Bank of Baroda says fresh NPA accretion nearly peaked

Mumbai: State-owned Bank of Baroda, which saw slippages soaring over Rs 10,000 crore in December quarter, is expecting the same to taper down from the next quarter, its newly-appointed managing director and chief executive Sanjiv Chadha said on Monday. In the three months to December period, BoB’s fresh slippages stood at Rs 10,387 crore, of which Rs 4,509 crore were on account of divergence found by the Reserve Bank for 2019 fiscal.

The city-based lender had reported a loss of Rs 1,407 crore in the December quarter as against a net profit of Rs 436 crore a year ago due to higher provisioning for bad loans.

“Given the fact that there are some indicators like the watch-list coming down, in terms of size, I can say with a reasonable degree of confidence that the slippage levels should be lower going forward,” Chadha, who took over the charge last week told in an interview.

The lender’s watch-list came down to Rs 10,500 crore in the December quarter from Rs 14,500 crore in the September quarter.

Chadha, who was with SBI prior to joining BoB, said if the divergence is kept aside, then slippages in the third quarter were similar to the previous quarters, which is in the region of Rs 5,000-6,000 crore.

He also said slippages will come down as the bank has been tightening its underwriting standards and loans are offered to highly rated entities.

“Nearly 70 per cent of our loans are of A-grade or higher. So, underwriting standards are much tighter than they would have been in the past. So, it should help (in reducing the slippage levels),” he said.

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The bank is looking at recovery from a large stressed steel account (Bhushan Power & Steel) in the current quarter. Barring this, the bank does not have large exposure to NCLT accounts, so recoveries will mostly come through other sources.

During December quarter, there were three NBFC accounts worth Rs 2,900 crore, one chemical company worth Rs 2,700 crore and two power companies worth Rs 1,000 crore that slipped into NPAs.

The bank’s gross NPA ratio declined to 10.43 per cent as against 10.91 per cent in the third quarter, while net NPA stood at 4.05 per cent as against 4.79 per cent.

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

Talking about the merger, he said the move was very well orchestrated.

“Over the next few months, we must make sure that it reaches a conclusion. The plan is to do it over 12-18 months period and we will make sure that it actually happens,” he said.

Chadha said merger of the three lenders will result in savings of around Rs 9,000 crore over the next five years.

“There is an estimate that over five years there would be Rs 9,000 crore of cost savings which will come on account of rationalisation of branches and treasury, among others,” he said, adding one major cost cutting will be by way of three headquarters becoming one.

According to him, international operations will remain an important part of the business mix for the state-owned bank and the emphasis may change from one geography to another depending on the growth opportunities.

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Chadha said the bank must play its role in terms of being a purveyor of credit to the economy and so the focus will be to have better risk management.

“We will ensure to make all the investments that are required to increase the pace of loan growth but at the same time do it in a manner which is risk-mitigated. Therefore, we will invest more in sprucing up our risk management processes,” he concluded.

BoB counter closed 3.4 per cent down at 92.35 on the BSE on a day when the benchmark Sensex plunged 1.1 per cent on the global risk averseness following the spread of the coronavirus to many nations from China. HV BEN BAL


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