MUMBAI, 10 AUGUST, 2020 (GPN): The share price of Bank of Baroda declined over 3 percent in the early trade on Tuesday after the state-run lender posted a net loss of Rs 864 crore for the quarter ending June, as provisions rose by 71 percent over last year. The bank had posted a profit of Rs 710 crore in the same quarter last year.

“Global advances growth was at 8.6 percent with organic retail loans growing at 13.5 percent. Domestic CASA ratio increased by 294 bps YoY to 39.49 percent. Domestic retail term deposits increased by 10.4 percent,” the bank said in its BSE filing.

Amalgamation benefits visible through realization of synergies with 99 percent of estimated synergies for year one realized in first year itself, it added.

Asset quality has been improved with gross non-performing assets as a provision of gross advances falling to 9.39 percent in Q1FY21 against 9.40 percent in March quarter, while net NPA fell to 2.83 percent from 3.13 percent QoQ.

Slippage ratio fell to 1.64 percent in June quarter 2020 compared with 3.56 percent in June quarter last year. Domestic slippage ratio in Q1 FY21 was at 0.45 percent.

Bank of Baroad has extended asset classification benefit to Rs 14,359.76 crore of loans. It has made additional provision in Q1 at Rs 996.1 crore and as a result, total provision as of June 2020 was Rs 1,806.76 crore.

Provisions and contingencies for the June quarter increased significantly to Rs 5,627.7 crore, compared to Rs 3,284.88 crore in year-ago period.

Provisioning coverage ratio (including floating provision) improved to 83.30 percent as on June 2020, compared to 81.33 percent in March 2020.

Pre-provision operating profit increased 1 percent to Rs 4,319.94 crore, while non-interest income declined 5.3 percent to Rs 1,816.28 crore YoY in Q1FY21.

The stock fell 3.08 percent to an intraday low of Rs 47.05 per share on the BSE. It, however, recovered slightly, trading 2.27 percent lower at Rs 47.45 apiece, at 10:45 am.

The bank’s net interest income during Q1FY21 rose 4.91 percent to Rs 6,816 crore from Rs 6,497 crore, YoY. Global net interest margin (NIM) stood at 2.55 percent and domestic NIM at 2.63 percent compared with 2.62 percent and 2.73 percent, respectively, during the same period of the previous financial year.

Asset quality improved marginally as gross non-performing assets (NPAs) ratio for the June quarter stood at 9.39 percent versus 9.40 percent in Q4FY20. Its net NPA ratio stood at 2.83 percent compared to 3.13 percent in the previous quarter.

Around 21.4 percent of the bank’s term loan book is currently under the moratorium, the management said in a concall with the media.

The bank set aside Rs 5,628 crore in provisions for the first quarter of FY21 against Rs 3,285 crores in the same quarter last year. Of this, the bank made Rs 3,458 crores provision for its bad loans, and Rs 1,811 crore for its standard advances.

Here’s what brokerages have to say about the bank’s Q1FY21 earnings:

CLSA

“Bank of Baroda’s 1QFY21 performance was weak in our view with moratorium at 17 percent-21 percent of total loans, 2x SBI’s moratorium level, and its capital position also deteriorated to a 9.1 percent CET-1 from 9.4 percent in Q4FY20,” CLSA said.

CLSA had recently downgraded BOB on the risk of highly dilutive capital raising, and after management indicated the company intends to raise Rs 9,000 crore in the capital in H2FY21.

The brokerage maintained an ‘Outperform’ rating with a target price of Rs 52 per share.

Morgan Stanley

Lower CET-1, elevated slippages, and elevated term loan moratorium were the key negatives, the brokerage said. It maintained an ‘Underweight’ call with a target at Rs 42 per share.

Nomura

Nomura believes dilution risk remains high as well with weak capital position and sub-par RoE. It maintained a ‘Neutral’ rating with a target price of Rs 50 per share.

Citi

Citi believes higher provisions in Q1 led to loss. It maintained ‘Buy’ call but reduced target price to Rs 65 from Rs 75 per share earlier.

Angel Broking

“Bank of Baroda is trading at low valuation compared to historical, however, here on investors will keenly watch for moratorium number movement and RoE improvement trajectory,” said Jaikishan Parmar, Sr. Equity Research Analyst, Angel Broking.