State-owned lender Bank of Baroda to look at selling some of its non-core assets of about Rs 2000 crore during the financial year 2018 as a part of its capital raising plan.
"We continue to focus on selling our holdings in our subsidiaries or joint ventures, it is about Rs 2000 crore there… cannot predict the timing of it. One of our investments is due for listing this year. We are hoping to exit some of our investments depending on the IPO listing and other processes. But we have been assured it would happen during the course of the year,” said PS Jayakumar in the post results announcement conference.
He added that the bank sees value in its insurance company, our share of wealth management is working well, see lot of value in the company so no plans to sell.
The bank’s profit dipped by half with a 52 percent fall in net profit at Rs 203.39 crore for the first quarter ended June on higher provisioning towards bad loans.
The government-owned bank set aside higher provisioning of Rs 2,156 crore for June quarter of 2018, as against Rs 1,986 crore in April-June 2016-17. It also made provision at 20 percent towards secured sub-standard advances as against the regulatory requirement of 15 percent.
Bank of Baroda's gross non-performing assets (NPAs) or bad loans rose to Rs 46,172 crore as on June 30, 2017, up from Rs 42,991 crore as on end-June 2016. Percentage wise, gross NPA ratio increased a tad to 11.40 percent of gross advances, as against 11.15 percent a year ago.
Jayakumar said, “Some legacy issues are dragging down the book. The impact would have been lesser if some of the larger accounts got resolved…We stay with our previous guidance of Rs 4000 crore increase in NPAs for the full year as the slippages this quarter was due to two lumpy accounts.”
The two lumpy accounts were from the telecom and an EPC (engineering procurement and construction) firm.
During the quarter, Bank of Baroda witnessed increased NPAs in its agriculture loan book (Rs 868 crore) due to farm loan waivers, MSME (micro, small and medium enterprises) of Rs 1,050 crore, retail at Rs 369 crore) and Rs 1909 crore in the corporate book.
The bank plans to use the insolvency process aggressively and has a pipeline to file 26 accounts in the NCLT (National Company law Tribunal).
“One is already admitted while 3-4 would be admitted soon…These are not the big names but exposures of very medium size, about Rs 100 to 500 crore but we are using the NCLT and continue using it.”
The bank's net interest margin or the measure of its profitability declined to 2.12 percent against 2.23 per cent in the June 2016 quarter. Its net interest income (NII – difference between interest earned and expended) grew less than 1 percent to Rs 3,405 crore versus Rs 3,372 crore last year. Sequentially, NII declined from Rs 3,582 crore.
On Friday, Bank of Baroda shares ended 3.91 percent down at Rs 142.55 apiece on BSE.
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