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Monday, November 10, 2014

Bank of Baroda maintains asset quality

Bank of Baroda’s net profit fell 5.5 per cent in the September quarter, despite 17.5 per cent growth in its net interest income. This was due to higher tax provisions.

This is the fourth consecutive quarter when BOB has been able to expand its net interest income. The bank has also been able to improve its asset quality over the last five quarters, with lower slippages to bad loans and lower addition to restructured loans.

In the last few quarters, Bank of Baroda (BOB), cautious of the slowing economy, has been focussing on asset quality and profitability, rather than on expanding its loan book aggressively. During the September quarter, the bank’s loan book grew a slower 13.5 per cent (18.8 per cent in the June quarter). Primarily a corporate lender, the bank has been focusing on higher growth segments, such as retail and SME, which have grown 15.8 per cent and 13.5 per cent, respectively, during the September quarter.

BOB is among the few public sector banks to have contained slippages and additions to restructured assets. During the September quarter, fresh slippages were Rs 1,758 crore, down from
Rs 1,863 crore last year. Similarly, additional restructuring is down to Rs 1,175Rs crore from Rs 1,637 crore during the same period last year. Total stressed assets (bad loans plus restructured assets) were about 9 per cent of the loan book. This is better than most other PSU banks, whose stressed assets are at about 11 per cent of loans.

BOB’s retail focus has led to a strong retail deposit base. The bank has been shedding high-cost deposits to reduce the cost of funds. From
Rs 11,792 crore as on March 2014, high-cost deposits fell to Rs 9,460 crore as on September 2014. This has improved BOB’s net interest margin in the last year to 2.4 per cent during the September quarter from 2.3 per cent in the year-ago period.

Source : The Hindu


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