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BOB : Dismal FY01 performance

Jun 29, 2001

Bank of Baroda (BOB), has posted a 45% drop in FY01 profits after writing off Rs 2.7 bn as VRS cost. Its topline too rose by a marginal 10%. The interest income growth of the bank was adversely affected in 4QFY01 with a slowdown in the economic activity.

(Rs m)FY00FY01Change4QFY004QFY01Change
Interest Income 52,202 57,573 10.3% 13,984 14,339 2.5%
Other Income 6,414 7,063 10.1% 2,248 3,020 34.4%
Interest Expenditure 35,066 38,196 8.9% 9,236 9,422 2.0%
Operating Profit (EBDIT) 17,136 19,378 13.1% 4,748 4,917 3.6%
Operating Profit Margin (%)32.8%33.7% 34.0%34.3% 
Other Expenditure 13,033 14,327 9.9% 3,689 4,195 13.7%
Profit before Tax10,51712,11415.2%3,3073,74213.1%
Provisions & Contingencies 3,088 5,767 86.7% 918 3,227 251.4%
Provision for VRS - 1,749   - 1,749  
Tax 2,401 1,851 -22.9% 1,081 311 -71.2%
Profit after Tax/(Loss) 5,028 2,747 -45.4% 1,308 (1,546) 
Net profit margin (%)9.6%4.8% 9.4%-10.8% 
No. of Shares (eoy) 294 294   294 294  
Diluted Earnings per share*17.19.3 17.8- 
P/E (at current price) 5.7  - 

During the year, the bank's deposits and advances grew by 14% and 16% respectively. Its credit to deposits ratio also rose to 51% from 48% in the previous year. BOB's lending to priority sector was on the higher side at 49% compared to 40% prescribed by RBI's norms. Saving account deposits, which contributed 23% of total deposits witnessed a growth of 12%.

Higher proportion of saving account deposits led to a rise of over 80 basis points in BOB's operating margins in FY01. The bank's average cost of deposit declined from 7.2% in FY00 to 7% in FY01. This has contributed to 13% growth in operating profits.

The bank's net profit growth was however, adversely affected by 87% jump in provisioning amount and write off of Rs 1.7 bn for VRS expenses. Concerted efforts in the direction of cost control fetched good results with the cost to income ratio declining from 55% to 54% (excluding VRS expenses). BOB's future profitability is also likely to improve with the reduction in wage bills.

In FY01, BOB's net NPAs to net advances ratio declined to 6.7% from 7% in FY00. Its capital adequacy ratio at 12.7% is also well above the 10% norm required by the RBI by FY02.

At the current market price of Rs 53 BOB is trading at a P/E of 6x and Price/Book value ratio of 0.5x. BOB has declared a dividend of Rs 4 per share. This translates into dividend yield ratio of 7.5%.

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