Analyzing...
Good evening, everyone, and welcome to the Analyst Meet for Bank of Baroda’s results for the quarter ended 31st December 2024. Thank you all for joining us. We have with us today our MD & CEO, Mr. Debadatta Chand. He's joined by the Bank’s Executive Directors and the CFO. We have a short presentation, that we will take you through followed by the Q&A session. I request Chand Sir to please take it forward.
Thanks, Phiroza. Again, good evening to all on call. So, let me introduce the management team. I'm D. Chand, the MD & CEO of Bank of Baroda and I'm interacting with all of you for many quarters now. With me, Mr. Lalit Tyagi, he's the Executive Director. He looks after the Corporate Credit, International Banking, and also Treasury for the Bank. With us again, Mr. Sanjay Mudaliar, he's the Executive Director looking after the entire IT operations of the Bank including the Retail Assets of the Bank. And with us we have Mr. Lal Singh, he is the Executive Director, looking after the Recovery, Agri and MSME vertical and also the HR function of the Bank. And again, with us in the management team, we have Madam Beena Vaheed, she is the Executive Director looking after all Control and Compliance function and including the Retail liabilities of the Bank. With all of us again the CFO of the Bank, Mr. Manoj Chayani, he is interacting with you for maybe two to three quarters now. So, with this Chayani ji over to you for your presentation and thereafter I will go for my opening remarks.
Good Evening everyone and as you know, it's always a privilege to interact with you and we are ready with our financial highlights of Bank of Baroda for the quarter and nine months ended, 31st December 2024. Since, we are meeting in the New Year for the first time, wish you and your family members a very Happy New Year 2025. Coming to the financial highlights; the Bank has posted total business volume of 25.65 lakh crores as of 31st December 2024.
If you look at the advances side, the global advances have grown by 11.8%, which consists of domestic advance of 11.9% YoY growth and International 11.2%. Segment wise if we analyze, we continue to grow our retail, it's an organic growth of around 20%. Agriculture is growing at 13%. MSME at 14%, which is better than the previous quarters, corporate at 7%. If we look at the retail segment, we have seen a smart growth of around 16.3% in mortgage, 16.6% at home loan, education at 17%, auto loan at 21%, and personal loan continuously we are moderating the growth and as of December 24, we have grown at 24%.
Deposit remains a constraint for the banking industry at large. However, the Bank has grown deposit at 11.8% YoY. CD ratio is a little elevated to 84.24%. But the two noticeable aspect is that our CASA has grown YoY by 6.5%, which is better than the peer banks, and we could maintain our CASA ratio around 40% as per our guidance.
Bank enjoys a robust profitability and we have posted operating profit of 7,664 crore for the quarter with 9.3% YoY growth and continuously we are posting profit after tax of more than 4,000 crores and this quarter also we have posted a profit after tax of 4,837 crores with YoY growth of 5.6%. Return on asset, continuously the Bank has posted for the 10th quarter more than 1% as against our guidance of more than 1% and return on asset is 1.15% and similarly there is a robust return on equity of 17% as a 31st December 2024.
If you look at the nine months period, operating profit has grown by 6.3%, profit after tax 12.6%, return on asset has improved from 1.15% to 1.17%, and return equity as we said it is 17.03%.
Yield on advances, nine months ended, it has grown from 8.44% to 8.46%, however, there is an increase in the cost of deposit from 4.85% to 5.09%, as a result of which, the net interest margin for the nine months, as has come down a little bit from 3.14% to 3.08%. However, this, as per our guidance, is in the lower band of the guidance of 3.15 +/ - 5 bps that is 3.10% to 3.20%.
Bank enjoys a robust asset quality, healthy asset quality with gross NPA trending at 2.43%, which has reduced by 65 bps YoY. Similarly, net NPA also reduced from 0.7% to 0.59% and provision coverage ratio is robust at 93.51%.
One of the key parameters is slippage ratio. Slippage ratio, we could improve to 0.90%against our guidance of 1 to 1.25% and we enjoy a very healthy credit cost of 0.30%, which has again improved from 0.39%. If we look at nine months period, the slippage ratio has come down to 0.81% and credit cost is 0.47%.
SMA book as you can see as against 0.47%, it is 0.49%. It is at a similar level, and we enjoy a healthy collection efficiency of 99%. Also, we are having a robust capital base of CRAR trending at 15.96%, this is excluding the profit for the current year. If we include that, then the CRAR is improved further to 17.34% and CET 1 of 12.38% as of December will improve to 13.77%. That's all from my side. Chand Sir, over to you.
Yeah. Thank you, Chayani ji, and once again, good evening to all of you and as the CFO said Happy New Year to you and all your team members and let me make some of the qualitative comments over and above the presentation made by the CFO and if we look at the numbers that we have announced for this quarter, this is again consistent to the numbers we've announced in the earlier quarters. So, the point here is that we are looking at a very sustainable business model wherein the growth in book, the growth in profit is something strong, robust, and consistent. The growth has been shared as against 9% to 11% deposit guidance and 11% to 13% advanced guidance, our deposit growth is 11.8% and the advance growth is 11.8%. This is one quarter where the growth of advance is almost equal to the growth of deposit.
As you know, this quarter also has I mean underlying market condition of a tight liquidity and also a tight deposit market wherein there are still elevated cost structure on the deposit side. We also said earlier one of the concepts of slightly retailisng the banks book more and typically we call it a RAM and the corporate, RAM is the Retail, Agri, and MSME. If you look at the percentage of RAM in December 24 over December 23, it has improved by 200 bps from 57.9 to 59.9%. As the retail continue to grow at 20% quarter-to-quarter for many quarters now on the Agri and MSME as compared to the September, we added almost 200 bps growth in December over September. The percentage of growth in Agri and MSME is almost 2% higher than the growth that YoY growth we had in September, so we'll continue to focus on the retailization story and would work on making a diversified book, so that we have margin accretive measures so that we improve the margin and the profitability going forward. At the same time a higher diversified book and a lower RWA density book, right.
On the CASA front, a noticeable thing that as the CFO said, our Growth is 6.5% this quarter and again, just to remind that our growth in September was 7% and earlier also we said that we continue to focus on the retail side of the CASA and also on the retail innovating product in the market trying to improve our service standard, adapting more and more digital part of the entire journey, so that's significantly giving us positive outcome and both the quarters the growth has been all you know the system growth on the CASA front and we are very satisfyingly placed at a growth of 7% in September and 6.5% in December.
The growth in operating profit, the key focus of the Bank is how do you again structure the operating profit as the core theme of optimizing that. If you look at the growth this time on the operating income growth is 9.2% and the operating expense growth is contained at 9.1%, the operating profit growth is 9.3% and a net profit for this quarter is 5.6%, whereas the nine months is 12.6%. So, considering that the major profit matrix of the Bank is quite strong, robust, sustainable, and we are working to maintain also going forward.
On the margin side, earlier, we guided the market 3.15 +/-, 5 bps. Let us also make a note that one accounting change that happened also during the year. There was a change in accounting from penal interest and penal charges. So, that impact is almost 5 to 6 bps lower. With that also, the bank could achieve a nine-month 3.08% margin, which is slightly lower than the lower band of our guidance earlier. So, going forward, our operating guidance for the margin for the full year is 3 to 3.10, that means 3.05 +/- 5 bps with an upside towards the upper band because of the change condition that you are looking at for this quarter particularly on the liquidity side and also on the rate expectation on the monetary policy that we have going to be. So, that continues to be something that we are quite mindful of how to operate at a margin guidance which again coming on the strong side, the book is calibrated keeping the margin and the ROA guidance. So, in that way you would have seen our growth is strong and robust for this quarter too. Asset quality as the CFO said right. The GNPA and net NPA trending downwards. The slippage ratio and the credit cost have been much lower than the guidance we had given, but we'll continue to retain the guidance at the same level.
On the digital, again, we're working. Recently, there was a IBA Digital Conclave wherein the Bank was a winner in two segments of the Digital Technology Awards and also runner up in two. So, digital continue to be a key focus on the business model that we have and continue to have. To sum up on the guidance, we keep the deposit guidance the same at 9 to 11%. The advanced guidance continues to be 11% to 13%. The slippage ratio continues to be 1% to 1.25%. The credit cost continues to be the guidance of less than 0.75%. The margin guidance is 3 to 3.10% that is 3.05 +/-5 bps. With a condition that we think can come, can be positively upward also, which can typically take us to the upper band of the guidance, which would be the lower band of the guidance earlier and in spite of the fact that the penal interest, penal charges impact is almost 5 to 6 bps for the full year.
With this again, thank all of you for joining on the call and open for question and answer. Over to you, Phiroza.
Thank you, Sir. The first question is from Rikin Shah.
Hi am I audible?
