Bank of Baroda's Q2 numbers were good in terms of both- asset quality as well as credit costs coming down, slippages were low as well, but the results were disappointing in terms of growth. State-run lender Bank of Baroda, on Wednesday, reported a net profit of Rs 2,087.9 crore for the July-September period, exceeding Street estimates. The bank's net profit was up 24.4 percent on a year-on-year basis. The state-run lender's net interest income (NII)- the difference between the interest earned and the interest paid -- rose 2.1 percent on year to Rs 7,565.9 crore. The PSU bank's net interest margin (NIM)- a key measure of profitability for lenders- was at 2.85 percent in the quarter under review, as against 2.78 percent in the year-ago period.

Sanjeev Chadha, Managing Director and CEO at Bank of Baroda, said, “Things have pretty much gone the way we thought would be appropriate in the circumstances. We had a difficult last year and so we thought it would be good to focus on a few things. One was to make sure that deposit growth and loan growth were aligned so that you don't pick up deposits, which you cannot place in the market by way of loans. Two, was to keep discipline in terms of quality on both the asset and liability side.”

“Growth has been a challenge and that is something which is reflected in the broader economy. At times it is good to trim your sails to see how the wind is blowing. But I do believe that as we go forward, the growth momentum should pick up; broad-based recovery is underway and so we can be more aggressive in terms of growth,” said Chadha, in an interview to CNBC-TV18.

On credit costs, he said that they expect it to be between 1.5 and 2 percent, but trending towards 1.5 percent if things pan out the way they expect them to.

On asset quality, he said, “It has been improving and the bank has tried to be reasonably aggressive with provisions depending on the kind of accounts we have, with the NBFC, where there was a court stay- we have been making provisions on that NBFC assuming it was really an NPA, and therefore there were provisions even for interest, which have now moved to the interest line. So the decline that you see in interest margins is largely on account of that, otherwise, the NIMs were stable. NIMs would have been about 3 percent both for Q1 and Q2.”

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“The broad-based recovery that we have seen in the corporate credit cycle is likely to continue, and outweigh any challenges in terms of MSME and retail. Even in terms of MSME and retail, there has been an improvement and so the slippages in Q2 for MSME were half of that in Q1. Our slippage in retail in Q2 were one-third of Q1. So I think the pressure that was there on these two books has dissipated, while corporate continues to improve,” Chadha mentioned.

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On SREI, he said “In terms of a specific provision, we, as of now, provide about 50 percent for this NBFC, which for the moment seems alright, given the prognosis for the company. But given the exposure we have, we are fairly comfortable, and should there be a need to up that, maybe by a small amount going ahead. I don't think that will be an issue,” said Chadha.

For the full interview, watch the video

(Edited by : Dipikka Ghosh)

First Published:Nov 11, 2021 2:00 PM IST