Welcome back to our earnings corner. Bank of Baroda's first quarter results were a mixed bag. Very resilient net interest margins but higher slippages due to an overseas loan and a slight uptick in personal loan NPA. But the net interest margin was the cynosure of everyone's eyes. It fell by only seven basis points. Remember, for many private banks, the margin has fallen by between 15 and 25 basis points. But can the margins see lower levels now in the current Q2 and in Q3 because of the rate cuts? Also, can loan growth maintain this 12 to 13% run rate that we saw in Q1? For all these questions, I'm joined by Mr. Debadatta Chand, Managing Director and CEO of Bank of Baroda. Good morning, Mr. Chand. Thank you very much for your time. Well, first up, it is the margins question. You all controlled it well in the quarter gone by, but will it take a bigger chunk in the current and next quarter? Have you any estimates?
Thanks. Good morning. As far as the margin is concerned, it is typically because of the rate transition that is happening in the economy. And as you said right, the book has shown resilience in terms of the margin cut as far as Bank of Baroda is concerned. So going forward, what we see is that the major part of the repricing, the full quarter impact, we're going to see in the next quarter, that is Q2. And this quarter the full impact has not come, so there can be pressure. At the same time, on the deposit side, we are seeing significant repricing, meaning the interest expenses are going to go down for the next quarter. So net there would be impact, but we are not looking at a significant impact on the net interest margin in next quarter. For the full year, we are giving guidance at 2.85 to 3, with a quite bit of hope that Q3 and Q4 will be much better than Q1 and Q2.
Okay. So you're expecting the recovery in Q3 itself. Q2 you think will be at the bottom.
Yes, that's right. Q2 would take the major impact, but Q3 and Q4 would be much, much better.
Okay. The other point is on slippages. There is, as you pointed out in the investor presentation as well, one international account, but there was a bit of pain in the personal loan account. Can you take us through the slippages picture and how it has evolved? You're already two months down in the second quarter. Can you give us an idea of how slippages might pan out sector wise?
As far as the slippage is concerned, even with the international account, we are well within our guidance range of 1 to 1.25. Because this international slippage is one-off, excluding that, the slippage ratio would be at 0.99, which is comparable with the slippage we have seen in the earlier quarter. Our normal run rate on slippage per quarter is roughly around 2,800 to 2,900. So the bank is well within the slippage guidance, and excluding this one, it is all comparable with earlier quarters. On the personal loan, on the legacy book, we have seen some slippage, but in terms of slippage ratio, because the denominator is also increasing, the slippage ratio is well within the comparable parameters with the earlier quarters. So we're not seeing any elevated level of slippage going forward, and the collection efficiency is much better now. The pre-book looks very good in terms of SMA 1 and 2. So we are not thinking that the asset quality of the bank is not quite robust and resilient enough to take care of any impact because of the slippage going forward.
No, I'm not saying that you will be in trouble at all, sir. After all, you have historically low NPAs of 6%. There's no question of any problem. But what I'm asking is, is there any vertical, for instance unsecured personal loans or MSMEs or any international book, where you may see pain? Have you already noticed in the first 50 days of the current quarter?
As far as the international book is concerned, the asset quality is quite good, and this particular account is a one-off clearly. So other than this, there is absolutely no other account which has any sickness as of today. Secondly, on the domestic book, only on the retail advances we have seen some 150 crore of additional slippage as compared to the last quarter, and precisely as I said, because of the legacy personal loan book, the slippage has been there. But as a strategy, earlier the personal loan used to grow at a much higher pace of 30, 40, 50%, we have moderated to 20% this quarter. And again, this additional slippage is because of the legacy book. On the current book, absolutely no stress there. But if you compare the slippage ratio, then it is well within our quarter slippage on the personal loan.
Okay. Just one number came to my eye. In your investor presentation, it says that the MSME loan NPA was the highest at 10,600 crore. In everything else, the next big is agriculture at 7,000, then retail at 5,000. MSME at 10,600 is standing out. Is that likely to give you any trouble at all?