Yeah, Rikin, please go ahead.
Thank you, Sir. Good evening for the opportunity and just a few questions. The first one is on margins, the domestic advance yield has declined again very sharply in this quarter and what explains that because the corporate loan growth has also kind of slowed down versus the last quarter run rate and in your opening remarks, you mentioned that there could be an upside risk to our margin guidance of 3.05%, which is the midpoint. How would that really kind of come through because if the rates are cut, while of course your MCLR book is higher, why would that be an upside risk to your guidance? So, that's my question #1.
The second question is on asset quality. The personal loan GNPA ratio in the last few quarters has been rising and despite that, we have seen almost 7% QoQ PL growth in this quarter. So, what's the thought process there? Of course, your retail slippages have moved down, so that’s a bit more comforting and the second part of the NPA would be gold NPA, even they have slightly moved up of course from a very low base, any color you would be able to share on that? So, that's my second question.
Thirdly, it is on SMAs, last quarter of course, we had called out couple of accounts because of which it was elevated. They seem not to have been rolled back. Do you expect them to see a rollback in the coming quarter and lastly, your slippage, credit cost guidance, you're kind of holding it up despite your nine month performance reasonably below that, so anything to read into it? Do you expect any kind of further deterioration, or should we expect the current run rate to kind of maintain? Those are my four questions and just two data keeping questions like always, the total number of employees and standard restructured account, that would be helpful. Thank you, Sir.
Thanks, Rikin. Actually, on the margin side there is no upside risk. What I said upside bias. So, when I say 3 to 3.10%, what I'm telling is that we'll try to have an upside bias that means we'll try to achieve 3.10%, not a risk to that, right. So, that's a clarification I want to give to point 1.
On the personal loan, you are right. Actually, if you look at the GNPA that we announced for the personal loan, the book is small, let's say 32,000 crore and the GNPA for December and September there is almost a 0.5% increase on the GNPA. In terms of amount, it translates to 100 crores per quarter. My fresh slippage for the full quarter is 2500 crores. That's insignificant in that way, and you rightly said that because other segment of the retail is much lower, benign slippage. This is getting adjusted actually in that manner. So, there is no concern per say. Actually, the quality of the book we have improved significantly when we stated 1.5 years back that we're going to moderate on the growth in the process. Actually, we improved the underwriting standard. So, there is no concern.
Similarly, gold loan, if you take the absolute amount in terms of the 0.71 to 0.80% amount transferred to 36 crores, so that also insignificant in that way. So, the normal slippage guidance is 2500 crore normalized basis quarter-to-quarter and that continue to hold on that. You also talked about SMA book rollback. Yes, that is already we rolled back actually. Lal Singh saab can you just throw some light on this. The SMA book at 0.49%.
So, SMA book is including restructured around 28,400 crore, which is 2.48% of the total loan book.
So Rikin, just to add to what Lal Singh saab said, actually slightly, you're looking at 0.49% to some 0.45% in the last quarter, right and that is higher than the 0.23 %earlier. So, couple of accounts 4-5 accounts, which was there, which was more of a technical or I mean what you can say temporary liquidity mismatch, out of that three already pulled back again today. So, if I look at the CRILC SMA that you have declared, actually it is not 0.49% now it is 0.19% because all these accounts have been pulled back by this time. So, there is no concern with regard to SMA in that manner, right.
Got it.
Thank you, Sir. Before we go ahead, just I would request to limit yourself to two questions per person and we'll come back to you if there is time. The next question is a question from Rakesh Kumar.
Yeah. Hi, Sir. Can you hear me?
I can hear you. Please go ahead.
Yes, Sir. So, just coming back to you know this margin number and the credited number, so we had a sharp fall in the recovery on the written off number and if I look at recovery coming from NPA, that number is broadly similar, there is not much of a change on a sequential basis.
So, what I think that your recovery number on the written off book has kind of you know dented your margin number, so firstly what is the recovery on written off number is going to be for fourth quarter and going ahead? And is the recovery number you know the interest income accrual number going into the interest income line, was that number 300 to 350 crore that we lost this quarter.
No, it is like just to clarify, last quarter the recovery from written off there was a one off, which is also clarified last time because of that the amount got boosted. Our normalized run rate for recovery out of written off is almost 750 to 800 crores and if you look at Q3 of December 23 also, it was almost at the same level. This quarter is almost at the same level and going forward, we will maintain the normalized rate. There may be a possibility of one off in couple of quarters, but that would be add on to that. So, the fall in the recovery from written off vis-a vis the last quarter, I’m talking the Q3 over Q2, it is also supported this time by the higher treasury income and also one element of the interest on the tax refund. So, that’s clearly negating bit of the fall in that manner. So, in that way, banks book is well balanced in terms of taking any impact because of the recovery from written off account. Last quarter it was one off, otherwise the normal rate is the level that we have I mean this quarter the number is.
But Sir, just to know that what is the interest income accrual that we would have done in second quarter you know because of the recoveries, NPA recovery and TWO recoveries, what that number was?
I think we'll update you roughly around out of that, it can be 500-600 crore.
That is what actually, there was a one off. So, obviously there was an interest income written back on the matter. So, I mean on the interest income on the impact suppose because of one off is not there this quarter, almost to the extent of like 300 crore - 350 crore kind of level.
Impact is there, correct. So, that is what I was estimating that 300 to 350 crore is the impact that we have this quarter.
Yeah.
And secondly Sir, fee income. Sir, fee income is pretty strong and asset quality is also pretty strong. So, on fee income, if you can, you know, highlight some of the things that why it happened, what are we doing, and why did we, you know, achieve this kind of a strong number on core fee income?
So, you are very right, actually earlier also we announced that we started some kind of an internal kind of a thing which we talked about fee and flows kind of and the idea was to strengthen the core fee income. See, the recovery from written off accounts other than the normalized run rate can be worn up at some point of time. Treasury income is also highly dependent on the market condition. So, the core fee income, if you look at the core fee income this quarter, the growth is 12.6% and that is where we have to optimize that. There are challenges in terms of, because
some of the core fee income going shifted like a moment ago for a normal physical transaction to a digital transaction and the fee goes off. But there are challenges to optimize, but clearly as a management, as a banker, we clearly focus how to optimize on the core fee income. So, this quarter, the core fee income leaving apart the treasury income or the tax refund or the core also is going up by 12.6%. That's something significant. See the numbers that we are looking at, the book increase is almost 12%, 11.8%. The operating profit increase is almost 9.3%. The operating expenses is contained at 9.1%. So, I think somewhere we have to have a stability of all this income and that is where we actually were, if you look at the core fee income this quarter, the growth has been good, but will be trying to focus more on that and try to optimize more also going forward.
Thanks, Sir. Many thanks. All the best, Sir.
Thank you very much.
Thank you. The next question is from Piran Engineer.
Yeah. Hello. Congratulations, Sir, on the quarter. Just firstly on the previous question, a clarification this 300-350 crore lower interest income, if we adjust for that, our margins would be about 10 Bbps higher, is that a correct understanding?
It is actually, the last time as I said there was one account which was one off in terms of a recovery of NCLT resolution and significantly, the recovery was full in that case, putting a positive interest income impact of roughly around 300-350 crore.
Okay.
So, there is a normalized, what we said that what is a delta that changed last quarter we saw vis a vis this quarter and that is about 300-350 crore and thank you very much for congratulating the Bank. The Bank would again, try to have one, I said initially to have a stable, sustainable kind of a growth both in terms of book and also in terms of the profit number. Thank you very much for that.
No, no, no, no problem. My pleasure. So, Sir, just one or two more questions.
Firstly, on our borrowings in the last two quarters, it's gone up from roughly 90,000 crores to now 1.3 lakh crores, can you just help us as to you know, what are these borrowings, are they more refinanced, NABARD, SIDBI, because we are growing on MSME or are they more infra bonds and ballpark what would be the cost of these borrowings - of the entire borrowing book?
Yeah, yeah, actually, you said all of that, actually part of the borrowing and clearly the borrowing is to substitute on the deposit cost otherwise, right. So, Mr. Tyagi can you just slightly update more on this?
Yeah. So, thank you very much, Sir. So, in fact, last quarter we raised infra bond to the extent of 5000 crores. Put together this financial year, we have raised infra bond to the extent of 15,000 crores and we also, you know, tap time-to-time the competitive refi from some of the domestic specialized distributions. Put together that and the market borrowings have elevated as the MD saab said that you know, when that option is available and cheaper and all of us know that deposit side, there are some, you know, limitations in terms of managing the cost. So, we balance it out with that.
