Simplex Projects case: Bank of Baroda moves SC against Calcutta HC's order

Bank of Baroda (BoB) has moved the Supreme Court (SC) against the Calcutta High Court’s (HC’s) order in the matter of a bank guarantee issued on behalf of Simplex Projects.

The matter pertains to a bank guarantee of Rs 6.97 crore furnished by BoB to Indian Oil Corporation (IOC) on behalf of Simplex Projects. IOC had demanded the amount be encashed under the bank guarantee, which the bank did not release since the guarantee was not valid on the date of invocation.

BoB, in a statement, said after seeking legal advice, it had decided to exercise rights available by preferring a challenge against orders passed by the Calcutta HC. BoB approached SC on Monday. The HC had asked the Reserve Bank to consider appropriate steps against BoB, including revoking licence or authority to carry with banking business, for failing to honour a bank guarantee.

Bank of Baroda cuts MCLR by up to 10 bps; home, auto loans to get cheaper

State-owned Bank of Baroda on Monday announced cut in its marginal cost of funds-based lending rates (MCLR) by up to 10 basis points, effective February 12.

The reduction will make home, auto and other loans cheaper for new borrowers.

With this reduction, the one-year MCLR has come down to 8.15 per cent per annum from 8.25 per cent, according to a bank statement.

The reduction in MCLR by the bank comes a day after the Reserve Bank of India left the repo rate unchanged at 5.15 per cent but announced long-term repo operation for up to Rs 1 lakh crore, making cost of funds cheaper for banks.

While the one-month MCLR has been reduced by 5 basis points to 7.55 per cent, overnight, three- and six-month rates were down by 10 basis points, it said.

Last week, market leader State Bank of India (SBI) announced 5 basis points (bps) reduction in its MCLR across tenors, effective February 10.

This was the ninth consecutive cut in MCLR by the bank in the current financial year.

Q3 results: Bank of Baroda posts net loss of Rs 1,407 cr, shares decline 3%

Bank of Baroda (BoB) shares on Monday declined by over 3 per cent after the company reported a net loss of Rs 1,407 crore for December quarter.

Shares of the company fell 3.40 per cent to close at Rs 92.35 on the BSE. During the trade, it dropped 3.76 per cent to Rs 92.

At the NSE, it dipped 3.13 per cent to close at Rs 92.60.

On traded volume front, 14.50 lakh shares of the company were traded on the BSE and 4.4 crore shares on the NSE during the day.

State-owned Bank of Baroda on Friday reported a net loss of Rs 1,407 crore for the quarter ended December on account of higher provisioning for bad loans.

The bank had reported profit after tax of Rs 436 crore in the same period last year.

Provisions for bad loans rose 47 per cent to Rs 6,621 crore from Rs 4,505 crore last year.

Total provisions increased by 54 per cent to Rs 6,365 crore as against Rs 4,133 crore.

BoB amalgamated Dena Bank and Vijaya Bank with it from April 1, 2019.

After bad loan issue, experts see more pain ahead for Bank of Baroda

Government-owned Bank of Baroda (BoB) is yet to come out of the woods. Some more pain — it reported a spike in bad loans during the December quarter — is possible, say analysts, given the economic slowdown. Credit costs could stay elevated in the coming financial year.

Says Lalitabh Shrivastawa, deputy vice- president at financial services entity Sharekhan: “In the September quarter, the bank’s slippages were expected to have peaked out. However, even after removing the divergence-related impact, the quantum of slippage continued to remain elevated in Q3 (October-December). We expect asset quality pain to continue in the near term, while the growth is likely to be tepid.”

The bank’s gross non-performing assets were Rs 73,140 crore at end-December, from Rs 69,969 crore at end-September. The figure at end-December 2018 was Rs 74,322 crore.

