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Analyst Meet / AGM - Analyst Meet

Asset quality stress to continue for next two quarter

Bank of Baroda

12-May-2015, 01:05

Bank of Baroda conducted an analyst meet on 11 May 2015 to discuss the financial results for the quarter ended March 2015 and prospects of the bank. Ranjan Dhawan, MD&CEO of the bank addressed the meet:

Highlights:

Higher NPA and tax provisions hit the profitability of the bank.
NPA provisions surged despite drop in fresh slippages of advances, as bank had to make incremental provisions for aging of NPAs (Rs 300 crone), earlier slipped advances (Rs 354 crore) in addition to NPAs provisions for fresh slippages of Rs 630 crore in Q4FY2015.
Bank also made provisions for decline in securities values worth Rs 550 crore and Rs 120 crore for non-fund based exposures.
Meanwhile, the bank reversed NPA provisions worth Rs 300 crore on account of upgradations, while also utilized about 425 crore of countercyclical provisions buffer to make specific NPA provisions in Q4FY2015 as allowed by the Reserve Bank of India.
The tax rate for the bank increased in the absence of non-availability of income tax set off against deferred tax assets from FY2015. The bank expects tax rate at 27-28%, going forward.
Bank has received positive surprise on the asset quality front, with fresh slippages coming in at sharply lower than expectations.
Fresh slippages of advances more than halved to Rs 1359 crore in Q4FY2015 from Rs 3042 crore in the previous quarter.
However, the fresh restructuring of advances jumped to Rs 4080 crore in Q4FY2015 from Rs 1598 crore in the previous quarter. The end of regulatory forbearance for restructuring beyond 31 March 2015 led to sharp surge in fresh restructuring in Q4FY2015.
Sector wise, infrastructure contributed about Rs 1542 crore of fresh restructuring, iron and steel at Rs 442 crore, engineering at Rs 155 crore and mining, cement etc at Rs 400 crore in Q4FY2015.
As per the bank, there is no large account witnessing stress and requiring restructuring. Also, there is no restructuring proposal cleared before 31 March 2015 pending to be implemented.
Restructured Standard Advances stood at Rs 25905 crore were at 6.15% of Total Standard Advances at end March 2015. Restructured assets worth Rs 885 crore slipped to NPA category during Q4FY15.
Bank expects slippages rate from the restructured advance book to remain at around 12%.
As per the bank, the economy continues to witness stress and banking sector would remain under asset quality stress for next two quarter.
Despite the pressure on earnings, the Bank has maintained Provision Coverage Ratio at 65% as at end March 2015.
The special mentioned account (SMA) -2, has about 98 accounts with the exposure of Rs 18240 crore at end March 2015.
Regarding the treasury portfolio, the bank do not see any negative valuation impact of recent surge in bond yields, while bank hopes for good profit even if 10-year g-sec yield rises to 8%.
Regarding the margins, bank expects the global NIMs to have touched the bottom and may improve only going forward.
Overseas NIM of the bank declined to 1.09% in FY2015 mainly on account of decline in margins on buyers credit, so bank is planning to extend more of term loans in the international book.
Bank has improved the domestic NIM to 2.91% in FY2015, while proposes to improve domestic NIM further to 3% in FY2016.
Bank proposes to improve RoA to 1% in FY2016.
During FY2015, the Bank has cut bulk deposit by Rs 15535 crore at end-Mar, 2015 in the Bank's domestic business.
Bank has opened 351 new branches in its Domestic Operations and set up 1776 new ATMs and 3,757 new POS machines in FY15. It also opened 106 e-Lobbies to offer 24X7 basic banking operations. Bank added two foreign branches in FY2015.
Under Prime Minister Jan Dhan Yojna (PMJDY), the Bank's share was at 5.7% of the total accounts opened by all banks and share in deposits mobilized is 7.86%.
Bank proposes to open about 200-2500 cash re-cycle machine in FY2016. Bank also plans to add 100 e-lobbies in FY2016.