Bank of Baroda posts net loss in Q1 due to higher provisions

Public sector lender Bank of Baroda (BoB) on Friday reported a net loss of ₹864 crore for the three months to June, owing to higher provisions for loans that are still standard.

The bank's loss came as a surprise to the market as a Bloomberg poll of 12 analysts had predicted a profit of ₹514 crore. The bank had posted a net profit of ₹710 crore in the same period last year.

BoB's provisions rose 71% on a year-on-year (y-o-y) basis to ₹5,628 crore. Of this, the bank said ₹1,811 crore was towards standard accounts, including ₹996 crore for loans under moratorium where the asset classification benefit was granted.

“Of the ₹1,811 crore, half is accounted for by the provisioning that has been done as per the RBI dispensation for assets that have not slipped on account of the moratorium. The other half of nearly ₹900 crore is on account of a government-guaranteed loan the bank has," said Sanjiv Chadha, chief executive, Bank of Baroda.

The total amount due for this loan is ₹7,600 crore, of that about ₹5,600 crore is a guaranteed by the government, said Chadha.

The bank's gross bad loan ratio or total bad loans as a percentage of total advances, fell 89 basis points (bps) y-o-y to 9.39%. Its asset quality improved in the June quarter as net NPA ratio also declined 112 bps from the same period last year.

The bank’s total loans under moratorium has declined to 21.4% at the end of the June quarter. This includes, 5.74% of loans less than ₹1 million and 15.69% more than ₹1 million.

Its net interest income, or the difference between the interest earned on loans and paid on deposits, increased 5% y-o-y to ₹6,816 crore in Q1 FY21. The bank's net interest margin (NIM), a measure of profitability, stood at 2.55%, down 8 bps from the sequential quarter.

On RBI’s recent announcement of the one-time loan recast window, Chadha said that the scheme was announced only a few days back and the bank has at review its portfolio.

“Maybe a few weeks from now, once we have done a review of our accounts in light of the RBI instructions, we should be able to give you a better answer," said Chadha, adding that the bank could also look at restructuring assets beyond this provision, if required.

The public sector lender's total advances grew 8.6% y-o-y to ₹7.36 trillion, led by retail loan growth of 13.5% y-o-y. Its total deposits grew 4.3% y-o-y to ₹9.34 trillion.

The bank's capital adequacy ratio under Basel III norms stood at 12.84% at the end of the June quarter.