Bank of Baroda Q1 preview: NII could rise 34% YoY; merged entity’s nos eyed

India’s first three-way merged public sector bank, Bank of Baroda, is scheduled to announce its April-June quarter result of financial year 2019-20 (Q1FY20) on Thursday, July 25. The bank, which got merged with Vijaya Bank and Dena Bank with effect from April 1, 2019, is expected to post stronger numbers on standalone basis while analysts would eye results for the merged entity.

According to analysts at Sharekhan, the public lender is likely to report a net interest income (NII) of Rs 5,853 crore, a jump of nearly 34 per cent year-on-year (YoY) from Rs 4,381 crore clocked in the June quarter of the previous financial year (Q1FY19). The same was Rs 5,067 crore in the quarter ended March, 2019 (Q4FY19). Analysts at Antique Stock Broking, however, estimate the same at Rs 6,891 crore, up 57 per cent YoY and 36 per cent sequentially.

As for the merged entity, analysts at Phillip Capital estimate the consolidated NII at Rs 7,343 crore and a net interest margin at 2.85 per cent.

PRE-PROVISION PROFIT AND PAT

On a standalone basis, analysts are eyeing a pre-provision profit for Bank of Baroda of up to Rs 4,765 crore the quarter under review, a growth of 58.5 per cent YoY and 23.4 per cent sequentially from Rs 3,006 crore (Q1FY19) and Rs 3,860.8 crore (Q4FY19) respectively. ICICI Securities, however, estimate a 98.5 per cent YoY rise in the pre-provision profit at Rs 5,967 crore.

“The bank is expected to clock operating profit of Rs 5,967 crore led by higher trading income as it is one of the beneficiaries of nearly 46 basis points decline in G-sec yield. The management has guided for restructuring of overlapping branches, which is set to aid in lowering of cost to income ratios. PAT is seen at around Rs 554 crore as the management is confident that no substantial increase in provision due to merger,” analysts at ICICI Securities wrote in an earnings preview note.

For the merged entity, the pre-provision profit and PAT are estimated at Rs 4,778.2 crore and Rs 782.5 crore respectively.

Bank of Baroda had reported a PAT of Rs 528 crore in the June quarter of FY19 and a loss of Rs 991 crore in Q4FY19.

SLIPPAGES AND RECOVERIES

According to estimates by Phillip Capital, stability in overseas loans book and growth in domestic loans book could drive the advances by the bank. Consequently, advances by BoB in the recently concluded quarter are pegged at Rs 6.83 lakh crore.

“International book growth should be marginal, but we expect domestic book to post over 10 per cent growth,” said analysts at Sharekhan.

For the merged entity, slippages could be around Rs 500 crore with gross and net non-performing ratios (GNPA) and (NNPA) at 9.77 per cent and 3.32 per cent respectively.

“Slippage could moderate in Q1FY20, but recovery is likely to remain modest in the absence of any major resolution,” Phillip Capital noted in a result preview note.

Analysts at Sharekhan, however, added a word of caution and said that the merger and impending uncertainty on leadership is likely to keep business growth range bound.

At the bourses, the bank has underperformed the benchmark S&P BSE Sensex. The stock of the public lender has dipped 5.4 per cent during the June quarter of FY20 as against a nearly 2 per cent rise in the Sensex during the same period.

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