Bank of Baroda Q2 Net Profit Falls 8% to ₹4,809 Crore

Bank of Baroda (BoB), the prominent public sector lender, has reported a mixed financial outcome for the second quarter of the current fiscal year, ending September 30. The bank’s standalone net profit after tax (PAT) registered a year-on-year decline of 8.2 per cent, settling at ₹4,809 crore, down from ₹5,238 crore recorded in the corresponding quarter of the previous fiscal.

While the headline net profit figure saw a dip, the results underscore the strong momentum in the bank’s core operational activities and a continuous improvement in asset quality, which were heavily counterbalanced by external factors affecting non-interest income.

Core Income Strength Remains Firm

The bank’s fundamental earnings driver—Net Interest Income (NII), which is the difference between interest earned and interest paid—remained robust, indicating sustained demand for credit and efficient margin management. NII saw a modest but steady 2.7 per cent rise year-on-year, reaching ₹11,954 crore for the quarter.

The strong NII growth was primarily fuelled by healthy credit expansion across key lending segments. BoB reported that its global advances grew by a solid 11.9 per cent year-on-year. The strategic focus on the RAM (Retail, Agriculture, and MSME) portfolio paid dividends, with this segment expanding significantly and now accounting for approximately 62 per cent of the total loan book. Within the retail segment, growth was particularly pronounced, with overall retail advances surging by 17.6 per cent.

On the profitability metric of Net Interest Margin (NIM), which gauges the efficiency of interest generation, the bank reported a decline year-on-year, standing at 2.96 per cent, down from 3.11 per cent a year ago, reflecting the higher cost of funds typical across the banking sector. However, the margin showed a slight sequential improvement over the preceding June quarter, suggesting stabilisation in pricing power.

Non-Interest Income Weighs Heavily

The primary drag on the bank’s net profitability was a sharp contraction in non-interest income. This segment witnessed a steep decline of nearly 32 per cent year-on-year. This drop was attributed largely to two factors: a moderation in treasury income and the absence of high, one-off recoveries from written-off accounts that had significantly bolstered the prior year’s comparative figures.

This normalisation in non-core revenue streams led to a moderation in the operating profit, which fell by approximately 20 per cent year-on-year to ₹7,576 crore.

Asset Quality Shows Substantial Improvement

A key takeaway from the Q2 results, offering a strong boost to the bank’s balance sheet health, was the consistent improvement in asset quality metrics.

The Gross Non-Performing Assets (GNPA) ratio eased significantly to 2.16 per cent of gross advances as of September 30, down from 2.50 per cent in the year-ago period. Similarly, the Net Non-Performing Assets (NNPA) ratio also saw a marginal reduction, settling at 0.57 per cent, a strong indicator of minimal credit risk remaining on the books.

This decisive improvement in asset quality led to a substantial reduction in provisions and contingencies, which fell by over 47 per cent year-on-year to ₹1,232 crore, providing a crucial cushion to the bottom line despite the pressure from the non-interest side.

Outlook and Capital Position

The bank’s management confirmed that despite the current headwinds affecting profitability, the outlook for credit growth remains positive. Managing Director and CEO, Debadatta Chand, stated that the bank is maintaining its guidance for overall credit expansion, targeting 11-13 per cent growth for the full fiscal year. He added that the bank intends to accelerate the momentum in corporate lending during the latter half of the year to complement the strong retail growth.

Furthermore, the bank’s capital adequacy ratio (CRAR) strengthened to 16.54 per cent, underscoring its robust financial foundation and capacity to support future business expansion.