InvestorQ : How did Bank of Baroda report such strong growth in profits for Q1FY23?
Archita Jajjoo made post

How did Bank of Baroda report such strong growth in profits for Q1FY23?

Niti Shenoi answered.
1 week ago

For the June 2022 quarter, Bank of Baroda reported 79.3% higher net profits at Rs2,168 crore on a yoy basis. This sharp growth in profits was largely driven by a dip in provisions for bad loans. It may be recollected that in the first quarter of FY22, Bank of Baroda had posted net profits of Rs1,209 crore. For the June quarter, BOB reported 12% higher net interest income (NII) at Rs8,838 crore. However, the net interest margin or NIM tapered slightly from 3.04% to 3.02% in the June 2022 quarter.

For the quarter ended June 2022, BOB witnessed lower non-interest income at Rs1,182 crore compared to Rs2,863 crore in the quarter ended June 2021. Needless to say, the treasury revenues took a sharp hit in the quarter on account of hardening of bond yields. The bank had to book mark to market (MTM) losses on its bond portfolio due to rising yields in the market. While the gross NPAs improved from 8.86% to 6.26% yoy, it is still high on an absolute basis. Net NPAs halved to 1.58% showing most potential losses provided for.

One of the big reasons for this sharp growth in profits in the quarter was the fall in NPA provisions by 39% to Rs 1,560 crore in the June 2022 quarter compared to Rs2,557 crore in the June 2021 quarter. Interestingly, the provision coverage ratio or the PCR improved to 89.38%. BOB also witnessed its loan portfolio grow by 18% in June 2022 quarter and had an outstanding advances book of Rs8.39 trillion. For the quarter, the deposits were up 10.9% at Rs10.32 trillion as of June 2022.

For the quarter ended June 2022, BOB reported credit to deposit or C/D ratio of a robust 80% and has maintained above 75% through FY23. BOB saw a marginal improvement in its capital adequacy to 15.46%.