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Bank of Baroda (BoB), a state-owned Indian bank, has reported a significant increase in net profit for the second quarter of fiscal year 2024. The bank's net profit surged 23% year-on-year to Rs 5,238 crore in the September quarter, compared to Rs 4,253 crore in the same period last year. This robust growth was primarily driven by higher recovery of bad loans and a strong performance in treasury income.
The bank's net interest margin (NIM) for the quarter stood at 3.10%, slightly higher than the 3.07% reported in the year-ago period. The NIM for the first half of the fiscal year was 3.14%. The net interest income, a key metric reflecting the difference between interest earned on loans and interest paid on deposits, rose 7.3% year-on-year to Rs 11,622 crore. Notably, non-interest income, which encompasses gains from recovery and treasury earnings, experienced a substantial 24% growth, reaching Rs 5,181 crore.
BoB's operating profit for the second quarter was Rs 9,477 crore, showing a 18.2% year-on-year increase. The bank's managing director, Debadutta Chand, stated that they are maintaining their margin guidance for the year at 3.15% while revising the growth guidance for both advances and deposits downwards by 100 basis points. The revised advance growth guidance is 11-13% compared to the earlier projection of 12-14%, and the deposit growth guidance has been adjusted to 9-11% from 10-12%. This suggests a strategic approach to balance growth and margin performance.
BoB's asset quality improved significantly in the quarter. The gross non-performing assets (NPAs) ratio declined to 2.50% at the end of September from 3.32% a year ago. Similarly, the net NPA ratio decreased to 0.60% from 0.76% in the previous year. The bank's slippage ratio, which reflects the proportion of loans that turn bad during a specific period, also saw a substantial decrease to 1.07% from 1.81% in the year-ago period. This positive trend in asset quality was aided by a successful loan recovery effort.
During the quarter, BoB recovered and upgraded loans worth Rs 2207 crore, a notable improvement from Rs 1837 crore recovered in the same period last year. This increased recovery contributed significantly to the bank's improved profitability. The bank's advances grew 11.6% year-on-year to Rs 11.43 lakh crore, driven by a 20% expansion in retail loans. Total deposits increased by 9.1% to Rs 13.64 lakh crore. Overall, BoB's Q2 results demonstrate a strong performance, driven by improved asset quality, higher loan recovery, and a favorable treasury environment. This positive trend indicates the bank's resilience and its ability to navigate the current economic landscape effectively.
Source: Bank of Baroda Q2 Results: Profit rises 23% to Rs 5,328 crore on higher recovery