Bank of Baroda Turns Profitable, Shares Slump On Rising Bad Loans
Bank of Baroda turned profitable after back-to-back quarterly losses However, the state-run lender's bad loans continued to inch up in Q1 Bank of Baroda was top Nifty50 loser, with shares down 10%
Bank of Baroda on Thursday bounced back into profitability, following back-to-back quarterly losses. However, continued rise in bad loans disappointed investors, leading to nearly 10 per cent fall in Bank of Baroda's shares.
India's second biggest state-run lender by assets posted a net profit of Rs 424 crore in Q1, missing the Street estimates. However, net interest income, which is the difference between interest earned on advances and interest paid on deposits, of Rs 3,372 crore was slightly ahead of estimates.
Bank of Baroda said its operating profit rose to a five-quarter high of Rs 2,669 crore, while net interest margin on domestic operations improved from 2.70 per cent to 2.80 per cent sequentially.
Investors however focused on Bank of Baroda's asset quality, which continued to deteriorate in the June quarter. The lender's gross non-performing assets (NPA) or total bad loans jumped nearly 6 per cent sequentially to Rs 42,992 crore in Q1.
Gross non-performing assets, as percentage of advances, were at 11.15 per cent in Q1 versus 9.99 per cent at the end of March quarter.
Bank of Baroda set aside Rs 1,986 crore as provisions for bad loans in Q1, which impacted the bottom line. Net NPA (gross NPA minus provisions) inched up to 5.73 per cent in Q1 versus 5.06 per cent in March quarter.
The lender's total restructured assets stood at Rs 14,164 crore at the end of June quarter. Together with gross NPA, the total stressed assets were 14.83 per cent of advances, Bank of Baroda said.
Commenting on Bank of Baroda's Q1, G Chokkalingam of Equinomics Research said "it's not a bad result".
"The increase in NPA is less than many other banks and 5 per cent net NPA is the new normal for the banking sector. Going forward, there will not be any escalation in net NPA for Bank of Baroda," he added.
However, Religare Securities said there is no recovery in Bank of Baroda yet.
Bank of Baroda shares closed 9 per cent lower at Rs 145.95 today, underperforming the Nifty that gained 0.2 per cent.