Captains Speak     

Published: May 31, 2024
Updated: May 31, 2024

Bank of Baroda

Rolling plan to double business in next 5 years

Bank of Baroda, the country’s second largest public sector bank, is devising a rolling plan to double its total business (advances + credit) to Rs 48 lakh crore within the next five years.

Within retail, home loans increased by 15%, education 19% and auto loans 24%. The bank has moderated personal loan growth to 50% from 100% last year. The deposit growth is moderate against the guidance of 12% and it would be the focus area of the bank going forward. The CASA deposits have increased by 8% at end-March 2024.

According to him, the bank has continued to maintain the RoA at above 1% for 7 straight quarters. The RoA stood at 1.25% in Q4 and 1.17% for FY2024. For the second straight year, the RoA is above 1%. RoE was robust at 19%. The net interest margin was strong at 3.27% in Q4, and excluding the one off recovery it was at 3.15%, in line with guidance.

NPAs DOWN

Referring to asset quality, Mr Chand revealed that Bank of Baroda has reduced GNPA ratio below 3% and the NNPA ratio well below 1% at 0.68% at end-March 2024. The provision coverage ratio is strong at 93.3%, while the slippage ratio was at the lower side of the guided range of 1.1-1.25%. The fresh slippage of loans was under control in FY2024, despite one large slippage from the aviation segment of Rs 1,700 crore and international slippage.

According to Mr Chand, the credit cost was higher as the bank has created a 100% provision for the aviation account as against the requirement of a 20% provision. It had provided Rs 1,200 crore in Q3 and another Rs 500 crore in Q4 for the aviation account. It has also created floating provisions of Rs 200 crore. Excluding these provisions, the credit cost for FY2024 was similar to FY2023. The SMA 1 & 2 loan book of the bank continued to trend down and stood at a comfortable level of 0.15%. The collection efficiency is very robust at 98%. The capital adequacy ratio has improved despite a 65 bps impact of RBI guidelines on higher risk weights for personal loans and the NBFC exposure. With regard to the aviation account, of which 1/3 is guaranteed by the government, the bank is expecting full recovery in the account. With regard to the new draft guidelines on provisioning for project loans, the bank does not expect any major impact on the credit cost, while it can also pass on the impact to customers.

The pool of technically written-off accounts stands at Rs 46,000 crore. The bank had recorded recoveries of Rs 5,098 crore from written-off accounts in FY2024 and it expects the recoveries to remain healthy in FY2025. About 50% of the domestic loan book is linked to the MCLR. The restructured loan book has declined to Rs 8,148 crore at end-March 2024. The bank created an additional Rs 400 crore of provisions for the employee retirement benefit. Further, on account of a decline in the bond yield, the bank had to create an additional Rs 400 crore of provisions.

Maintaining that prospects for Bank of Baroda during fiscal 2025 are better, Mr. Chand revealed that the bank is targeting deposit growth of 10 to 12% with a focus on CASA and retail term deposits. The bank is targeting advances growth of 12-14% with a focus on the retail segment. The net interest margin is expected to be at 3.15% (- /+5 bps). The bank is raising the guidance for RoA from 1% to 1.1%. The fresh slippage ratio is expected to be at 1- 1.25%. The credit cost is expected to be below 1% with the proportion of stressed advances reducing from 2.04% to 0.92%. The bank expects a better asset quality trend going forward.

The bank aims to maintain a CD ratio in the range of 80-82%. It is targeting reducing the GNPA ratio to 2.5% and the NNPA ratio to 0.5% by end-March 2025. The bank is targeting recoveries and upgradations of Rs 10,000 crore for FY2025. The bank has an internal policy of keeping recoveries, upgrades and write-offs above fresh slippages.