Last updated: 11 Nov, 2021 | 08:54 am
Higher profits - Bank of Baroda has reported a 24% jump in consolidated net profit to Rs 2,087.85 crore in Jul-Sep 21 period, beating street estimates. The bank had posted a net profit of Rs 1678.6 crore in the year-ago period. High profits were supported by lower provisions and higher other income.
Tepid rise in NII: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income (NII) for the bank rose 2.11% on year to Rs 7,566 crore in the quarter ended September. Analysts had earlier estimated the NII to come in at Rs 7,950 crore. The NII last year for the same quarter was Rs 7,410 crore. The net interest margin (NIM) moderated by 22 basis points QoQ to 2.9%.
Asset Quality stable: Bank of Baroda Gross Non Performing Assets (NPA) reduced to Rs 59,504 crore in Q2FY22. In Q2FY21, Gross NPA was Rs 65,698 crore. The Gross NPA ratio improved to 8.11% in the quarter ended September compared to 9.14% in the year-ago period. The Net NPA ratio increased to 2.83% in the September quarter compared to 2.51% in Q2FY21. The Provision Coverage Ratio (PCR) reported by the bank was 83.42%.
Deposits - Global Deposits grew marginally by 0.54% year-on-year at Rs 9.59 lakh crore. Domestic Deposits increased 3.43% and stood at Rs 8.64 lakh crore in Q2FY22. Bank reported domestic current account deposits at Rs 60,098 crore, a 15% growth year-on-year, and domestic savings bank deposits grew by 12% to Rs 3.15 lakh crore.
CASA - CASA capital is the cheapest source of capital for banks. The higher the number, the more profit a bank can earn. The current account and savings account deposits increased by 13.01% compared to last year's same period.
Bank of Baroda results review
Bank of Baroda has reported a steady set of numbers in Jul-Sep 21 quarter, backed by a healthy rise in other income and lower provisions. However, the Net Interest Income has come in below street expectations. The NII was impacted by one-time write-offs. Asset quality too has remained stable during the quarter, despite the bank’s exposure to SREI Infra.
Overall the business trends remain positive. The bank has reported a steady 4% QoQ rise in its advances, led by the Corporate and Retail book. The management expects the growth momentum to continue, led by the Retail segment, while the Corporate book continues to see a gradual recovery.
BoB results: Brokerage Action
Global brokerage firm CLSA has retained a ‘Buy’ call on the stock and has raised the target price to Rs 140 per share. The bank is a beneficiary of the corporate recovery cycle, noted CLSA. It expects credit costs to normalise to 120- 125 bps by FY23 and expect 10.8-11% RoE by FY23/24.
Credit Suisse has maintained an “Outperform” call and raised the target price to Rs 120 from Rs 100 per share. The growth is picking up, with healthy asset quality outcomes, said the research house. Its CET is healthy at 11.4% and expects RoE to improve to more than 10% in the upcoming quarters. The brokerage has increased FY22E EPS estimate by 15% on lower provisions.