Bank of Baroda’s net profit for Q2 FY25 reached ₹5,238 crore, a 23.2% increase from ₹4,253 crore in the same quarter last year. Net interest income rose by 7.3% to ₹11,622 crore, up from ₹10,831 crore in Q2 FY24. In the first half of FY25, net interest income grew by 6.4% year-on-year to ₹23,222 crore.
Non-interest income also increased by 24.2% to ₹5,181 crore in Q2 FY25, compared to ₹4,171 crore last year. This contributed to an 18.2% rise in operating profit, which reached ₹9,477 crore.
Bank of Baroda’s market capitalisation is around ₹1,30,318.33 crore, with shares up nearly 27% over the past year.
Below is the verbatim transcript of the interview.
Q: Let me start with the asset quality, which is quite stunning. The slippages are lowest in three quarters. Can you tell us the breakup? Did you see any pain in unsecured for instance?
A: The asset quality, as you see, is one of the best quarters we have particularly there has been a good recovery out of the return of accounts and that supported the other income also, if you see the numbers. In terms of the slippage, our normal run rate is roughly around ₹2,700-2,800 crore per quarter and in the last two quarters, the slippage has been almost at the same level. Again, 70-80% of the slippage would account for less than ₹5 crore. In terms of the quality of the book and the fresh slippage, I do not think will exceed the run rate forward that you got the expectation at this point.
Also Read: Bank of Baroda Q2 results: Net profit rises 23%, net interest income 7% up
As far as unsecured personal loans are concerned, as I said, when I talked in September 2023, we clearly said that we are going to moderate the growth on the unsecured personal loan, and that is a positive impact in terms of the fresh slippage now, and the fresh slippage is this quarter is around ₹200 crore out of unsecured personal loan. But let me again tell you that the book has been much better as compared to the book we had earlier. So, I am not anticipating any elevated slippage out of the unsecured personal loan book, even if so, it will be very insignificant for my book as a whole in that matter.
Q: You just referred to recoveries. Can you give us an idea of what was the recovery and what is the expectation for the full year?
A: If you look at the item that the recovery of account that we have given for this quarter, our normal run rate is around ₹750-800 crore, and this quarter is almost like ₹2,500 crore because we got recovery from a couple of good accounts, one was in the National Company Law Tribunal (NCLT) framework. So, in that scenario, if you look at my normal run rate, also, we are fairly like you are looking at the gross non-performing assets (GNPA) trending downwards for the last many quarters now, the net NPA position is improving.
On the asset quality, we are giving two ratios, which are again coming true for quarter to quarter. One is a slippage ratio; we want to maintain the slippage ratio between 1 and 1.25. At the same time, the credit cost that we said will remain below 0.75, in this quarter it is 0.65. So, if you look at the parameters of the asset quality, we are fairly balanced and the normalised kind of a slippage, and the normalised kind of the recovery would continue to be there for the book.
Q: I am just saying that since the recoveries have been stunning, is there a number you can guide for the full year since you still have a lot of NCLT accounts?
A: We anticipate having a recovery target of ₹12,000 crore for the full year and at the same time continuing the slippage somewhere around ₹9,000 to ₹10,000 for the full year.
Also Read: Bank of Baroda launches new fixed deposit scheme with higher interest rates
Q: Let me come to the interest margin. Your deposits have been slower at less than 10%, 9% odd. Do you see that margins can still be under pressure? Are you expecting that deposit costs can still rise?
A: Let me give the full context of it, we had given a deposit guidance of 10-12% earlier and in Q1 and Q2, growth has been lower. So, we calibrated the deposit growth to 9-11% now and consequently, we revised the advanced growth also from earlier, 12-14% to 11-13%. The precise reason for this is about how to maintain the margin there. And if you look at the margin that we have achieved this quarter, is 3.10 which is the lower band of 3.15 plus-minus, 5 bps. If the impact of the penalty, interest and charges has been almost 5 bps.
So, in a scenario like that, our efforts to maintain the margin going forward, that is the key primary one of the objectives that we are running by doing a tradeoff between the growth and the margin. So, we continue to maintain the same margin guidance, both 3.15 plus minus 5 bps. And the kind of an asset liability management, we can still maintain that.
There are two assumptions that we forecast going forward, as you see globally, there has been moderation happening on the asset pricing and also liability pricing. In India, it has started now in terms of the regulator changing its stance. The system liquidity is better month to month as compared to the earlier months. In that scenario, we still expect some kind of moderation on the cost of the deposit, maybe towards late Q3 or early Q4 and if that happens, we will be in a position to maintain the margin guidance of 3.15 plus-minus 5 bps.
For the entire interview, watch the accompanying video
Catch all the latest updates from the stock market here