Bank of Baroda conducted a conference call 30 January 2025 to discuss the financial results for the quarter ended December 2024. Devdutt Chand, MD&CEO of the bank addressed the call:

Highlights:

The bank has recorded a healthy 12% growth in the business volumes to Rs 25.65 lakh crore end December 2024 driven by 12% growth in advances and matching 12% growth in the deposits.

The domestic loan book has grown 12%, while the international loan book has expanded 11.2% end December 2024.

The domestic loan growth has been driven by strong organic growth for the retail segment at 20%, while the agriculture loan book increased 13% and MSME 14% showing improvement over the past growth. The corporate loan book has also moved up 7% end December 2024.

Within the retail loan book, there is growth of around 16.3% in mortgage, 16.6% in home loan, education at 17%, auto loan at 21% and the bank is continuously moderating the personal loan growth to 24% end December 2024.

Driven by the retailization strategy, the bank has exhibited a sharp 200 bps yoy increase in the share of retail, agriculture, and MSME (RAM) loan book to 59.9% end December 2024 from 57.9% end December 2023.

The bank would continue to focus on a retailization strategy to diversify loan book, improve margins and reduce risk weight density.

Deposit remains a constraint for the banking industry at a large. However, the bank has grown deposits at 12%, while the CD ratio is little elevated to 84.2%. The CASA deposit grew at a steady pace of 6.5%, which is better than the peer banks. The bank has also maintained Casa ratio around 40% as per guidance.

Bank enjoys robust profitability and posted 9.3% growth in the operating profit Rs 7664 crore in Q3FY25. The net profit has moved up 5.6% to Rs 4837 crore.

The bank has consistently maintained RoA above 1% for the tenth consecutive quarter at 1.15% in Q3FY2025. The RoE is also strong at 17% for Q3FY2025.

The bank has witnessed an improvement in the yield on advances to 8.46% in 9MFY2025 from 8. 44% in 9MFY24, but the cost of deposit increased to 5.09% from 4.85% leading to decline in NIM to 3.08% from 3.14%.

The NIM has been at the lower end of the guidance of 3.15% +/- 5 bps.

The margins of the bank was impacted to the extent of 5-6 bps on account of accounting change relating to penal interest to penal charges.

The normalized run rate for recoveries from written off book is at Rs 750-800 crore, while the bank has witnessed one-off recovery in Q2FY2025 providing additional interest income recognition of Rs 300-350 crore, which is absent in Q3FY2025 impacting NIMs.

The bank has robust asset quality with gross NPA trending down to 2.43%, down 65 bps yoy. The net NPA also reduced to 0.59% from 0.70%and provision coverage ratio is robust at 93.51% end December 2024.

The slippage ratio improved to 0.90% in Q3FY25 and 0.81% in 9MFY2025 as against guidance of 1-1.25%.

The credit cost was also low at 0.30% for Q3FY2025 and 0.47% for 9MFY2025 against the guidance of 0.75% for FY2025.

SMA book has been stable at 0.49% end December 2024 as against 0.47% end September 2024. The bank enjoys a healthy collection efficiency of 99%.

The personal loan book of the bank is small at Rs 32000 crore with stable asset quality. The bank has improved the underwriting standard and the book is mostly towards the salaried customers.

SMA book including restructured loan book is at Rs 28400 crore which is 2.48% of the total loan book.

There were 4-5 accounts moved to SMA on account of technical reason due to temporary liquidity mismatch, out of that 3 accounts have already pulled back, so there is no concern with regard to the SMA book.

The gold loan book is small at Rs 6000 crore end December 2024.

The capital adequacy ratio of the bank is healthy at 15.96% with CET-1 is at 12.86% end December 2024. Including the profits for 9MFY25, the CRAR is higher at 17.34% and CET 1 rises to 13.77%.

The bank has posted healthy 12.6% growth in the fee Income for Q3FY2025.

The borrowings of the bank have increased to Rs 1.3 lakh crore, including infra bonds and refinancing from local institutions to replace higher cost deposits.

The bank has raised infra bonds of Rs 5000 crore in Q3FY25 and Rs 15000 crore in 9MFY2025.

Guidance

The bank is targeting deposit growth of 9-11% and advances growth of 11-13% for FY25.

The slippage ratio is expected to be within 1-1.25%. The credit cost is expected to remain below 0.75%.

The bank expects NIM to be at 3.05% +/- 5 bps which is 3.0-3.10% with upward bias on account of favourable liquidity and policy rate changes providing benefit on the borrowing cost.