The extra slippage in Q3 of 2019 was a little over Rs 10,000 crore. Of these, Rs 4,500 crore was on account of divergence (gap between BoB’s assessment of bad loans and those estimated by the Reserve Bank of India for 2018019). This pushed the slippage ratio to 6.78 per cent in Q3, from the earlier 3.95 per cent.

chartS L Jain, executive director in BoB, said at a meeting with analysts that the divergence was due to two factors. One, shortfall in provisioning which happens due to the value of security, which deteriorates with the time for which you have to provide these. Two, asset qualification due to interpretational issues. The bank had, he said, provided in Q3 for all the divergence RBI suggested.

Jain said about Rs 2,000 crore was due to a big financial services entity and Rs 2,000-3,000 crore was due to the segments of agriculture, retail and small & medium enterprises. More from the loan book of BoB than those of Dena and Vijay Bank. The later two merged into BoB at the start of this financial year.

Broking house Motilal Oswal says BoB continues to report weak numbers as fresh slippage stays elevated and business growth moderates. The appointment of Sanjiv Chadha as managing director and CEO removes one concern. However, the standing watch-list and SMA-2 assets in a slowing economy remain a concern, it said. Jain said the bank was not unduly worried over the watch-list accounts; it was regularly monitoring these.

Vibha Batra, co-founder at Fairconnect Business Advisors, said one has to be watchful of the burden of provisioning for some accounts. The macro economic environment would also have abearing on the asset quality profile.

Bank of Baroda raises Rs 920 cr via private placement of Basel III bonds

State-owned Bank of Baroda on Friday said it has raised Rs 920 crore by issuing Basel III-compliant bonds on private placement basis.

The issue which opened on Thursday and closed the same day, saw a total of 11 allottees through private placement of bonds, the bank said in a BSE filing.

A total of 9,200 bonds, aggregating to Rs 920 crore, were issued.

The lender has issued and allotted unsecured rated listed subordinated non-convertible fully paid up redeemable Basel III compliant tier II bonds on private placement basis, it added.

To comply with Basel-III Capital Regulations, banks need to improve and strengthen their capital planning processes.

These norms are being implemented to mitigate concerns on potential stresses on asset quality and consequential impact on performance and profitability of banks.

Indian banking system has been implementing Basel III standards in phases since April 1, 2013. The banks are expected to fully implement these norms by March 2020.

Bank of Baroda underreported bad loans by Rs 5,250 cr in FY19: RBI report

Government-owned Bank of Baroda has reported a Rs 5,250-crore divergence in the calculation of bad loans for the 2018-19 financial year.

The Reserve Bank of India's (RBI's) assessment of its gross non-performing assets (NPAs) for the year is Rs 75,174 crore. Against this, the bank had reported GNPAs of Rs 69,924 crore, it told the BSE exchange. All figures are for the recently amalgamated entity, wherein Vijaya Bank and Dena Bank were merged with BoB.

After the disclosure, BoB's share price fell by 3.3 per cent to Rs 98.9 on Wednesday. Net NPAs assessed by the RBI for FY19 are Rs 29,045 crore, as compared to BoB's own calculation of Rs 23,795 crore. The provisioning BoB had made on its balance sheet for NPAs were Rs 46,001 crore for the year; RBI says this has to be Rs 50,091 crore, an additional Rs 4,090 crore.

The bank has said of this Rs 4,090 crore divergence, it had already made a provision of Rs 1,475 crore in the current financial year. Leaving an additional impact of Rs 2,615 crore. Consequently, the adjusted net loss for FY19 is Rs 10,998 crore, in place of the earlier reported net loss of Rs 8,339 crore.

In recent months, there have been several instances of under-reporting of bad loans by lenders, prompting regulatory action by the central bank.

Last month, the capital markets regulator, Sebi, had said disclosures in respect of divergence and provisioning are in the nature of material events and, hence, necessitate immediate disclosure.

Further, this information is price-sensitive, requiring prompt disclosure by a listed entity. It has asked banks listed on the stock exchanges to make disclosure of divergences and provisioning beyond a specified threshold as soon as reasonably possible and not later than 24 hours upon receipt of RBI’s Final Risk Assessment Report.

