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Analyst Meet / AGM - Analyst Meet

Expects to reduce net NPA ratio to 2.5% in next 6 to 12 months

Bank of Baroda

17-Nov-2017, 12:38
Bank of Baroda conducted an analyst meet on 16 November 2017 to discuss the financial results for the quarter ended September 2017 and prospects of the bank. PS Jayakumar, MD&CEO of the bank addressed the meet:
Highlights:

The bank has showed acceleration in domestic business growth to 12%, driven by 14% surge in advance and 11% growth in deposits end September 2017. The bank has further improved domestic CASA deposits ratio to 39.2% end September 2017.
The bank has exhibited decline in cost of funds mostly on account of reduction in the saving bank deposit rate. The bank has also exhibited an improvement in yield on loans driven by better negotiations.
On loan book front, the bank has showed strong 25% growth in retail loans driven by 35% surge in home loans. Within the retail book, the bank has posted 100% increase in number of vehicles financed.
The bank has been following risk based pricing for quality loan growth. Accordingly, the bank has exhibited substantial improvement in risk profile of loan book with the share of unrated loans showing further decline to 18.98% end September 2017 from 24.7% end June 2017 and 29.32% end September 2016.
Bank has witnessed an improvement in asset quality with the dip in fresh slippages of advances in Q2FY2018. The fresh slippage of loans eased to Rs 2586 crore in Q2FY2018 from Rs 4384 crore in Q1FY2018.
Sector wise, agriculture contributed fresh slippages of Rs 700 crore in Q2FY2018, MSME Rs 739 crore, retail Rs 340 crore and large corporate at Rs 650 crore.
The standard restructured assets of the bank were Rs 11722 crore end September 2017. The SMA -2 category loans of the bank stood at Rs 14000 crore end September 2017.
As per the bank, around Rs 6000 crore of restructured loans and overall Rs 8000-9000 core of loans are showing stress.
With regard to NCLT referred accounts, under first list bank has exposure to 10 accounts amounting to Rs 7694 crore against which bank holds Rs 3983 crore of provisions. The bank is required to make provisions of Rs 450 crore in FY2018 against these accounts, while it has already made provision of Rs 163 crore. The bank aims to raise provision cover on these account to 64% from existing 54%.
In case of second list of accounts likely to be referred to NCLT, the bank has exposure to 18 accounts amounting to Rs 4200 crore and holds provisions of Rs 1473 crore. The bank is required to make provisions of Rs 800 crore on these accounts, while bank would take call on accelerating provisions on these accounts only after these accounts are actually referred to NCLT. Even bank holds overall excess provisions on its books worth Rs 1500 crore.
Top 53 accounts contribute 50% of NPAs of the bank.
The bank has substantially improved its provision coverage ratio to 67.2% end September 2017. As per the banks, its adjusted provision coverage ratio is 14-15% ahead of peer banks.
The bank has made provisions of Rs 129 crore for stressed sectors in H1FY2018.
The bank do not expects any asset quality surprise, going forward. The bank expects to reduce its net NPA to 2.5% in next 6 to 12 months. Gross as well net NPAs are expected to decline, while loan book expansion is expected to contribute to the improvement in NPA ratios.
As per the bank, the net NPAs would decline to Rs 12000-13000 crore in next 6-12 months from existing Rs 19000 crore. The NPA reversal, resolution under NCLT, cash sales to ARCs etc would contribute to decline in NPAs. Meanwhile, the loan book is expected to surge to Rs 5 trillion from Rs 4 trillion.
With regard to capital infusions, the bank is well capitalized and would remain well capitalized even in the absence of capital allocation under bank recapitalization program.
With regards to mergers in the banking sector, the bank would focus on balance sheet strengthening on priority basis.