Bank of Baroda puts Rs 28 billion non-fund exposure under watch list

The public sector lender’s net profit more than doubled at Rs 5.28 billion in the first quarter
Besides having direct loans worth Rs 68 billion under its watch list, Bank of Baroda has also put non-fund exposures worth Rs 28 billion on “watch”, which could turn into stress asset.

The bank has also started making provisions for non-fund-based limits such as guarantees and letters of credit. The non-fund-based exposure is about Rs 28 billion and has provision of 35 per cent of the amount — about Rs 9.8 billion.

P S Jayakumar, managing director and chief executive, BoB, said that not all of non-fund-based exposure is going to devolve and some of the guarantees are going to fade out. “The provisions taken so far are an adequate reflection of the risk that we see on portfolio,” he said.

The watch list — loans which show high risks of slippages of Rs 86 billion (direct loans) — mostly comprise of loans to power, iron and steel textiles and road sector.

It has already sold bad loans worth Rs 8 billion, and are expecting another Rs 18-19 billion get resolved. The bank is expecting slippages to be about Rs 40 billion in the current financial year.

Jayakumar said its Gross Non-Performing Assets (NPAs) at 12.46 per cent as on June 30, 2018 against 12.26 per cent last quarter (March 2018), indicating stabilization in NPA levels. They were at 11.40 per cent at the end of June 2017. Its net NPA ratio declined to 5.40 per cent from 5.49 per cent last quarter (March, 2018). The net NPAs were at 5.17 per cent at end of June, 2017. The provisions for NPAs declined on year-on-year (YoY) basis and sequential basis (Quarter-on-Quarter). They fell by 18.41 per cent on Y-o-Y basis to Rs 17.59 billion. The fall was sharper sequentially of 75.05 per cent.  

Provision Coverage Ratio (PCR) continues to be high. PCR, including that for the written-off (TWO) accounts increased to 69.11 per cent. PCR, excluding TWO, increased to 59.94 per cent as on June 30, 2018, from 58.42 per cent as on March 31, 2018.

Stress on international book

Provision coverage ratio for NPAs in international book is about 75 per cent. There are certain External Commercial Borrowings of Indian corporations, some trading assets for which we are heading towards 100 per cent provisioning and some coal assets, which we feel will have some realizable value, although their resolution has been postponed. Given the fact that there is market pick up on coal, one should hope that recoveries on them should come through, he said.

Its advances rose by 9.8 per cent to Rs 4.14 trillion, while deposits rose by 1.9 per cent to Rs 5.81 trillion at end of June 2018.

The public sector lender’s net profit more than doubled at Rs 5.28 billion in the first quarter ended June 2018 (Q1Fy19) on improvement in interest margin. The stabilisation of asset quality leading to fall in provisions for bad loans also helped to report robust growth in net profit.

It had posted a net profit of Rs 2.03 billion in April-June 2018 (Q1Fy18).