Understood, understood, and Sir just lastly on gold loans. There is a lot of talk about Agri gold loans you know below 2 lakhs should actually be collateral free and you can't take gold from the farmer. Sir, can you just probably clarify these rumors that are or whatever these news are that is going around as to whether this is what the RBI wants, collateral free up to 2 lakhs. And also in regular consumer gold loans a lot of talk about you know refinancing at the end of it, doing EMI payment, 75% LTV throughout the loan rather than at disbursements. So, maybe if you can just share some light on what is what's the RBI thinking and what is the conclusion that would be very helpful?
See, as long as it's not guidelines normally, difficult to comment on that.
Actually, they are matter which are again not crystallized yet, so we've not framed a stance on the matter, but Lal Singh saab, anything you want to update on this on the gold loan side, agri gold?
Thank you, Sir. In fact, Agri gold, there is no such guideline till date, but yes on MSME there is guideline that up to 10 lakhs we can't take any collateral. That may be land building or gold, whatever is there. So, those we are adhering to.
On the retail gold loan, you have some question, right? So, what is that?
Basically, you know RBI has expressed some concerns on things like bullet repayment on maintaining LTV of 75% throughout the term of the loan and there was a meeting of you know, the Gold Lenders Association with RBI a couple of weeks back. So, some updates, even qualitative, is fine, but some updates would be useful, Sir?
No, actually, as far as the retail gold, my book is almost hardly 6,000 crores.
So, it's not a very significant amount therein, but then some of the conversation we are not aware as in today, but our business is a compliant business as on today. Mudaliar saab anything you want to add on this?
No, Sir. In fact, since the details are not available, I don't think it will be appropriate to give any comment at this stage. Thank you.
Okay. Thank you.
Okay. Fair enough. Fair enough. Thank you, Sir and wish you all the best.
Thank you very much once again.
Next question is from Mahrukh Adajania, please.
Hello.
Yes, Mahrukh, please go ahead.
Yeah. Hi. Hello, Sir. Good evening. I had two questions. Actually, three questions. Basically, firstly on your credit cost, right. So, you had explained that you had made higher specific provisions last quarter and a floating provision of 2 billion and that's why we understand that this quarter, the credit costs are lower, but they are at 38 basis points. So, is this a new normal now or where do you see your credit cost settle in the fourth quarter or maybe over the next three to four
quarters? What should we build in like 40 basis points, 35 what is the number? That's my first question.
Okay. We'll reply first one. There's not any new normal. The only normal is that the credit cost would be below 0.75%, right. So, that is point 1. Point 2, is a case wherein yes, the credit cost is also linked with the asset quality and as in today, when we look into the SMA book, the stress book, we are quite comfortable as on today with regard to the asset quality. So, in that scenario, I don't think anything like nine months credit cost is 0.47%, right. So, maybe a band between 0.5 to 0.75% we would like to end in the full year, but again, it all depends upon the forward, what you can say emerging facts and figures that would come to us, but then the full year it would be below 0.75%, that is what fully we are convinced on the piece, right.
Okay, Sir. Sir, my next question is on home loans. Obviously, your home loans are growing well. They have grown 4% quarter-on-quarter, but if you see some private banks, they are not being able to deliver growth of four, very few are delivering even 3% QoQ. So, is it that you are getting a lot of refinancing requests from private banks? What is your rate to the most prime customer that you offer?
See, there is no, actually the numbers that we have given is the organic book.
So, there is no refinancing or anything from private banks on that matter. The numbers that we see is 20% or 19.5% on the home loan 16.6% is the organic book. It's not like this quarter ,we have a growth of 16.6%, right. That is consistent for Bank of Baroda, particularly in the segment of home loans, we do have the right delivery channels, the right relationship measures, the right project approval, so that is giving us bit of a positive outcome for many quarters. So, continue to grow therein and I don't think there are elements which again can slightly put the guidance below what we are growing, but we are quite comfortable with the growth both in terms of asset quality.
In terms of the best rate, they are all card rates being defined in the website. I mean the bias is obviously, I mean borrowers having a better CIBIL score. So, that's on the asset quality we are quite mindful in terms of what is that book we built. In terms of rather, actually one data we didn't share.
The RWA density that we compute for many of the products including home loan is showing a positive outcome. So, in that way, we believe in good quality borrower. We believe in the right relationship manager. Actually, one of the important factor in the home loan segment is the time you take to give a sanction, right. So, that is what actually we improved significantly in our last many years. So, I think there's a sustainable growth that we've maintained and on the quality side, it is on much better side.
Actually, there is no concern as on today.
But your best borrower would be getting at 8.50, 8.40, what would be the rate?
They are all card rate ma’am. Actually, the card rate is defined on the website.
Alright. Okay, Sir. Sir, and my last question is just one clarification that you did say that you know your recovery income that goes into interest on loans, it goes there, right, has come down though the QoQ growth in loans and interest on loans is matching, but okay it's gone down from say around 830 to around 500-550, that’s correct, right?
No, no, I will just update you. Actually, the conversation we had actually our normalized recovery out of written off accounts is almost 750 to 800 crores. What had happened last
quarter, there was one off in that recovery of written off accounts and because in that particular recovery, the recovery was substantial that we could recover the full amount. The positive impact because of that particular one off is roughly around 350 crores on the interest income, which is not available this quarter, right.
Got it.
So, otherwise, normal is going to be 750-800 crores that we are going to have a future quarters also.
Right. So, the normalized reversal or the normalized accretion to interest income will also be then what happened this quarter only, right?
No, no, that cannot be quantified, Mahrukh that cannot be quantified, the reason being, many of the recovery, you are not recovering the full amount to get benefit of the interest reversal, right. You may recover your principle out of the recovery, but last quarter there was a one-off case where the recovery was full that included the reversal of the interest income and also the full extent of the principal. So, the delta that we made last quarter, that was the point of discussion, not on a normalized. Normalized, it may give some reversal of the interest income, it may not give any reversal of the interest income.
Got it Sir, very helpful. Thanks a lot, Sir. Thank you.
Thank you. Thank you, Mahrukh.
The next question is from Kunal Shah.
Yeah, Kunal, good evening.
Yeah. Good evening. Can you hear me?
Yeah, I can hear you.
Yeah. So, couple of questions. Firstly, on the international slippages and international margins. So, again, this quarter we saw decline, last time you indicated it can still be managed at 1.9 to 2 odd percent and given the global rate environment, do we see pressure over there or is it on account of maybe the slippage in the, it's a small number, but still like 200 crores slippage which is leading to a lower NIM in the international market?
See, one is the slippage, another is the margin. The margin is stable. Actually, if you look at the nine months margin on international, it is 2.02% and this quarter it set 1.8%, slightly when the reset of pricing happens in the international book, both on the advance and also on the deposit, there is a lag clearly. So, a lot of refi transaction happened on the asset side, which again not passed on to the exchange of the deposit, but broadly our NIM on the international would be 1.9 to 2%, that is what we are hopeful going forward we can maintain. On the slippage particularly that you talked about, although a very small amount of 200 crores, Tyagi saab can you just update on the slippage side?
So, actually this was one of the cases in our one of the territories and probably it is not the normalized degradation rate in international book. In fact, for many quarters, international book has not shown any distress. So, at individual asset cases, sometimes you know these emerges, but this is not the normal case for the international book.
In fact, it's a very combination of many of the small accounts, which again based on some accounting change we made that NPA, but during last many quarters it's a very fairly stable asset quality as far as the international book is concerned.
Yeah and secondly, again, maybe someone asked with respect to the personal loan growing at 7% quarter-on-quarter, most of the players we have seen there is a slowdown which has happened, but I think for us it is still continuing to be faster pace and there is a rising NPL on this growing book. So, wouldn't we be slightly cautious or conservative in this segment that we see?
Kunal, you're right on that. Actually, if you look at my base is very low, 32,000 odd crores in personal loan as compared to and out of that maybe 50% is the non-digital personal loan then the digital personal loan, the point you are referring is on the digital personal loan, right? So, that book is almost 12,000-13,000 crores, not a big amount therein. Earlier, the growth in this segment was almost 80%-100% quarter-to-quarter, right. Actually, I mean quarter-to-quarter on a YoY basis and like in July 2023 even when the market was not discussing, we started talking about moderating this growth. So, from almost 80% to 100% YoY in one and half years’ time have come back to 24%.
Couple of measures that we have undertaken during the process is to completely change the underwriting model based on a much state of art Bureau model now. At the same time, some of the segment which has given a slightly elevated slippage, we completely stopped those segments. So, the book is fairly balanced. We are comfortable growing at 24% or 30% or 35% maintaining the asset quality. In terms of the incremental slippage that you may be talking about in this quarter, it’s 100 crores on a slippage of 2500 crores for the quarter. So, it's not any way significant. You get a like unsecured personal loan is something that you need the market growing in that segment, you want a bit of margin is quite high also, you can't put everything on the same yeah, but I don't know other banks, but we're quite comfortable at 25%-30% growth because underwriting quality is much better as compared to what you had in the past because of the model part of it. Anything Mudaliar saab you want to add further on this?
