The losses were due to additional provisions BoB had to make on select accounts from sectors such telecom
Provisions, or capital that banks set off against their non-performing assets (NPAs), continues to gnaw into their profitability.
Bank of Baroda (BoB), now the second-largest public sector bank, reported a loss of Rs 991.37 crore for the quarter ended March 31, 2019, down from Rs 3,102.34 crore a year ago.
The bank also had a tax writeback of Rs 547.13 crore in the reporting quarter against a tax writeback in the year-ago period was Rs 904.55 crore.
The losses in the quarter were due to the additional provisioning BoB had to make on select accounts from sectors such telecom where it had to keep additional capital buffers. Accelerated provisions for select NPA accounts was at Rs 5,550 crore during the quarter.
Bengaluru-headquartered Vijaya Bank and the Mumbai-headquartered Dena Bank were merged with BoB in the first three-way merger in the banking sector effective April 2019. Post the merger, BoB is the largest public sector bank after State Bank of India. The first quarterly result of the merged entity will come at the end of June 2019 quarter.
Though the gross non-performing assets (NPAs) fell 33.53% to Rs 15,609.50 crore at the end of the March quarter from Rs 23,482.65 crore a year, the accelerated provisions on some accounts where the bank expects some stress and aging provisions led to the losses. As NPAs get older, banks have to keep aside more capital until 100% of the loan is provided for it is becomes a loss with no recovery. Fresh slippages during the quarter were at Rs 3,192 crore, coming from across sectors. Banks had an exposure of Rs 4,572 crore, of which it has provisions of Rs 2,200 crore and the portion that the bank classifies as at risk is Rs 1,166 crore.
P S Jayakumar, managing director and chief executive officer, BoB, said at a press conference, "On the revenue front, we are doing well, but the additional provisions that we took on our books during the quarter led to the loss. Even on accounts like Alok Industries and Bhushan Power and Steel additional provisions are done even though in both the accounts the recovery is expected within the first two quarters. The gross NPAs have come down as a percentage of the loans." The bank made additional provisions of Rs 950 crore just on these two corporate accounts even though both are resolved in the NCLT and the money will come back to the bank in the first quarter itself.
Gross NPAs of the bank were 9.61% of the total loan book, lower than the 12.2% a year ago. Provisions and contingencies surged 93.23% from Rs 2,794.20 crore in the December quarter to Rs 5,399.29 crore in the March quarter. It was down 19.08% year on year from Rs 6,672.38 crore.
Net interest income, the bank's core income that it earns from lending operations, was up 26.6% to Rs 5,066.96 crore, higher than the Rs 4,002.26 crore last year. Other income was at Rs 1,970.41 crore, up 16.2% from Rs 1,695.90 crore in the year-ago period.
BoB shares closed 0.7% higher over the previous close at Rs 126.20 on BSE.
PRUDENTIAL MOVE
- The losses were due to additional provisions BoB had to make on select accounts from sectors such telecom
- Accelerated provisions for select NPA accounts was at Rs 5,550 crore during the quarter
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The losses in the quarter were due to the additional provisioning BoB had to make on select accounts from sectors such telecom where it had to keep additional capital buffers. Accelerated provisions for select NPA accounts was at Rs 5,550 crore during the quarter.
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