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Bank of Baroda: Earnings hit hard by falling asset quality - Views on News from Equitymaster
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  • Nov 19, 2015 - Bank of Baroda: Earnings hit hard by falling asset quality

Bank of Baroda: Earnings hit hard by falling asset quality
Nov 19, 2015

Bank of Baroda (BOB) declared the second quarter results of financial year 2015-2016 (2QFY16). While net interest income was down by 4.6% YoY, the bottomline fell by a steep 88.7% YoY during the quarter. Here is our analysis of the results.

Performance summary

  • Net interest income (NII) fell by 4.6% YoY in 2QFY16, due to a muted growth in interest income. For 1HFY16, NII was down by 0.4% YoY.
  • Other income grew by 15.4% YoY in 2QFY16 on the back of jump in trading gains. For 1HFY16, other income increased by 4.7% YoY.
  • Global NIMs contracted to 2.1% in 2QFY16 from 2.4% in 2QFY15 due to a steep fall in yields on advances.
  • The cost-to- income ratio has risen above 46% in 2QFY16 and 1HFY16.
  • The gross NPAs as a share of loans have gone up to 5.56% (2QFY16) from 3.32% (2QFY15) and the Net NPAs have risen to 3.08% in 2QFY16 from 1.58% in 2QFY15.
  • Net profit fell by 88.7% in 2QFY16 YoY due a 113% jump in higher provisioning. For 1HFY16, net profit declined by 52%.
  • Capital adequacy ratio stood at 12.5% at the end of 2QFY16.

Financial Performance Snapshot

Rs (m) 2QFY15 2QFY16 Change 1HFY15 1HFY16 Change
Interest income 108,257 111,564 3.1% 214,836.3 224,328.5 4.4%
Interest expense 74,246 79,119 6.6% 147,542.1 157,287.6 6.6%
Net Interest Income 34,011 32,445 -4.6% 67,294 67,041 -0.4%
Net interest margin (%) 2.4% 2.1%        
Other Income 9,917 11,440 15.4% 20,161.9 21,112.7 4.7%
Other Expense 19,898 20,515 3.1% 38,630.80 42,763.9 10.7%
Provisions and contingencies 8,880 18,917 113.0% 14,147.5 24,914.4 76.1%
Exceptional item* 0 0   0 0  
Profit before tax 15,149 4,453 -70.6% 34,678 20,475 -41.0%
Tax 4,107 3,208 -21.9% 10,016.8 8,709 -13.1%
Effective tax rate 30.3% 72.0%   30.3% 42.5%  
Profit after tax/ (loss) 11,042 1,245 -88.7% 24,661 11,766 -52.3%
Net profit margin (%) 12.8% 1.1%   12.8% 5.2%  
No. of shares (m)         2,310.5  
Book value per share (Rs)*         172.5  
P/BV (x)         1.0  

* (Book value as on 30th September 2015)
*Charge on taking over the Assets & Liabilities of Memon Co-operative Bank

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