Analyst Meet / AGM - Analyst Meet

11-Feb-2017, 06:16
Bank of Baroda conducted an analyst meet on 11 February 2017 to discuss the financial results for the quarter ended December 2016 and prospects of the bank. PS Jayakumar, MD&CEO of the bank addressed the meet:

Highlights:

• The bank has posted healthy 52% growth in the operating profit for Q3FY2017. As per the bank, the operating profit is likely to be above the estimate of Rs 10000 crore for FY2017 and accelerate further in FY2018.
• The bank has posted healthy growth in operating profit in FY2017 without any divestment receipts.
• The GNPA ratio of the bank remained lower among the peer banks. The bank has posted substantially improvement in Provision Coverage Ratio in Q3FY2017, while bank expects further improvement of 2 percentages in Q4FY2017.
• The bank is hopeful of achieving RoE of 14-15 and RoA of closer to 1% by FY2019.

Business

• The business of the bank was impacted due to redemption of FCNR deposits worth Rs 11000 crore and repayment of FCNR linked loans of Rs 10000 crore in Q3FY2017.
• The bank is observing some signs of pick up in loan demand, while expects loan growth to improve by year end. The bank expects loan growth to be above industry level in FY2018.
• The bank has 37 million debt cards in force, while the bank proposes to raise the share of credit cards market.

Asset quality

• The fresh slippages of loans stood at Rs 3073 crore in Q3FY2017. As per the bank, the accounts mostly in the range of Rs 10 to Rs 100 contributed to the fresh slippages in Q3FY2017. The major accounts contributing to fresh slippages were Mandhana (Rs 240 crore), Coastal Energy (Rs 198 crore) and Associated Decor (Rs 140 crore).
• The bank has utilized RBI dispensation allowing delaying of NPA classification of account due for payment during demonetisation period of November-December 2016 by 90 days for delaying NPA classification of about Rs 480 crore of small loan accounts in Q3FY2017.
• The bank had watchlist of accounts worth Rs 10171 crore at end September 2016, while about Rs 2100 crore of slippages in Q3FY2017 came from watchlist accounts.
• The gross slippages of loans stood at Rs 10847 crore and NPA reductions stood at Rs 8725 crore in 9MFY2017. The bank has maintained the guidance of Rs 15000 crore of slippage and Rs 10000 crore of NPA reductions for FY2017.
• The bank expects fresh slippages to decline in FY2018 from FY2017 level, as most of the slippages have already happened, while see more scope for resolution.
• The SMA-2 category loans of the bank, excluding the overlap with restructured loans, stood at Rs 7900 crore at end December 2016.
• The standard restructured loans of the bank stood at Rs 14059 crore at end December 2016. The bank's exposure under S4A scheme stands at Rs 1948 crore for 8 accounts, under Strategic Debt Restructuring (SDR) scheme exposure stands at Rs 6944 crore for 35 accounts (of which Rs 4193 crore is standard in 20 accounts) and under 5/25 refinancing scheme exposure stands at Rs 7408 crore towards 15 accounts.
• The bank has not conducted any sales of assets to asset reconstruction companies in 9MFY2017.

Demonetisation

• The bank sees demonetisation as a non-disruptive event. The bank does not see any impact from demonetization on the performance of its SMA 1 Category loans.
• The bank has received cash deposits of old banned notes amounting to Rs 65000 crore.
• During the demonetisation period the bank has opened about 20 lakh new accounts, while dormant account also became operational.

Capital

• The capital adequacy ratio of the bank was at comfortable level of 12.55% at end December 2016. The capital adequacy ratio of the bank showed decline in Q3FY2017 on account of some reclassifications.
• The bank is well capitalized, while its looks at various options to boost its capital adequacy ratio.
• The bank has shareholding in UTI and NSE, while it may look at stake sales in these institutions. The bank may also look at partial or full exit from subsidiaries.
• The bank is also raising non-equity Tier I and II capital. The bank may also consider QIP at a fair price.
• The bank is also reducing the higher risk assets, while do not see need for equity dilution.

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