Bank of Baroda raises Rs 1,747 cr by issuing Basel III-compliant bonds

Bank of Baroda on Wednesday said it has raised Rs 1,747 crore by issuing Basel III compliant bonds on a private placement basis.

The bank has issued and allotted Basel III compliant additional tier I bonds, Bank of Baroda said in a regulatory filing.

A total of 17,470 '8.99 per cent unsecured rated listed subordinated fully paid up additional tier I Basel III compliant non-convertible perpetual taxable bonds, Series XI' were allotted to 18 allottees on December 18, 2019, the state-run bank said.

To comply with Basel III capital regulations, banks need to improve and strengthen their capital planning processes.

These norms are being implemented to mitigate concerns on potential stresses on asset quality and consequential impact on performance and profitability of banks.

Indian banking system has been implementing Basel III standards in phases since April 1, 2013 and is expected to fully implement these norms by March 2020.

Shares of Bank of Baroda traded down 3.42 per cent at Rs 98.75 on the BSE.

Fitch affirms Bank of Baroda's IDR at 'BBB-'; VR off rating watch negative

Global rating agency Fitch today took Bank of Baroda (BOB) off the Rating Watch Negative and said that public sector bank's asset quality has remained broadly stable in the six months since its merger with two other state-owned banks, Dena Bank and Vijaya Bank. The three had merged in April 2019.

Fitch affirmed BOB’s Long-Term Issuer Default Rating (IDR) at 'BBB-' and its Viability Rating (VR) at 'bb'. The outlook is stable.

BoB’s core capitalisation has moderately improved following capital support from the state in the fourth quarter of the financial year ended March 2019 (FY19) and more recently in Q2FY20.

However, overall performance is expected to remain subdued given the weak macro environment and potential stress in the non-bank and real estate sectors in India. Fitch has put a negative outlook on the Indian banking sector.

The lender's intrinsic risk profile mainly stems from its risk appetite, which has reduced in recent years. But the weak operating environment has rendered its financial metrics, particularly asset quality and earnings, somewhat volatile.

Its key core financial metrics such as the impaired loans ratio and core capitalisation haven't deteriorated materially due to the merger. Its impaired loans ratio, at 10.3 per cent in 1HFY20, is slightly above the sector average.

Nevertheless, any weakness in terms of financial profile has not diminished the bank's franchise and ability to source low-cost deposit funding.

BoB has received two rounds of equity from the state (Q2FYE20: $1 billion and 4QFYE19: $720 million in Q4FY19), which somewhat restored the bank's Core Equity Tier-1 (CET-1) capital ratio (1HFYE20: 9.8 per cent).

"Overall, net NPL-to-equity remains quite high at 35 per cent, but is lower than in previous years. We believe that the state will be willing to inject more equity into BOB to meet growth and provisioning demands," Fitch said.

Bank of Baroda and HDFC Bank cut MCLR by 5 bps and 15 bps respectively

Bank of Baroda, the country's second largest public sector bank, has reduced its benchmark lending rates, or the marginal cost of funds-based lending rates (MCLR) across various tenures.

Its one-year MCLR will be 8.25 per cent, 5 bps below the existing level. The latest interest rate cut will be effective December 12.

There is a 20 bps reduction in overnight and one-month MCLR from 7.85 per cent to 7.65 per cent and a 10 bps reduction in three-month and six-month MCLR, from 7.9 per cent to 7.8 per cent, and from 8.2 per cent to 8.1 per cent, respectively.

HDFC Bank has also reduced its loan rates across tenures by up to 15 basis points (bps). According to the bank’s website, the latest interest rate cut will be introduced on December 7. After the latest cut, six-month MCLR stands at 8 per cent (down by 10 bps), and one-year at 8.15 per cent (down 15 bps). The two-year rate will be 8.25 per cent and the three-year rate will be 8.35 per cent (both down 15 bps). The country's largest private sector bank cut its MCLR last month by 10 bps across tenures.

The country’s largest public sector lender, State Bank of India (SBI), announced a 10 bps cut in its one-year MCLR, whereas Bank of India reduced its MCLR by 20 bps.

