage growth while maintaining asset quality and profitability?
A: We aim to achieve 10% to 12% deposit growth and 12% to 14% loan growth while maintaining a margin of 3.15% ± 5 bps. We will manage asset liability to support growth without compromising profitability.
Q: What is the long-term growth plan for Bank of Baroda?
A: We aim for a CAGR of 13.5% over the next five years, doubling the balance sheet size by March 2029. We will focus on maintaining asset quality and achieving an ROE of 15% to 16%.
Q: Why did the credit yield fall this quarter?
A: The fall in credit yield was due to strategic shedding of fine-priced assets and competitive market conditions. We focused on protecting margins while managing asset quality.
Q: What caused the write-back in investment depreciation and standard provisions?
A: The write-back in investment depreciation was due to valuation gains in a specific NPA account. The write-back in standard provisions was due to milestones being met in certain assets.
Q: How will the bank handle the potential impact of ECL norms on credit costs?
A: We have factored in the potential impact of ECL norms in our credit cost guidance of below 0.75%. Our stable asset quality and standard provisions position us well to manage any ECL impact.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
