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Analyst Meet / AGM - Analyst Meet

Expect to return to normal earnings ahead, RoE of 8-12% likely for FY2017

Bank of Baroda

13-Feb-2016, 10:15
Bank of Baroda conducted an analyst meet on 13 February 2016 to discuss the financial results for the quarter ended December 2015 and prospects of the bank. PS Jayakumar, MD&CEO of the bank addressed the meet:
Highlights:

Fresh slippages of advances jumped to Rs 15603 crore in Q3FY2016, as bank decides to fully provide and recognize stressed assets as NPAs identified by the Reserve Bank of India in its Asset Quality Review (AQR).
As per the bank the bank, RBIs AQR related assets amounted to Rs 10500 crore of which about Rs 3100 crore were already recognized as NPAs in Q2FY2016, while the balance Rs 7400 crore were recognized in current quarter Q3FY2016, instead of spreading it over two quarters.
Bank has also made provisions at the higher rate of 20%, instead of regulatory requirement of 15%. The NPA provisions stood at Rs 6474 crore in Q3FY2016.
About Rs 5800 crore of overall slippages were contributed by restructured advance book in Q3FY2016.
The sectors such as Iron & Steel and Power continued to contribute to fresh slippages of NPAs.
On account of surge in NPAs, the Net Interest Margin (NIM) of the bank declined sharply by 48 bps yoy to 1.72% in Q3FY2016. As per the bank, the impact of interest income reversal on domestic NIMs stood at 66 bps and 44 bps on global NIMs.
The fresh restructuring of advances stood at Rs 250 crore in Q3FY2016, which is line with RBI guidelines. About Rs 200 crore of fresh restructuring was done due to the change in DCCO, while agriculture segment also contributed to fresh restructuring on account of draught announcement in 51 districts of Uttar Pradesh.
Bank has not conducted any sales of assets to Asset Reconstruction Companies (ARCs) in Q3FY2016.
Bank has conducted 5/25 restructuring for 9 accounts with the exposure of Rs 5427 crore in Q3FY2016, of which about Rs 1965 crore were standard.
Bank has conducted Strategic Debt Restructuring (SDR) for 14 accounts with the exposure of Rs 2400 crore of which about Rs 523 crore were standard.
The loan of the bank is becoming granular, while it has very few accounts with the exposure of Rs 2000 crore and above. The bank is also not leader of many consortium loans.
Bank is focusing on improving the CASA ratio to 40% over long term.

No need of capital infusion

As per the bank, it is well capitalized and would not require any capital infusion for next 18-24 months. The current capital position is sufficient to take care of 20% business growth in FY2017.
Bank has also communicated to the government about no further capital infusion support requirement.
Meanwhile, the bank is looking at various other options to improve capital adequacy position. Bank expects about Rs 3500 crore from sales of non-core investments.

Returning to normalcy ahead

The bank expects the slippages to be normal ahead and do not expect anything abnormal ahead.
The bank is also set to return normal profitability with normal provisioning ahead.
The bank expects RoEs to be in the range of 8-12% in FY2017.