Sir, only one additional point I will give it is, we are now moving towards more of the salaried class account where we are going into the personal loan. So, that gives us some additional comfort on this.
Okay.
Okay. Got it and last question on employee provision, so this quarter the run rate has been high. Is it more to do with the interest or discount rate assumption or maybe now and maybe if the rates decline would we see a relatively higher provisioning requirement or we have already factored that in because that's going up to almost like closer to 1150 odd crores for this quarter?
You're right. Actually, we are slightly adequately covered in the segment with regard to the discount rate that you are referring. So, we are quiet, I mean that way the adequately provided on the matter. Anything CFO, you would like to add here?
Yes, Sir. So, Kunal, as you know, there is a movement in case of the gratuity it has moved from 6.99 to 7.05% and also the fund size, the requirement is there. So, as a result of that, there is an increase in this provision amount, but we are prudent in taking the provision. All the provisions as required has been provided till date.
So, the next question is from Jay Mundra.
Yeah. Hi. Good evening, Sir. Thanks for the opportunity.
Good evening. Please go ahead.
Sir, few questions, first on, if I look at your interest on advances, right only the gross interest on advances that has gone up by 9.7% YoY in this quarter? Versus 11.8% growth in advances, right? So, we are in at least we would have increased the MCLR, we are doing more PL, less corporate, asset quality has been holding up, so why is that the interest on advances growth is lower than the loan growth?
Okay. Let me respond to that. Actually, rather, that's very positive that the book increase is 11.8% and the interest income increase is almost 9.7%. See, once stance, that you would have seen that we are also at the meantime building the quality of the book, right. So, the quality of book covers with regard to, as we discussed on the previous, can we reduce the personal loan growth, you know the margin in personal loan is very high.
Similarly, a segment where there is bit of elevated stress therein, you would have seen my NBFC book has gone down as a percentage. The YoY growth is very less because this is induced by the regulatory norms that came in. So, it's a balance in terms of how do you again put the income growth at the same time create the underwriting quality and earlier also we said for us the underwriting quality is one of the main building blocks while creating the book. So, in that way I'm quite happy that the growth is both balancing out in the 11.8% and 9.7%. So, going forward, I mean depending upon the interest outlook, there may be changes on the pricing of the loan asset and then we'll map it out accordingly what is the percentage increase there will be. Anything, Madam Beena you would like to comment on the planning prospective on the income growth in advances? You are on mute ma’am.
No, Sir.
Okay. Fair.
Okay. Secondly, Sir, on your margins, right. Sir, I heard your commentary, if I were to adjust for the 350 odd additional recovery that we had in second quarter, right. So, then the margins in second quarter would have been 3% and that has now come down to 2.94. Would you believe, considering your emphasis on quality and still tight liquidity, the trend maybe should be similar, right? I mean Q4 margins can actually be lower by a similar adjusted number 5-10 bps lower, could that be a fair assumption?
See, my nine months NIM is 3.08%, so one factor again I said during commentary that the penal interest and penal income impact is almost 5-6 bps negative, right. So, otherwise, it would have been 3.13 or 3.14%. On the recovery out of written off accounts exactly, it depends on the recovery that happens, how much you are recovering. If you are able to recover higher than the principle, obviously there could be an interest component which will go to the interest
income. So, there are some one off on that, so that positively attributed, but at the same time, let us also look at the deposit cost, which is again being elevated across the system. Rather on the margin cut that you have taken is much lower as compared to many of the industry that we have seen. So, it's a balanced call. You would have seen that there is a corporate loan growth slightly lower as compared to what we did in September. Typically, while providing full money to the CapEx, the term loan segment, lot of refi transactions that happens, lot of takeover transactions that happen which is again at a very fine price, obviously high-quality asset, and there again slightly we try to grow lower as compared to the last quarter.
So, these are all calibrating calls, in terms of how do you manage it, but the full year guidance that on the margin side we said 3.05 +/- 5 bps, that means 3% to 3.10% for the full year. I am talking about Q4 can be any number that you can estimate, but the full year would be 3 to 3.10% with an upside bias. Why the upside bias is that a couple of factors that we are anticipating that the market to happen particularly, there is an improvement of liquidity that is happening because the regulator, the RBI, injected durable liquidity now. If there is an expectation of a rate stance change or a cut happening in Feb policy. So, our market borrowing size that is also significant amount will undergo a change because that rate can reset quickly on that. Typically, the CD book that we are carrying, almost can reset in no time. A lot of other deposits also, there are maturing deposit happening before March.
So, based on that we anticipate that full year guidance will be keeping somewhere between 3 to 3.10%, whatever may the scenario going forward on the credit front.
So, Sir you're saying this is assuming some rate action also, right? Even if there is a rate cut, you will hold onto this more or less the guidance, right?
Yeah. The upside that is what I said. Ideally, otherwise, you can take the median number at 3.05, right. Hopefully, but I can still optimize to 3.10%, if some of the assumption comes true for us, in that way.
Thank you, Sir. The last question for this evening will take it from Nitin Agarwal.
Yeah. Hi. Thanks for the opportunity. Sir, I have a question around your business growth. While you have reported a similar growth in advances and deposits and that's something we appreciate, but at the same time bulk deposit mix has also gone up during the year. So, what will be the any particular threshold that you will look to maintain because as you go forward, the requirement of deposits will remain as is to support the loan growth and CD ratios are already elevated. So, any particular level of bulk deposit beyond which you will not want to venture in?
Sure. We said earlier multiple quarters, the dependency on the bulk has to go down. Actually, if you look at Bank of Baroda the earlier quarters, there was a high amount of dependency vis-à-vis bulk deposit. We said now for almost 6-7 quarters the dependency has to go down. The dependency doesn't mean that the outstanding would go down for every time. Although, we reduced the outstanding consistently for many quarters, this quarter it is slightly increased. The slight increase vis-à-vis the normal growth of deposit of let's say 11.8%, this 14%. This is precisely for two reasons. One is that we are able to grow CASA higher than many of the peer in the system right.
My last quarter CASA growth was 7% and this quarter is 6.5%, where also at the same time, the retail term deposit also able to grow at 9.5-9.6%. That is allowing us slightly on a mix to grow slightly higher in the bulk deposit keeping, there is a liquidity constraint in the market, right. So, in that way the stance continues to be lowering the dependency, but if there is a requirement while you can optimize on the both side or if there is a requirement to give a certain resource mobilization, then we will keep
on raising on the bulk deposit. The number that you're looking at, 2,44,000, there is almost 25%-28% component of certificate of deposit therein.
And the certificate of deposit as you know is for a short-term, at a much lower rate than the wholesale bulk deposit rate. And in case there is a, hypothetically thinking, a cut happening, this market would react very fast to that. So, in that way you balance out, it's a combination of many strategies in terms of how do you optimize on a cost. The stance continues to be lower dependency on the bulk deposit.
That means this is a percentage of total deposit should not go up rather for many quarters actually significantly we have reduced, although we have not disclosed to the market the number, but we said we will reduce the dependency in the bulk deposit and then continue to be the same stance for the future quarters.
Right Sir and Sir the second question is on the retail GNPA, because if I look at the segmental GNPA, retail is one space where in the GNPAs have gone up over last one year pretty sharply and within that specifically the personal loan where in on a book which is growing well, the GNPA ratios have been inching up. So, how do you look at that and how long will you think the stress will continue especially in the first loan book?
Personal loan, see the GNPA personal loan December over September, the growth is, it has from 3.16% I believe it has gone to 3.9% level. In terms of the absolute number, this is roughly around slippage of 100 crores right and my normalized slippage amount is roughly around 2500 crores, that’s not significant for me. Again, retail we in one and half year, we improved the underwriting quality, but then there are legacy book therein. This book is a small book. Actually, my outstanding is 30,000 odd crores. The incremental slippage that you are talking about is much lower and the retail GNPA is going down. Like other components of the GNPA, I mean the elevated slippage is not there. So, it is much more manageable. This is a segment where it's a NIM accretive. It gives a good margin. There is a requirement. People look for a bundle product rather with a secured loan along with unsecured loan. So, we will grow at 24%, 25%, 30% kind of a level. I’m quite comfortable growing at that level and not going to put anything stress in terms of slippage, particularly on the unsecured personal loan. So, on the planning perspective, Madam Beena, anything you want to comment on the retail personal loan on this?
Sir, with regard to the retail personal loans, we have been going quite slow. The growth this year has been, though it has been 7% we are more or less going with salaried class advances and we are not looking at the other advances as we looked in the previous years. So, our focus would continue to be on the salaried class personal loans. Not that we would de-grow, but focus would be more on the salaried class and we would continue to grow, but with regard to the best of advances.
