Bank of Baroda Q3 Net Profit Increased By 4% on YoY Basis

Bank of Baroda (BOB), one of the largest public sector banks has posted a mixed set of results for its quarter ending December 2013. Although, bank has posted a rise in its net interest income (NII) and net profit, the asset quality has deteriorated. 

Net interest income of the BOB increased by 8% on yearly basis and stood at Rs 3057 crore for Q3FY14. While its other income which forms around 9% of the total income of the bank and was at Rs 932 crore for Q3FY14. Despite such increase in NII and other income the operating profit declined by 1 % on yearly basis to Rs 2197 crore for Q3FY14. Rise in employee cost by 33% on yearly basis to Rs 1055.71 crore for Q3FY14 and other expenses by 17% in the same period to Rs 1791 crore led to such decline in operating profit. 

Nonetheless, net profit increased by 4% on yearly basis while declined by 10% on quarterly basis and was at Rs 1047.84 crore for Q3FY14. It was the drop in provisions & contingencies by 26% on yearly basis to Rs 761.87 crore that led to such rise in net profit. 
The asset quality of the bank has deteriorated on both sequential as well as on yearly basis. Gross non-performing assets (NPA) of the bank have increased by 63% on yearly basis in absolute numbers whereas on Q-o-Q basis it has increased by 10% to Rs 11925 crore for Q3FY14. The net NPA of the bank for Q3FY14 is at Rs 6623 crore, which is up by 5% on yearly basis and almost double on yearly basis. As percentage of advances, gross and net NPA has increased by 17 basis points and 2 basis points respectively on sequential basis. 

The advances and deposits of the bank have increased by 18% and 21% respectively on yearly basis. 

Shares of the BOB are currently trading at price to book value of Rs 0.6 times, which looks attractive but advice to stay away till the time asset quality stabilises.