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Bank of Baroda Q1 net dips 60% as bad debts surge
Shares of public sector Bank of Baroda plummeted 9% on Thursday after reporting a massive 60% plunge in its standalone net profit at ₹423.62 crore for the quarter ended June 2016, hit by higher provisions for bad loans and contingencies.
Shares of public sector Bank of Baroda plummeted 9% on Thursday after reporting a massive 60% plunge in its standalone net profit at ₹423.62 crore for the quarter ended June 2016, hit by higher provisions for bad loans and contingencies.
The bank had a net profit of ₹1,052.15 crore on standalone basis in the corresponding quarter a year ago.
“Total income decreased to ₹ 11,877.91 crore for the quarter ended June 2016 from ₹ 12,243.720 crore in the quarter ended June 30, 2015,” it said in a regulatory filing.
The bank said it made a profit of ₹424 crore while moving from a loss position in the previous two quarters.
Bank of Baroda is India’s second largest commercial bank, which along with State Bank of India, is widely seen as representative of the Indian banking sector.
The fall was mainly on account of a large provision for bad loans at ₹1,986 crore, compared to ₹568 crore in the same quarter last year. The provision was however lower than the ₹4,880 crore of the January-March period.
Both gross and net non-performing assets (NPAs) rose over two times as a proportion of advances during the first quarter of the current fiscal.
Gross NPAs were 11.15% of gross advances as of June 2016, up from 4.13% a year ago, and in absolute terms rose to ₹ 42,991.68 crore as against ₹17,273.95 crore a year earlier.
Net NPAs stood at 5.73% (₹20,783.77 crore), up from 2.07% (₹8,470.02 crore).
Thus, provisions for bad loans and contingencies were raised to ₹2,004.07 crore for the reported quarter against ₹599.74 crore a year earlier.
The profit after tax declined largely on account of decline in the net interest income and the sharp increase in provisions, said Parag Jariwala, vice-president of Religare Capital Markets.
Shares of Bank of Baroda fell sharply by 9%, wiping out ₹ 3,306 crore from its market valuation on Thursday after the results were declared.
The scrip tanked 8.95% on BSE to settle at ₹145.95, after dipping 9.51% intra-day to ₹145.05. On the NSE, the scrip dived 9% to close at ₹145.95.
Outgoing RBI governor Raghuram Rajan had listed cleaning banks of large bad loans as one of the most important unfinished tasks on his agenda, as his term ends in September.
The central bank has been actively taking steps — from asking banks to identify early on to suggesting specific measures to restructure company debt.
In July RBI said gross bad loans at banks had risen to 8.5% of total assets from 7.6%.