Okay. Thanks. Wish you all the best.
Thank you very much. Thank you.
Thank you. That's the last question we will take today. Can I request Manoj Chayani Sir, to please give the vote of thanks?
So, as we conclude today's Analyst Meet, I would take a moment to express our sincere gratitude to all of you for your time and participation. We are thankful to each of our analyst for their valuable contributions and their feedback, which will help this organization to grow a long
way. Your continued support, engagement means a lot to us, and we look forward to have a stronger bond with you. If there is any query, any clarification required in future, you can contact me or our investor relations team anytime you feel like to get it clarified. Let's have a stronger bond with each other to have a stronger organization. Thank you for your participation.
So, thank you very much all analysts on call. Thank you very much.
Thank you.
Bank of Baroda Media Meet for Quarter and Nine months ended 31st December 2024 30th January 2025
Participating members from the Management Team of the Bank ➢ Mr. Debadatta Chand, Managing Director & CEO ➢ Mr. Lalit Tyagi, Executive Director ➢ Mr. Sanjay Vinayak Mudaliar, Executive Director ➢ Mr. Lal Singh, Executive Director ➢ Ms. Beena Vaheed, Executive Director ➢ Mr. Manoj Chayani, Chief Financial Officer (CFO)
Good afternoon, everyone, and welcome to the media meet for Bank of Baroda’s financial results for the quarter ended 31st December 2024. Thank you all for joining us. We have with us today our MD and CEO, Shri Debadatta Chand and he is joined by the Bank’s executive directors and our CFO. We have a short presentation that we will take you through followed by brief opening remarks by Mr. Chand, and after that we will have the Q&A session. Chand sir, I would request you.
Thanks, Phiroza. Once again good evening to all my media friends. And just to introduce the management team, I am D. Chand, MD & CEO of Bank of Baroda, and I have been interacting with you for a couple of quarters like 7-8 quarters now. With me, Mr. Lalit Tyagi, he is the Executive Director looking after the Corporate credit, International banking and Treasury, and with Mr. Tyagi also, we have Mr. Sanjay Mudaliar, he is our Executive Director looking after the IT and also the Retail Assets of the Bank. We are also joined by Mr. Lal Singh, he is Executive Director looking after the Recovery department, more importantly the Agri and MSME vertical and also the HR function of the Bank. And Executive Director who has also joined with us is Madam Beena Vaheed, she is Executive Director looking after all Compliance and Control function including the Retail Liability. And we have also, the CFO of the Bank, Mr. Manoj Chayani. He is interacting with all of you possibly for a couple of quarters now. With this Chayaniji over to you for a brief presentation, thereafter I will go for my opening remarks.
Thank you so much, sir. Good evening, it is my privilege to present before you the financial position of Bank of Baroda for the quarter and 9 months ended 31st December 2024.
The Bank has posted a total business of 25.65 lakh crores as of 31st December 2024 with a YoY growth of 11.8%. If we look at the asset side the global advances have grown YoY of 11.8% with domestic growing at 11.9% and international at 11.2%. Looking at the segment wise - retail continues to grow at 20% as per our guidance. Agriculture around 13%, MSME around 14% and Corporate is around 7%.
In retail also, the mortgage piece and the home loan piece is growing at 16.3% and 16.6% respectively with education around 17%, auto loan 21% and personal loan segment as you know for quite some time we are moderating our growth and it is at 24% right now.
With regard to the liability piece, the total deposit has grown by 11.8% with a domestic growing at 9.2%. And if we look at the credit deposit (CD) ratio, the CD ratio is a little bit elevated to 84.24% as of Q3 FY25. However, two distinct factors are that our domestic CASA has grown by 6.5% which is better than many of the peers. And we are able to maintain our CASA percentage around 40% as we have been doing for quite some time.
Regarding Profitability metrics, operating profit has grown upto 7,664 crore at 9.3%. Profit after tax at 5.6% YoY growth and we have posted a profit of 4,837 crores. Similarly, for last 10 quarters we are posting return on asset more than 1% and as of 31st December it is 1.15%. Return on equity is robust at 17%.
If we look at 9 months’ position we are placed in a better position with total operating profit of 24,300 crores with a growth of 6.3% YoY and similarly in case of return on asset it is 1.17% and return on equity it is 17.03%.
Yield on advances, 9 months ending yield on advances if you look at it, yield on advances has grown from 8.42 to 8.46%. However, there is an increase in the cost of the deposit, this has gone up from 4.85 to 5.09%. As a result of that if you will look at our net interest margin for 9 months it has gone down from 3.14 to 3.08% as on 31st December. This is little less than our guidance of 3.15 +/- 5 bps.
The Bank enjoys a robust asset quality as you can see the gross NPA has reduced from 3.08% to 2.43% at 65 bps down. Similar is the case in case of net NPA to has gone down from 0.70 to 0.59%, and provision coverage ratio remains stable at 93.51%.
The two important metrics showing the robustness of our asset quality is the slippage ratio, this is 0.90% as of 31st December which is within our guidance of 1 to 1.25% and credit cost has gone down from 0.39 to 0.30% which is the best among our peer banks. Similarly for 9 months the slippage ratio is 0.81% and credit cost is 0.47%.
SMA book as you can see as against 0.47%, it is 0.49%, it is at a similar level. Collection efficiency, we are trending at 99%.
Bank enjoys a robust capitalization position of CRAR at 15.96%, CET at 12.38% and Tier 1 at 13.44%.
This is without considering the profitability position. And if we consider the profitability position of the current year then the CRAR becomes 17.34%.
Thank you so much. Over to you, Chand sir.
My media friends, let me again make some qualitative comments on the financial results. As you would have seen the numbers, the outcome is more of a strong one, robust one, a sustainable one, based on the consistent business model we have. The business growth has been quite strong at 11.8% both on the deposit advances. We see another quarter where the growth of deposit is almost aligned with the growth of advances. This is again the underlying, the challenging factor is the growth of the deposit that is what is happening in the system also but in spite of that the Bank has a very strong growth both on the deposit and also on the advances.
One thing which is noticeable is that earlier also we said that we tried to retailize the book more. So, if you look at December 2024 over December 2023 the RAM book which is Retail Agri & MSME, the book percentage has increased from 57.9 to almost to 59.9%. So, roughly there is a change of almost 200 bps between the December ’23 and December ’24 over December ’23 that’s something very significant and that is what we wanted the book to diversify in terms of retailizing the book.
In terms of the CASA growth as the CFO said rightly the growth is 6.5% and let me also remind that our CASA growth in September 2024 was at 7% which is comparing to the system that we have done much better that is what our key focus area. In spite of the challenging deposit market condition the CASA percentage is almost at 39.68%. we are almost able to sustain the CASA percentage vis-à-vis September, in December over September. And we intend to keep the focus on the same way we are focusing on the CASA deposit more as compared as to any other form of deposit.
Our CD ratio we are mindful, this is at almost at 84% so as I said also earlier domestic CD which will operate between 80 to 82% whereas the global CD we would like to operate between 82 to 84%.
The profitability as you look at the book increase is of almost 11.7% to 11.8%. The operating profit increase is of 9.3%. This is again consecutively 8 quarters where we are posting net profit in excess of 4000 crores and the last quarter it was in excess of 5000 crores.
Only on our margin front, this is a industry phenomena in terms of the cost of deposits slightly being higher, the margin has gone slightly lower as compared to our guidance of 3.10 to 3.20%. 9 months NIM is at 3.08%. So, I mean there is a bit of squeeze on the NIM side because of the market conditions but we will be trying to operate within the band of 3 to 3.10% full year for FY25.
Asset quality is one of the best quarters we have had, I said the credit cost is almost 0.30%, the slippage ratio is 0.90%, this is well below our guidance of 1 to 1.25% for the slippage ratio and also below 0.75%
for the credit cost. I think in terms of the quality of book as we have as on today, I think it is a sustainable one. Both net NPA and the GNPA has been trending downwards vis-à-vis YoY and also on a sequential basis.
Also as our CFO said right, this is the 10th consecutive quarter we are posting ROA in excess of 1% and the ROA for the quarter has been 1.15% as compared to 9 months of 1.17%. So, we continue to have a guidance of more than 1% ROA, going forward.
Couple of things on the technology piece which is important, there was an IBA Technology Award and the Bank could get the best prize in terms of being the winner in the AI/ML adoption. Bank was a winner in two segments of the Digital Technology Awards and also runner up in two. In terms of creating the right digital architecture for the customer to get the best service from the Bank.
