Shares of Bank of Baroda on Monday are leading the fall in the Bombay Stock Exchange’s (BSE’s) banking index, trading 9.1% down in the afternoon trade, after the bank on Friday reported a net loss of Rs 3,230 crore during the January-March quarter against a net profit of Rs 598 crore in the same period last year.
At Rs 141.20, the Bank of Baroda stock is witnessing one of its steepest falls, even as the banking index is down 0.83%.
On the National Stock Exchange (NSE), the scrip tanked 9.18% to Rs 140.85.
Bank of Baroda last week reported another quarter of loss with the new management providing higher provisioning for employees’ pension liability as well as for the stressed loan. However, fresh slippages normalised to Rs 5,930 crore – with slippage ratio of 6.2% – as guided by the management compared to Rs 15,790 crore (slippage ratio of 15.2%) in the third quarter of the previous fiscal. The bank has also hiked provisioning coverage ratio to 60% in the fourth quarter of 2015-16 from 52.7% in the third quarter of 2015-16 by providing higher provisioning for stressed loan.
State-owned banks are busy cleaning up balance sheets marred by a rise in corporate defaults, with most of them reporting losses due to high provisions in the previous quarters.
Reliance Securities said that though the management has been assuring to regain lost glory in ensuing quarters, an “effective execution of strategic revival plan is the key.” The brokerage has downgraded its 2016-17 estimated earnings by 55% due to a sharp rise in incremental stressed asset formation.
State-owned Bank of Baroda, which is one of the largest public sector banks, expects about Rs 3,000- 5,000 crore of incremental bad loans in the near term.
“The NPAs (non-performing assets) have peaked…but regardless of that we will be at about Rs 45,000 crore of gross NPAs and as a prudent measure will provide for Rs 50,000 crore. We have a watchlist of about Rs 15,000 crore, which is likely to go bad, but also Rs 10,000 crore of recovery is expected,” said Bank CEO P S Jayakumar.