During the monetary policy press conference on December 5, Reserve Bank of India governor Shaktikanta Das said, “Although it (RBI) is not in a hurry to keep reducing interest rates, it would work to ensure that the transmission turns more effective since much needs to be passed on.”

He added that the RBI cut repo rate by 135 bps between February and October this year. Of this, 44 bps has been transmitted and the full impact on lending rates is still playing out.

Bank of Baroda raises Rs 1,650 crore via Basel-III compliant bonds

Bank of Baroda on Thursday said it has raised Rs 1,650 crore by issuing Basel-III compliant bonds.

The bank issued 16,500 '8.70 per cent unsecured subordinated fully paid-up additional tier 1 Basel-III non-convertible perpetual taxable bonds' with an issue size of Rs 1,650 crore, it said in a regulatory filing.

The issue, which opened on Tuesday and closed the same day, saw a total of 21 allottees through private placement of bonds.

To comply with Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

These norms are being implemented to mitigate concerns on potential stresses on asset quality and consequential impact on performance and profitability of banks.

Indian banking system has been implementing Basel-III standards in phases since April 1, 2013. The banks are expected to fully implement these norms by March 2020.

Shares of Bank of Baroda on Thursday were trading up 4.16 per cent at Rs 106.45 on the BSE.

Bank of Baroda Sept quarter pre-tax profit zooms 184% to Rs 1,127 crore

Public sector lender Bank of Baroda’s profit before tax (PBT) rose 184 per cent to Rs 1,127 crore for the September 2019 quarter (Q2FY20).

This figure is for the amalgamated entity (standalone basis). The three-way merger of Bank of Baroda, Vijaya Bank, and Dena Bank came into effect during the previous quarter (Q1FY20).

The comparable PBT for Q2FY19 was Rs 397 crore. Net profit of the amalgamated entity rose 394.6 per cent to Rs 739 crore for Q2FY20. Net profit for Q2FY18 stood at Rs 149 crore.

Shares of Bank of Baroda closed at Rs 93.80 apiece on the BSE, down 2.39 per cent from the previous close.

The bank did not factor in the effect of deferred tax assets for this quarter. It will, however, do it before March 2020.

Net interest income (NII) increased by 10.1 per cent to Rs 7,028 crore in Q2, while net interest margin (NIM) improved by 19 bps to 2.81 per cent in Q2FY20 from 2.62 per cent last year.

Domestic advances grew 2 per cent to Rs 5.33 trillion in Q2, from Rs 5.23 crore a year ago. The increase was led by retail loans, which grew 16.2 per cent.

Our focus will be on retail loans. In the corporate segment, we will try to extend 80 per cent of our loans to AAA and AA-rated companies, said Murali Ramaswami, executive director of Bank of Baroda. Domestic deposits increased by 4 per cent year-on-year to Rs 7.83 crore as on September 30, 2019. The share of low-cost Current Account Savings Account (CASA) deposits stood at 37.9 per cent as on September 30, 2019. Gross non-performing assets (GNPA) stood at Rs 69,969 crore (10.25 per cent), while the net NPA ratio stood at 3.91 per cent. Loans to two non-banking financial companies (NBFCs), one textile and one plastic company, slipped in the quarter. Exposure to these two NBFCs was Rs 2,000 crore, said S L Jain, executive director of Bank of Baroda.

Jain added that the bank’s total real estate exposure was at Rs 15,000 crore and the exposure to troubled mortgage lender Dewan Housing Finance Corporation or DHFL stood at close to Rs 2,000 crore. Capital adequacy ratio was at 12.98 per cent, and CET-1 at 9.84 per cent in Q2.

Bank of Baroda Q2 preview: Muted loan growth seen, fresh slippages eyed

Bank of Baroda is slated to report its September quarter (Q2FY20) earnings on Friday, November 8 amid expectations of muted loan growth and marginally higher net interest income (NII) on a sequential basis.