To sum up the guidance that we want to retain for the FY25, on the deposit guidance continued to be 9 to 11% as we said earlier and this time we have exceeded that 11% on the upper band. The advance guidance continued to be 11 to 13%. And this time the advance is 11.8% slightly on the corporate we wanted to moderate the reason being because the cost of deposit is on the higher side, slightly on the finely priced book on the corporate credit we wanted to go slow on that. The slippage received we continued to be 1 to 1.25%, the credit cost guidance continued to be below 0.75%. On the margin side although we tried to optimize on that but the operative guidance on the margin would be 3 to 3.10% that means 3.05 +/- 5 bps with a bias towards upwards that means we tried to optimize at the upper band which will be at the lower band of the last guidance we had given.
With this again we thank all of you for the joining the call today. The Bank continues to work on having a sustainable and consistent business model, defining the outcome whether it is book increase, whether it is a profit increase and at creating a better asset quality going forward.
Thank you all for again joining and Phiroza for the questions and answer session.
Thank you, sir. We are now opening for questions. If you have a question please raise your hand.
If you have a problem with the microphone you can also type in your question in the Q&A box and we will come to you.
The first question is from Ms. Siddhi Nayak of Reuters. Siddhi, if you can please unmute yourself and ask your question.
Hi, am I audible?
You are audible, Siddhi please go ahead.
Sir, a few clarifications before I start my questions. You said your net interest the margins would be in what range for FY25, I just missed that number, sorry.
For the full year the operating band would be 3 to 3.10% that is 3.05 +/- 5 bps but then the bias is upward in a sense we will try to optimize at 3.10% which is the lower band of the guidance we had given earlier.
Okay. Sir, the other thing you said on corporate loans you said that you deliberately want to keep that book a little slow, what was the reason for that.
See, there are particularly in the corporate book there are capex/non-capex, PSU/non-PSU, so the area where the economy wants a productive capacity to be created we are going long on that we are funding big time on that. But there are asset class where the pricing is very fine
because these are typically high rated, high-quality asset, typically on a refi market or a takeover market and where we have slightly gone slow. If you look at our 3 quarter performance, June we are slightly slower on the corporative credit, September it was in excess of 10%, and December slightly at 6.8%, but the full year we will try to achieve around 10% of corporate credit.
Okay. Sir, coming to my questions right now, what is the ideal retail to corporate books mix that Bank of Baroda is targeting especially and since you said there is some of issue on pricing also on corporate notes so what is the outlook on book mix that Bank of Baroda wants to keep.
Yeah, we said earlier actually over a period of time we would like to …. retail means not only the retail asset we are talking about the entire RAM book we are talking about which consists of Retail Agri and MSME. At some point of time, we will try to reach around 65 and 35, so that data that I am giving as on December ‘23 the RAM was 57.9% and as on December ’24 RAM is 59.9% almost 200 bps changed in the RAM book. So, as you know the retail is growing almost 20% consistently for last many quarters. The Agri MSME for this quarter we added almost 200 bps growth vis-à-vis the last quarter so the RAM is going faster than the corporate obviously the book would tend towards a higher RAM to Corporate, going forward.
Okay. Sir, last question is on your LCR if we could explain what would be the hit if the new draft guidelines were to be implemented.
So, the LCR we have disclosed at 130% which is very strong and comfortable level, right, so 130% as against 100% of the requirement. So, always all the banks would try to keep the buffer vis-à-vis the regulatory requirement. So, it is draft guidelines, the final contour is yet to come out. But earlier also we said that even if the guidelines comes as it is then the impact can be 10 to 12% maximum. So, taking that into account at 130%, we will be comfortably above the regulatory requirement of 100%. But now our normal comfort range is 115 to 120% is the range that we, normally look for.
Okay. And so, my last question is on your provisioning part, it is still like more than 60% increase YoY on provisioning, wanted to understand what was the rationale behind that and how many quarters do you foresee this trend of elevated provisioning to continue.
No, if you get the provisioning vis-à-vis the Q3 it has been higher but if you look at the Q2, sequentially it has gone down, right. So, from 2,336 crores to 1,082 crores, the lower provisioning is because of the better asset quality of the Bank and particularly the provisioning requirement because of corporate credit and all has been very less. So, there is no concern at all with regard to the provisioning. The asset quality is very strong at this point of time so the provisioning requirement is much lower.
Sir, thank you.
Thank you.
Thanks, Siddhi. If I could request everyone to limit their questions to two and we will come back to you if there is time. The next question is from Mr. Vishwanath Nair of NDTV Profit.
Good evening, I hope my audio is good.
Good evening, Mr. Nair, please go ahead.
Sir, with regard to your bulk deposits you said it is 14% growth there, compared to that your retail deposits have grown about 9.7% even though in absolute terms retail term deposits
are higher. But I just wanted to get a sense on this bulk deposit because you have mentioned multiple times on the corporate credit growth the fact is that the deposit cost is higher so you are trying to control margins there. But 14% growth would indicate that you are okay with cumulating the bulk deposits. That’s the first question, sir.
So, I have been guiding the market actually, we have been talking about reducing the dependence on bulk deposits since long. If you look at my earlier quarters the growth has been much lower on the bulk deposit and this quarter because the retail term has grown at 9.7% that could allow our bulk to grow at 14.7%. So, what is important here is that bulk is not only the bulk deposit that including the certificate of deposit which is a lower tenure and much lower pricing. So, depending upon market condition to optimize that we grow, right. In a case we maintain a margin on the other side, to the extent the balance sheet allows us to grow on the bulk side we will grow. But clearly if you look, since I have maintained the CASA at almost at 40% so you can imagine the kind of focus on retail CASA as compared to bulk deposit or any other form of deposit which is higher than the CASA cost, right. As a percentage we are quite below the threshold in terms of percentage of bulk deposit to total deposit. If you look at last 10-12 quarters the percentage is much better as compared to the earlier quarters. Clearly, that’s our focus going forward and the numbers that we are giving on bulk deposit is not only, only bulk deposit it is consisting of a significant portion of the certificate of deposit also.
What share of the 2,32,000 crore would be CD?
CD roughly we have not given here. It almost like 30-35% would be CD component here.
Alright. My second question is on the retail slippages, so there the number is a little elevated. That doesn’t stop you from growing on this portfolio, sir?
See, the retail NPA we have given data somewhere the percentage NPA is 1.3% or 1.31% kind of a level
I understand it is not affecting your book much but you know specific assets are defaulting that’s what.
So, if you grow on the book obviously the absolute number would go equal to the proportion that you want on the book. Looking at both the factors in terms of the growth on the asset side of the retail and also slightly higher what you can say couple of 100 crores higher on the retail asset NPA, it is not at all a concern, rather it is well below our tolerance and threshold at this point of time.
Alright. Lastly, sir, on CASA that seems to be still dropping, you know the expectation is that there is going to be a rate cut soon but it will take time before your deposits are repriced. How soon do you think this can be arrested?
See, we are focused on CASA, I have given a data that in September also the growth is 7% and you would have seen in the system growth particularly other banks’ growth on that.
So, in that way, focus will continue to be there. But at the same time while a tight deposit market we are also not willing to sacrifice the CASA percentage. On the dip that you are looking at 16 bps or around slightly 16 or 17 bps. That in terms of the market actually you can imagine what is the focus that you are going to retain the CASA percentage. So, we will continue to have a lot of optimization within the liability structure so depending upon the assets, the asset pricing how much you could pass
on and the book would calibrate accordingly so that the guidance is on the margin more and also the ROA more.
Understood, thank you, sir.
Thank you, Vishwanath. Joel Rebello of the Economic Times, Joel, you will have to unmute yourself.
Good evening, I hope my audio is good.
Yeah, I can hear you please go ahead.
Thank you. Sir, in your comments in your opening remarks you mentioned that CD ratio of 84% you are very mindful of in the context of you’ll growing the book at the rate that you’ll are growing especially the retail side what are you going to do to ensure that CD ratio doesn’t go up further or you know, you’ll don't get into I think you’ll are already in the danger zone. If I’ve heard you right, I think 80-82% is what you’ll want to be and you’ll are at 84%.
You know, just to slightly I mean tell you here that our domestic CD continues to be in the range of 80 to 82% while the global CD continues to be around 82 to 84%. And when we talk about the CD ratio there are a couple of data points which are important, I am running an excess SLR of almost 6.5 to 7%, I am running a LCR of 130%. So, if in both the data points I think this is a level where we are comfortable at this point of time. Let us also understand that the deposit market is quite tight and with the deposit market improving the ratio would go down. But let’s say again on the growth the numbers we have said deposits we want to grow at 9 to 11%, advances we want to grow at about 11 to 13%. If you see, if we are at the top end of the growth, deposits 11% and advances 13%, I think below 84% CD we can achieve both the targets. So, we are very certain with regard to how do we construct the book so that we maintain the CD at the same time achieve the growth guidance that we are giving for the full year.
