Bank of Baroda Beats Estimates With Record Rs 6,532 Crore Profit, but Treasury, Not Lending, Did the Heavy Lifting

Bank of Baroda shares go into the weekend at Rs 238.50, down 1.24% on Friday and close to 20% lower for the year. The lender's September-quarter numbers, released after the closing bell, give investors plenty to weigh before trading resumes on Monday: a record profit that comfortably beat expectations, built on a mix of income that looks less durable than the headline.

The beat, in numbers

The state-run lender reported net profit of Rs 6,532 crore for July-September, its highest-ever for a quarter and 35.8% more than the Rs 4,809 crore it earned a year ago. A Zee Business poll had pencilled in about Rs 5,290 crore, so the bank cleared estimates by roughly 23%.

Operating profit rose even faster, up 50.9% to Rs 11,430 crore. Return on equity improved by 363 basis points to 19.28%, and return on assets rose to 1.26% from 1.07%.

Where the money came from

The split of income is the detail that matters most. Net interest income, the spread a bank earns on loans over deposits, rose just 9% to Rs 13,026 crore. Non-interest income, by contrast, jumped 95.8% to Rs 6,881 crore from Rs 3,515 crore, with higher treasury income cited as a key contributor.

Treasury gains depend on bond market moves and tend to swing from quarter to quarter, which is why analysts usually give more weight to interest income. A 9% rise in NII against 18.3% growth in global advances suggests margins are under pressure, a theme that is hard to escape with the RBI having raised the repo rate to 5.50% this month and deposit costs rising. Our earlier coverage of SBI chief CS Setty's rate outlook explains why bankers expect more tightening before a pause.

Asset quality keeps improving

The cleaner side of the report is the loan book. Gross NPAs fell to 1.78% from 2.16% a year ago and 2% in the June quarter. Net NPAs dropped to 0.37% from 0.57%. The slippage ratio, which measures fresh bad loans, eased to 0.69% from about 0.91%, and the provision coverage ratio including written-off accounts rose to 94.65%.

Provisions still nearly doubled to Rs 2,382 crore from Rs 1,232 crore, which means the bank chose to set aside more even as stress eased, a conservative step that leaves a cushion if the economy slows.

Balance sheet growth

Global advances grew 18.3% to about Rs 15.12 lakh crore, while domestic advances rose 13.5%. Global deposits grew 16.4%, and domestic CASA deposits, the cheapest source of funding, rose a slower 10.4% to Rs 5.40 lakh crore. Retail, agriculture and MSME loans now make up 64.2% of domestic advances. Capital is comfortable, with a CRAR of 16.61% and CET-1 of 14.20%.

What to watch on Monday

The stock's 20% slide this year has priced in plenty of worry about margins in a rising-rate cycle. Friday's report addresses part of that worry through better asset quality and higher returns, but the reliance on treasury income leaves the core margin question open. How the market weighs those two threads will become clear when trading reopens, and management commentary on net interest margin guidance is likely to matter as much as the headline profit.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.