Analyst Meet / AGM - Analyst Meet

28-Feb-2014, 07:01
Bank of Baroda conducted an analyst meet on 06 February 2014 to discuss the financial results for the quarter ended December 2013 and prospects of the bank. S.S. Mundra CMD of the bank addressed the meet:

Highlights:

• Bank has witnessed sequential improvement in margins with the shading of bulk deposits, better liabilities structure and easing fresh delinquencies.

• Bank has been prudently making provisions for all necessary items. Bank has been making additional provision of Rs 200 crore per quarter for last three quarters for employee pension with new mortality table, while it is also providing Rs 75 crore per quarter for wage revision under negotiation. Thus, the provision for employee benefit has increased to Rs 275 crore per quarter in FY2014 against Rs 100 crore earlier.

• The outstanding provision for wage revision stood at Rs 330 crore at end December 2013.

• Bank had to make provision of Rs 272 crore for creating deferred tax liability (DTL) on special reserves. In the absence of DTL, net profit would have been higher by 30% in Q3FY2014.

• The DTL estimated at Rs 818 crore till March 2013 has been debited to General reserves, leading to 5-6 bps impact on capital adequacy ratio.

• Going forward, the estimated DTL is expected at Rs 70-80 crore per quarter. Thus, the tax rate is expected to increase to 22-23% from earlier estimate of 18-20%.

• On account of prudent provisioning, the bank as raised the provision coverage ratio during Q3FY2014.

• Bank has maintained the advances growth above the system growth. However, bank would not like to grow ahead of peers at the cost of profitability.

• Bank is focusing on strong CASA deposits mobilization. It is opening more than 7500 CASA account per day.

• Bank has opened twelfth Regional Back Office in Ahmadabad.

• Bank has completed the MTN issue in January 2014, where issue recorded six times subscription and bank retailed the subscription of $750 million. The price compression was also 35 bps below earlier guidance.

• Bank has raised FCNR deposits of $1.9 billion in quarter ended December 2013 under RBI special swap window.

• Bank has been witnessing decline in fresh loan impairments, while expects further improvement in asset quality trends. Bank expects fresh slippages to be under control, while upgradations are likely to improve. Bank is also looking at sales of bad loans to Asset Reconstruction Companies (ARCs).

• As per the fresh delinquencies are fragmented and the largest account restructured was Rs 132 crore, while the largest account that slipped to NPA category was Rs 180 crore.

• Bank has highlighted the slowing down payment cycle ahead of elections as a major concern for asset quality. However, the bank expects fresh restructuring of advances to remain elevated in the range of Rs 1500-2000 crore per quarter.

• Bank expects to meet the overall Priority Sector Lending (PSL) target in FY2015, with some shortfall in agriculture.

• As per rough estimates, the bank estimated the provision requirement for unhedged forex exposure of borrowers at Rs 3 crore, in line with RBI guidelines effective from April 2014.

• Bank proposes to improve the domestic NIM to 3% and RoA to 1% by end March 2014. Bank also expects to maintain the advances growth above industry level.

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