So, in other words if I have read you correctly you do not expect CD ratio to go above 84% for the fiscal year.
Yeah, yeah.
So, you are at the peak in CD terms.
We are comfortable at this level.
On the margin side, sir, year-on-year margins have fallen. I can understand cost of the funds getting expensive, liquidity tight, but your yields on advances have also fallen year-on-year.
Can you just tell us what is the problem that yields on advances, sir?
No, actually there is no, see, if you look at the ROI matrix of the advances side, whether it's BRLR or the MCLR, these are already saturated since long, right? So, the asset side, where the cost of deposit was catching up in terms of month-to-month and quarter-to-quarter. So, this is what the structure we have. In that scenario, there will be a bit of repricing happening because of the asset getting repriced. There are resets happening, consequently putting some impact on the yield side. So now we’re at a scenario where you are looking at a cost moderation because of the aspect that we talked about. And I think, which is again going to balance out going forward in that way.
Okay. So basically, if I've understood again correctly, you're saying that it is not because your loans have been repriced at a lower rate because of MCLR adjustments or whatever in the last few months. That's why the yield has come down. I mean, put it simply?
There are two ways. The reset can happen at a higher rate or can happen at a lower rate. But let's say again, a couple of things I have said, that personal loan, which was quite NIM accretive, we have reduced the exposure significantly. The NBFC exposure also would have seen, suppose you have that analyst presentation, there the percentage has gone down. So, while balancing the portfolio, you have to look into what is the RWA, the risk-weighted asset also in that way. So, it's a balancing act in terms of how do you structure so that you maintain the asset quality, at the same time, maintain your margin guidance.
One last thing, sir. Other Income has shown a very handsome growth; that's for all banks mostly this quarter. But for y'all it's been pretty high year on year, if I'm looking at 34%. So where is it coming from? What is the outlook? I mean, is it there is either a one-time gains there? Is there some treasury gains that you all made, which was one time? If you can elaborate?
Yeah, two factors who contributed well for this quarter on the Other Income.
Last quarter was because of the recovery of the written off accounts that we said last quarter. This quarter, there is a good growth on the treasury income. The trading profit has been higher. On the depreciation scale, there is a write back as compared to a depreciation provided in last quarter of last year. So, the treasury income there’s almost substantial growth vis-a-vis the last year, the same quarter. At the same time, you can also take a note of one element, there is an interest on the tax refund, that's almost 330 crore. So, that has also contributed to a handsome 34% increase in the Other Income.
Okay. Okay. Just to clarify again, lastly, sir, NIMs, you expect it to be better than this.
I mean, 3-3.10% is better than what you'll achieve in this quarter. That is because you think that retail will continue to grow, the high yielding portfolio will continue to grow, basically?
That's fairly right. So, we have achieved 3.08% for 9 months. The guidance was 3.10 to 3.20%. So, now we’re giving an operating guidance of 3 to 3.10%, we'll try to have upside there, so that we at least achieve the 3.10%, which would be the lower band of the earlier guidance.
Okay. Thank you so much, sir. And all the very best for the rest of the year.
Thank you, Joel. Thank you very much.
Thank you, Joel. Mayur Shetty of Times of India.
You said the provisions were not out of place, the 66%. But your profits have been contained at 5% because of increase in provisions and also operating costs. In absolute terms, both have 600 crore increase in operating costs and around, I think, 400 in provisions. So where do you think the profit increase will come in future? Like, will it be by reduction of these operating costs or do you see the operating income going up substantially higher than 10%?
So, you are right on the matter, actually. If you look at the Net Profit, the growth is 5.6% yeah, the growth is 5.6% for this quarter on the YoY, whereas for 9 months it is 12.6% on the Net Profit. This is one. Secondly, the growth slightly in terms of the Net Profit growth has been significant, but in YoY terms, it is 5.6% because the NII growth has been 2.8% because of the cost increases therein. So, interest expense is growing slightly higher than the increase in the interest income. So, this is typically based on the current market scenario where the system is also facing a bit
of margin squeeze because of the cost of deposit. So, there is a different outlook, going forward. So, in that scenario of that, and normally when you walk into the Quarter 4 of the financial year, it's a very productive quarter for all the banks, right? So, this is a busy season, good productive quarter. If you look at the Quarter 4 results of the bank for multiple years now, always it’s better than the earlier quarters. So, in that way, when we are giving a ROA guidance of in excess of 1%, I think we will be positioned to achieve a significant growth in terms of what do you think the Net Profit that we have achieved for 9 months now.
Yes, sir. And one more question. The 1.5 lakh crore liquidity measures announced by RBI, how will that impact your, say, P&L and balance sheet? Would borrowings go up? Would the interest costs come down?
Ideally, it should be because it's a durable liquidity being injected to the market. And obviously, there should be moderation at the market borrowing cost, and possibly some segment of the deposit cost, particularly the certificate of deposit and all. So that's why actually when we are looking at a NIM guidance, we think of slightly a better outlook on the cost structure on the deposit side and whether it is a borrowing or a certificate of deposit. Even if the retail deposit may slightly take a longer time for a bit of moderation, but other market would react to this. And that’s something positive for the bank.
Thank you very much.
Thank you, Mayur. Mr. Abhijit Lele of Business Standard. Okay, we'll come back to Abhijit. Piyush Shukla of Hindu Business Line.
Hi, sir. Good evening. So just to, just one clarification for Joel's question, you said 330 crore of that penal interest that used to come, has now gone in Other Income in this quarter. 330 crores?
No, no. We said there is an item of around 330 or 340 crore, which is interest on the tax refund, which is an item which is shown as part of the Other Income. So that's something that has slightly boosted the non-interest income, almost the growth has been 34%, right? So, that is what the point I made.
Okay. Thanks, sir. So just two quick queries I have. One is, I want to know what is the loans that you have given against securities in terms of shares, mutual funds? One is that. And then, that product that you’ve launched, Systematic Deposit Plan, how much of a traction has it gained? If you could help me with that.
And the last question is on the ECL. If you have estimated the amount of provision that you would make as per the draft norms? I understand the final guidelines have not come in, but have you done any estimation of how much provision you will have to make? Thank you.
See, on the loan against shares and mutual fund, I think we do have an insignificant exposure therein. And so hardly any exposure on that. Although I don't have ready data, but then that’s not a product we have been quite active on that. So that would be very insignificant.
Secondly, you talked about the ECL impact. As the framework is still yet to come, but then obviously, we have our calculations, the proforma which is shared with the regulator. But then the impact currently, because it allows for an amortization over a period of 5 years in that way. So, I don't think the impact is going to be very significant vis-a-vis the numbers we are doing. Actually, like you, I have read in multiple newspaper also, like banking system, the impact on the CRAR can be maximum 100
to 125 bps. So that's a ballpark number everybody talks about, and we can also possibly have that kind of impact. But normally, once the guidelines will come, then definitely we'll disclose all the numbers required to guide the market with regard to the actual numbers, right? So, this is one.
I just missed your second question. What was that?
SDP, sir.
Yeah. SDP has seen a good traction, good response, and with the Master Blaster being our brand ambassador, now we’re getting very good traction on that. I think the last 6- 7 months would have mobilized more than 3,000 crores on the SDP side. So that's getting good traction.
Sir, just one last question on this Nainital Bank. Last year there were a couple of reports. Is there any update on the likely stakes sale that you were going to do? Is there any update on that front, sir? Thank you.
So as of today, Piyush, no update on that. Actually, all my subsidiaries, including Nainital Bank, are unlisted and continue to be unlisted. The divestment depends on a host of factors in terms of process, timing, valuation, the approval process. So, there is no set timelines for any of the divestment, whether it's Nainital or any other subsidiary that we talked earlier. So, once the right time comes, we'll announce to the market. But as of today, it's unlisted and will continue to be unlisted.
Thank you, sir.
Thanks, Piyush. The next question is from Kshipra Petkar of Informist.
Hi, sir. So just a couple of questions. The first is on your expenditure on tech. How much are you expending? Are you planning to increase that portion for this year and for FY26 as well?
Yeah, to respond, Kshipra, actually, normally, all our expenditure, both revenue and the CapEx is in excess of roughly around 4,000 crore. But normally, as a principle, what we normally decide, that I set aside around 12 to 15% of the operating profit towards the tech spend, which includes the capex and also the operating expenses. And we'll continue to be guiding on that.
That is a significant amount and that can take care of the requirements for investing on the digital side.
Okay. S,o the other one was, you recently launched your liquid fixed deposit and a couple of other deposits as well. So, any plans on coming out with more products on the deposit side?
