Analyst Meet / AGM - Analyst Meet

28-May-2018, 10:10
Bank of Baroda conducted an analyst meet on 26 May 2018 to discuss the financial results for the quarter ended March 2018 and prospects of the bank. PS Jayakumar, MD&CEO of the bank addressed the meet:

Highlights:

• The earnings performance of the bank was impacted due to higher provision for bad debt at more than Rs 7000 crore in the quarter ended March 2018. However, the bank has continued to improve provision coverage ratio (PCR), while the capital adequacy ratio was comfortable end March 2018.
• The bank has exhibited consistent improvement in CASA deposit ratio, while substantially reduced large value deposits in FY2018 and repaid about Rs 10000 crore of bulk deposits. However, the bank expects its cost of deposits to increase in FY2019 in line with market interest rate.
• The bank is required to make gratuity related provisions of Rs 388 crore, of which Rs 97 crore were made in Q4FY2018, while rest of the provisions will be provided in first three quarters of FY2019.
• The bank has posted strong growth in a cross sell fee income in FY2018, while expect to sustain strong growth momentum in fee income in FY2019. The bank is scaling up Wealth Management business which is expected to contribute to fee income.
• The bank has focused on quality loan growth in FY2018. New origination of loans is predominantly in high quality loans. The bank has posted strong 42% growth in its retail loan book, which is substantially higher than the retail industry loan growth of 15 to 17%. The retail loan growth is driven by strong 48% loan growth for home loan segment against the home loan industry growth of 15 to 20%. Auto loans has also surged 30% against the industry growth level of 12%. Further, the growth in the personal loan segment was also strong at 40% in FY2018.
• The fresh disbursements in the retail loan book stood at Rs 10700 crore for Q4FY2018, with home loan disbursements at Rs 8300 crore of which portfolio buyouts was Rs 4800 crore.
• The retail loan book stands at Rs 82600 crore end March 2018 with a market share of 4 to 4.5%. The net NPA ratio for the retail segment was stable, while PCR was substantially higher at 75 to 80%.
• The bank has improvised its products and also improved turnaround time. The bank has put in place infrastructure to grow retail loans, while expects to sustain healthy growth momentum in the retail loans segment with distribution network strengthening.
• The exposure to A & above rated corporate book increased to 52.4% end March 2018 from 39.3% end March 2017.
• The bank has a customer base of 7.8 crore customers end March 2018. The bank has added 4.7 lakh savings accounts in the quarter ended March 2018 of which 70 to 80% of the accounts were opened through tabs and digital modes.
• Subsidiaries of the banks are performing well, while the bank is targeting sale of non-core assets in FY2019 mainly in the AMC and other financial Institutions businesses.
• The bank would continue to focus on quality loan growth and credit optimization in FY2019.
• With regard to prudent provisioning policy, the bank is making provision at 20% for all sub-standard loans, while the bank is also making provision for impaired non-fund based exposure. The provision for auto and education loans with 180 days overdue and mortgage loans with 2 years over dues is made at 100%.
• The bank has exhibited sharp increase in fresh slippages of loans in Q4FY2018. As per the bank from the fresh slippages of Rs 11000 crore in Q4FY2018, about Rs 8960 crore of slippages came from the watch list accounts, while the RBI tightening of NPA recognition norms contributed slippages of Rs 4274 crore.
• Segment wise, large corporate segment contributed fresh slippages of Rs 8200 crore, retail Rs 530 crore, MSME Rs 945 crore and agriculture Rs 715 crore in Q4FY2018. The slippages in the international loan book stood at Rs 1360 crore in Q4FY2018.
• The interest income reversals stood at Rs 169 crore in Q4FY2018 and Rs 587 crore in FY2018.
• As per the bank, the accounts that slipped to NPA category due to latest RBI circular on asset quality recognition and resolution, the bank has to make additional provisions of Rs 1846 crore in Q4FY2018.
• Exposure in accounts under NCLT 1 list is Rs 7158 crore and NCLT 2 list is Rs 3830 crore end March 2018. Provision held in accounts under NCLT 1 is Rs 3950 crore (55.18%) and NCLT 2 list is Rs 2114 crore (55.20%).

Guidance

• The bank watch list of stressed account stands at Rs 10039 crore end March 2018.
• The bank expects to maintain its credit cost below 100 bps in FY2019.
• The bank is targeting ROE of above 10%, while expects loan growth above 15% to be driven by retail loan growth 2x corporate loan growth in FY2019.
• As per the bank, its fresh slippages would be lower than the size of its watch list accounts, while expect to maintain higher recoveries and upgradations of Rs 5000 to 6000 crore in addition to recoveries from NCLT accounts.
• The bank expects to continue to raise PCR in FY2019.

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