The bank, which got merged with Vijaya Bank and Dena Bank, posted a standalone profit of Rs 425.4 crore in the corresponding quarter of the previous fiscal (Q2FY19), and a PAT of Rs 709.87 crore in the previous quarter of the current fiscal (Q1FY20). The NII was Rs 4,492.5 crore and Rs 6,498.1 crore in Q2FY19 and Q1FY20, respectively. Recently, the government decided to infuse capital worth Rs 7,000 crore by way of preferential allotment of equity shares during FY20.

Numbers for this quarter will remain incomparable on a yearly basis as the three-way merger came into effect in the last quarter (Q1FY20).

At the bourses, the stock declined 23.6 per cent in the quarter under review, relative to the benchmark S&P BSE Sensex, which fell by nearly 2 per cent during the same period.

Here is what to expect from the results:

Reliance Securities

The brokerage expects the net profit to decline 52.2 per cent QoQ to Rs 339.3 crore in Q2FY20, while pegs the pre-provision operating profit (PPOP) at Rs 4,436.9 crore, a rise 3.8 of per cent sequentially.

“Advances growth for the domestic book are likely to moderate on account of integration challenges… Mark-down of Deferred Tax Assets (DTA) could lead to lower earnings,” the brokerage wrote in its results preview note.

Emkay Global Financial Services

Analysts at Emkay Global remain watchful of deterioration in the asset quality due to large accounts turning into non-performing assets (NPAs).

“Categorisation of Reliance Commercial will be watched as we expect the key large account to turn NPA at Rs 17 billion. We also remain cautious of Cox & Kings,” they noted.

Prabhudas Lilladher

The brokerage estimates a 4 per cent rise in NII at Rs 6,755 crore, while the net interest margin (NIM) is pegged at 2.75 per cent. They expect the net profit at Rs 560 crore.

“Even though we expect the DTA mark-down to be spread over the three quarters, we expect it to impact profitability in Q2… Centre has put in the capital in last day of quarter which should help improve Tier-I capital, while improved operating performance should take care of the provisioning. Margins may slightly improve but loan growth could remain slow,” they said.

Analysts peg the loan growth at Rs 6.2 lakh crore, while expect the provisions at Rs 3,006.7 crore. The gross NPA (GNPA) ratio is likely to see a sequential improvement of 6 bps at 10.22 per cent.

ICICI Securities

The brokerage would eye exposure to stressed asset and its consequent impact on slippages. However, recoveries from Bhushan Power, and GMR Chhattisgarh could aid in reducing the asset quality ratios, it said.

“While PAT is seen at Rs 933 crore, we do not see any positive impact of higher recoveries. Reason being, higher recoveries from National Company Law Tribunal (NCLT) resolution are expected to be utilised for building higher provisions for other stressed account,” it noted.

Besides, an update on succession of incumbent MD & CEO, PS Jayakumar would also be keenly watched by analysts.

Elara Capital

Analysts at the brokerage expect the bank to report a revenue of Rs 8,322 crore, a drop of 1.1 per cent QoQ from Rs 8,413.7 crore. The same was Rs 5,844.2 crore in the year-ago period.

Bank of Baroda plans to raise capital up to Rs 3,000 cr via tier-II bonds

Public sector lender Bank of Baroda (BoB) plans to raise capital up to Rs 3,000 crore through tier-II bonds for meeting capital adequacy norms for the merged entity (integration of Vijaya and Dena Bank with BoB).

Rating agency India Ratings has assigned “AAA” stable rating to proposed bond offering by the PSB. Ratings for state-owned lender factors in large franchise, a pan-India presence, adequate funding base and liquidity. BOB is amongst the better capitalised PSBs, with a common equity tier I capital of 8.49 per cent in 1QFY20 (June 2019) and a capital adequacy ratio of 11.50 per cent.

The amalgamation has led to dilution of capital ratios as expected. However, the recent announcement of capital infusion of Rs 7,000 crore should add to the bank’s capital buffers (CET I could increase by about 120 basis points). The capital available with the merged entity will be sufficient to support its targeted level of growth for FY20, rating agency said in a statement.