Yeah, actually, the point, Kshipra, you're rightly touched upon that, as we keep focusing on the retail side of the CASA and the retail term deposit. Earlier also, we announced to the market that we need to keep innovating because we need to meet the trust of the depositor or the preference of the depositor in the current scenario. And some of the products that you are referring, whether it is a liquid deposit, whether it is an SDP deposit, whether it is a Green Deposit, these are all timing on the customer preference. And out of all the deposits we're getting good traction as on today.
And we may innovate particularly on the Green Deposit, we are looking for a new… because Green Deposit has got a very good traction. The outstanding Green Deposit as on today is more than 1,000 crores since we have launched that. We're trying to again create a new structure for the Green Deposit. We'll keep on innovating within the regulatory norms so as to meet the slightly changed preferences of the depositor that we have seen for last couple of quarters in the banking sector.
Sir, the last one. Any fundraising plans for this, the rest of the financial year as well as for next year?
There are two ways I will address this. One is a normal fundraising in terms of Infra. We almost raised 15,000 crores. In terms of tier 2, we raised around 3,500 crores. We'll continue to do that. There is some headroom available in terms of our announcement, both on the Infra and also tier 2. If you're referring to the equity raise, the Bank has not decided as on today; the Bank is quite adequately capitalized. But looking at a future scenario, we'll plan, and accordingly we'll let the market know at that point of time.
Sure, sir. Thank you so much, sir.
Next question is from Anshika of Mint. Please unmute yourself.
Hi, sir. Good evening. Sir, two questions. One, you mentioned that on the personal loan, you're going a little slower on the personal loan portfolio, but it's still grown about 24% on year, and about 7% on quarter. What was the growth last year and what has been the slowdown? How much has the slowdown been?
And the second question is, because you said you're going a little slower on personal loans, if you could just share the breakup of disbursements within the RAM portfolio this quarter, and whether you expect that share of disbursements to continue, or could we see MSME loans going a bit faster and there could be some amount of shift in the portfolio mix within RAM?
On the personal loan, actually, if you have the data of more than a year, the growth was almost 70-80% continuously. So, in July 2023, we announced to the market that we're going to moderate that. And, that was much before any discussion happened on the unsecured personal loan in the entire market itself, right? So currently, we have come to a very… earlier also I said, the growth target would be something around 30 to 35%. This quarter, the growth is 24%. We slightly segmented the unsecured personal loan in terms of salaried class, in terms of category of customers who have a higher bureau score. So currently, the kind of underwriting quality that we're looking at, we're quite comfortable growing at 25-30%. Mind it, my base is quite low as compared to many of the peer banks on the market, right? That is one.
Secondly, on the RAM side, yes. Actually, not only the retail, growth of almost 20% for last many quarters now. If I remember, it is almost like 10-12 quarters, the retail growth is 20%. Agri and MSME, in December 2024, we picked up almost 200 bps more than the September quarter. So clearly, there are segments under Agri and MSME where we think these are again going to be a sweet spot, good quality underwriting quality and the growth continues to be higher there. We'll try to optimize further on that, no doubt. So, the overall piece that we are working on the RAM, slightly grows faster than the corporate credit, so that I chase the mix that you are talking about on that. I've changed that 200 bps December ‘23 to December ‘24, and going to improve further upon that.
So, would you be able to share the disbursement breakup?
On the RAM disbursement all together, I may not have. We can share offline. Any idea Mudaliar sir on that?
Sir, we will share separately, I also don't have immediately.
Sure, sir, no problem. Thank you.
Thanks Anshika. Abhijit Lele sir, do you have a question? Not sure whether you can unmute yourself.
Hi, sir. One is with regard to the MCLR book. Is there still room left for you to revise the rates, keeping the cost of funding behind? And if that is the case, what would be the broad basis point that you see, so that that might improve your yield on advances?
Just to answer this actually, the cost of deposit, as we said earlier, almost peaked out in a manner, right? So, if there is a cost increase that happens, MCLR is directly dependent on the cost of deposit as per the model. So, there may increase in case the cost goes up. But then, now we are at an outlook which is completely different than the outlook, maybe a month back. There is durable liquidity injected to the system, both in terms of CRR cut and also the measures announced.
There is a policy again due, which again would be much watched in terms of the policy stance, and particularly, on the rate stance. So, in that scenario, I think fairly well balanced in terms of managing book, in terms of maintaining margin. Our book is actually rather a strong and robust one. And while again, the idea that we are doing on the book, in case you look at the book increase, the profit increase, the margin guidance, it's a very balanced, sustainable and consistent vis-a-vis many quarters now. So, the model that we're working on, the business model, is to have a sustainable and consistent business model. And I think any cost factor going up and down, the system would take care of it, in terms of how do you pass on and how do you absorb that in the book. So, I think there is no guidance on the MCLR. Typically, it's an ALCO call. But then I'm not seeing a case where the cost of deposits is significantly going up and impacting the MCLR upward in the matter, going forward.
Okay. I'm through with my query. Thank you.
Thanks, sir. Dipankar of PTI. Dipankar, can you please unmute yourself?
Good evening, sir. Sir, I just wanted to understand with respect to your exposure in MFI sector. And, do you see the pressure mounting as far as delinquencies are concerned in that segment?
Actually, my MFI exposure is very less, actually. Maybe around 6,000 crore is the exposure as of today. And these are again, on a rating scale are A and above. Maybe a couple of accounts would be below A. So, if you look at the percentage slippage that we’ve given, this is not at all accounting anywhere in terms of any slippage out of the MFI book. So, we are quite comfortable at the current exposure, which is not large, a small one. At the same time, the asset quality of our book of 6,000 crore on that.
Okay. And since you said that, if you plough back your profit, your CRAR comes around 17%. So that is good enough to sustain the credit growth of 11 to 13%.
Absolutely. Rather, it would support a higher growth of 14 to 15%, but then we're comfortable with that.
So next year, you may look at raising some capital, or next year also you will be sufficient?
So, in terms of the normalized growth and the plough back, I mean, we do have the requisite growth capital to sustain growth of 14 - 15%. That's not a point. The point, which again, I'll slightly give a dimension that, ECL framework is one thing that we need to factor in. So, the Bank would be looking at all these aspects, and possibly at the right time, would announce whether there is a requirement of equity or not. So as of today, no plan for an equity raise. But then going forward, yes, we may evaluate all the options and come back to the market at the right time.
Thank you, sir.
A couple of questions that have come in on the Q&A chat. So, one is from Manish Suvarna of Moneycontrol. Given that there's an expectation of a rate cut in Feb in the monetary policy, what impact do you see on NIMs?
And can you clarify on the liquidity announcement by RBI and how it will help Bank of Baroda?
So, Manish, there are two things on the rate cut. Yes, it's an expectation that there may be moderation, looking at the liquidity measures announced and the global outlook therein.
But it's a Regulator’s call. In case that rate cut happens, then obviously, we expect a cost moderation immediately to happen on the market side of the deposit side, on the resource side. Retail deposit may take a lag effect in terms of resetting on the deposit, retail deposit. But obviously, the bulk, CD and market borrowing would immediately react to that, and that would be positive to the NIM and for the Bank.
The liquidity measures again announced is also positive because as I said, the system liquidity was lax, negative. So now, there is a durable liquidity being injected to the system. And I think, that’s again, positive in terms of cost moderation and positively impacting on the NIM that the Bank has, or is going to be for the full year.
One question from Ram Kumar of Hindu Business Line. Why is the Net Interest Income growth muted, but Other Income growth is robust? And why is the bank buying pooled assets? And what do these assets consist of?
See, the first point is the Net Interest muted growth because obviously, the interest expenses growth has been higher than the income. So, the Net Interest Income has been muted. And that's typical to the current market conditions for the industry per se. So that's very apparent therein. In case there is a elevated cost structure on the deposit, and the asset repricing has happened long back in terms of the BRLR and the MCLR, then obviously the NIM.
But earlier also we said while looking at the profitability side, we do not take NIM as the only parameter. We always said NIM and ROA are the twin parameters. To improve the ROA, we need to have a very strong Other Interest income. So that has been very strong this quarter, and the earlier quarter also it was very strong. So, while we'll react to the market scenario, in case, there is an interest expenses going up because of market scenario, we'll try to optimize on the non-interest income, which has been slow for the Bank for many quarters now. So, we optimize on the ROA. That's why the ROA has been consistently above 1% for 10 quarters now. And this quarter it is 1.15%, and the full 9 months it is 1.17%. So, we'll operate on both as a twin objective to operate. Somewhere, it may be optimized and other factor may not be optimized. But it's a balance for us to try to optimize on the margin and also at the ROA.
Thank you, sir. The last question for today is from Falak of Deccan Chronicle...
Okay. Then I think that is it for this evening. Thank you all for joining us. Have a good evening.
Thanks, all media friends on the call. Thank you very much.