Release Date: October 25, 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 significant increase in net profit, surpassing INR 5,000 crores for the first time, with a YoY growth of 23.2%.
- The bank's global advances grew by 11.6%, with domestic advances increasing by 12.5%, indicating strong growth in its core markets.
- Asset quality improved, with gross NPA reducing from 3.32% to 2.5% and net NPA decreasing from 0.76% to 0.60%.
- The bank maintained a strong capital position with a capital adequacy ratio of 16.26% and a provision coverage ratio of 93.61%.
- Bank of Baroda (BOM:532134) achieved a return on assets of 1.30% for the quarter, maintaining a consistent performance above 1% for nine consecutive quarters.
Negative Points
- The cost of deposits increased to 5.12% from 5.06%, impacting the net interest margin, which slightly decreased to 3.10%.
- The bank revised its deposit growth guidance from 10%-12% to 9%-11% due to challenges in the deposit market.
- There was a reduction in the yield on advances from 8.55% in Q1 to 8.48% in Q2, partly due to changes in guidelines affecting interest income.
- The bank's international book growth was moderated to 7.6%, impacting the overall global book growth.
- Despite strong recovery efforts, the bank faced elevated provisioning, including INR 230 crores in floating provisions, affecting overall profitability.
Q & A Highlights
Q: Can you provide details on the provisioning side, particularly any prudent specific provisioning done this quarter?
A: We have made INR230 crores of floating provisions, increasing our total to INR600 crores. We have also taken extra provisioning on both the standard asset side and the NPA side, but the exact quantum will be provided later.
Q: What was the impact of penalty charges on the Net Interest Margin (NIM)?
A: The impact was approximately 5 basis points, amounting to around INR179 crores to INR180 crores, which moved from interest income to other income.
Q: There were high write-offs and recoveries this quarter. Are these linked, and what accounts for this?
A: The write-offs and recoveries are not linked. They involve different accounts. We had a significant recovery from a large ancillary account that got resolved, allowing us to have higher write-offs this quarter.
Q: How do you see the cost of deposits evolving, given the competitive environment and festive offers?
A: The cost of deposits increased by 6 bps in Q2. We believe the repricing effect is nearly over. We anticipate potential moderation in deposit costs towards late Q3 or early Q4, given improved system liquidity.
Q: What is your outlook on profitability and treasury income for the coming quarters?
A: We do not provide specific profit guidance but aim to maintain an ROA of 1.10. Treasury income has been strong, primarily from bonds, and we expect stability in bond markets. We have also built significant AFS reserves, which positions us well for future opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