Meanwhile, the agency has flagged concern over appointment of New Managing Director and Chief Executive (MD&CEO). P S Jayakumar has been heading BOB as MD& CEO since October 2015.

While he was initially appointed for a three-year term, he received a one-year extension from the government in October 2018. His term will end on 12 October 2019. The Banks Board Bureau has invited applications for the positions of MD & CEO of four PSBs in August 2019, which includes BOB.

The limited clarity regarding the appointment of the new MD and CEO could have a bearing on the bank’s near-to-medium term performance, especially since the amalgamation has become effective recently.

BOB maintained a relatively high provision coverage ratio (PCR) of 64.1 per cent on an amalgamated basis in 1QFY20 (excluding technical write-offs). The ratio, however, declined from 67.6 per cent in 4QFY19 (on pre-amalgamation basis) due to the amalgamation. While slippages declined on a year-on-year basis in FY19, it will remain a key monitorable in the near term.

BOB’s amalgamation with Dena Bank and Vijaya Bank became effective from 1 April 2019. The completion of the integration will take another 15-16 months, with the integration of the IT systems requiring the longest time.

Bank of Baroda to share its merger experience with 10 public sector banks

The brass of 10 public sector banks (PSBs) will meet in Mumbai on Wednesday to gain insights from Bank of Baroda (BoB) in managing its merger with Dena Bank and Vijaya Bank. The four anchor banks and six merging entities will also discuss initial merger plans.

A senior executive of a South India-based PSB said, “We are meeting in the financial capital to understand from BoB how it went about the integration process for Vijaya Bank and Dena Bank.”

While the market is looking at near-term implications of the merger like the pace of lending activity, banks are more concerned with long-term issues. They include synergies for branch and ATM network, human resource (HR) and cultural integration as well as integration of information technology (IT) systems of the banks concerned. The meeting at the BoB headquarters will be a day-long affair where the bank will make a presentation on its experience in coordinating the merger, HR and cultural challenges faced and how the IT backbone is stabilising, the PSB executive said. In April, Vijaya Bank and Dena Bank were merged with BoB.

Last Friday, the Centre unveiled a mega plan to merge 10 PSBs into four. Punjab National Bank, Oriental Bank of Commerce and United Bank of India will combine to form the nation’s second-largest lender; Canara Bank and Syndicate Bank will merge; Union Bank of India will amalgamate with Andhra Bank and Corporation Bank; and Indian Bank will merge with Allahabad Bank.

State Bank of India is also expected to share takeaways from merging its five associate banks and Bharatiya Mahila Bank with itself, an exercise done in 2017.

The associate banks were State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Hyderabad, and State Bank of Patiala.

Bank of Baroda reports Q1 consolidated net profit of Rs 826 cr for June qtr

Bank of Baroda on Thursday reported a consolidated net profit of Rs 826.13 crore for the June quarter of 2019-20 financial year.

This is the lender's first earnings announcement after it merged Dena Bank and Vijaya Bank with itself.

In the year-ago same period, Bank of Baroda's consolidated net profit was at Rs 645.71 crore.

Total income during the quarter under review stood at Rs 22,056.95 crore. It was Rs 13,729.50 crore in the year-ago period, the bank said in a regulatory filing.

On standalone basis, the bank's net profit was Rs 709.87 crore in the June quarter of 2019-20. In the same quarter of the last fiscal, the profit was Rs 528.26 crore.

Income in April-June 2019-20 stood at Rs 20,860.90 crore. In the year-ago period, the standalone income was at Rs 12,787.71 crore.

The June quarter results are not comparable with the year-ago period because of the amalgamation of the lenders.

Bank of Baroda's gross non-performing assets (NPAs) on standalone basis were 10.28 per cent of gross advances as on June 30, 2019. The figure stood at 12.46 per cent a year ago. Net NPAs or bad loans were 3.95 per cent in the latest quarter.

In the year-ago period, net NPAs stood at 5.40 per cent.

On consolidated basis, the bank did not provide the NPA data saying "not applicable".

Stock of the bank closed 0.68 per cent down at Rs 109.55 on BSE.