Debadatta Chand On Bank of Baroda Q4 Results, Future Growth & Margins

Thanks for inviting me. And as you said, right, this is one of the strongest quarter we had in the last 10 quarters. So, whether it is loan advances growth or deposit growth, we had one of the strongest quarter. At the same time, in terms of profitability also, if you look at there's a growth in NII. There's a growth in operating profit and there's a growth in net profit. And the margin again as compared to the last quarter of 2.79, it has upsized to 2.89. So, in terms of profitability also, I think the bank has done well. And we achieved two critical milestones in this year. One is that our business crossed 30 lakh crore of business, right? At the same time, the net profit has been full year has been more than 20,000 crore of net profit. So, I think it's one of the good, I mean, in terms of what we have done for last many years now. So, couple of things that really helped the bank to achieve: we have a on the liability management, something that we wanted to focus more and try to optimize on the liability front. And that typically, if you look at this quarter, the rise in interest income has been higher than the percentage growth of interest income has been higher than the interest expenses. That is what actually getting reflected in the growth in NII. So, one way the business growth has been very strong. At the same time, we optimize on the profitability. And the ROI continues to be more than one. And this is duly supported by the asset quality, which is again one of the best in last many quarters. So, in that way, overall, the bank has done well in terms of the performance parameter. And thanks to the economy, even if there are geopolitical issues for at least 1 and a half months in last financial year, but the Indian economy has been resilient, and so is the bank's book has been quite resilient.

You said right, actually, our credit cost for the full year has been 0.46 as compared to 0.47 last year. But as the provision has gone up, not because of the loan side provision, it is because we have created a floating provision of 1,500 crore. And floating provision has been created to buffer the balance sheet in terms of its balance sheet strength. We had opportunity this quarter this year also we created with this the floating provision is now 2,500 crore. So I think it's a significant buffer to the balance sheet in creating floating provision. And precisely for that reason only it has gone up, the provision has gone up, not because of the loan losses because loan losses if you exclude floating provision the credit cost is 0.32 which is below that of the last quarter. So I think on the asset quality and the provision the bank is running a good cycle of asset quality and consequent requirement of provision. With regard to sustainability of profit and all we are very hopeful or rather very optimistically that the bank would maintain because we upsize the loan guidance and also the deposit guidance by 100 bps on the upper side. So with the growth that we are expecting I think one of the key guidance that we give to the market that we will maintain ROA more than one. And we've been maintaining ROA more than one for last 16 quarters. And I think going forward also our ROA guidance would continue to be more than one unless and until significant geopolitical impacts the bank's book significantly because we run our businesses across the globe also including some of the impacted countries also. So I think the bank otherwise the Indian economy is resilient and so is the bank's book. But saying so if geopolitical issue continues for a longer term then possibly there would be impact. But we have time to rethink realign with those impact. As on today it looks like things are, I mean, in terms of asset quality looks good both in Indian book at the same time the overseas book including a country where we operate big time as a local bank a retail bank. So the book seems as on today as usual so there is no impact but if continues for a longer time, then you have to realign our forecasting guidance.

See, as on time, suppose I look into, keeping everything as it is in terms of both asset pricing and liability pricing, our NIM as on March was 2.89. But there is also a interest on IT refund which, I mean, added to some bit of income there in. Which may continue the same, what you can say, quantum or a lower in this year, I mean, '26-'27. So, considering the impact of this volatility, we've given a guidance of 2.75 to 2.95 for '26-'27. So, as against 2.89, I'm giving a guidance of 2.75, which is lower than 2.89. At the same time, the upper range can be 2.95. So, this is what is the guidance, but there are two other factors to be accounted for. If you look at the deposit market as on today, I think earlier, I used to talk about moderating the deposit cost. Actually, we had one of the lowest deposit cost in the system. But now we say that the deposit cost going to be sticky in the sense that further moderation we are not looking at based on the current market scenario. At the same time, on the asset side, look, the repo linked will be the same unless and until we change the spread based on the RBI guidelines. The MCLR again based on a model that's on the cost of deposit. The only segment of market which can see some kind of a realignment on the upper side is a corporate loan book which is not linked to the MCLR. Which is typically linked with T-bill or a G-Sec or any other form of benchmark. So, if you're able to realign those rates along with the stickiness of the deposit cost that I talked about, I think we'll be right on the band of 2.75 to 2.95.

See, particularly we have bigger remittance from some of the retail operations, not on the wholesale where we operate. So, many of the centers we are on wholesale. So, there is no remittance per se on that. So, some of the retail operations wherever we operate, yes, there are some impact, but we need to see whether it is a temporary blip or a significant continuation of those impact. So, as far as our baseline assumption with regard to the geopolitical issue that we see, we may look at it different once we go forward, but that things should improve maybe in coming days or coming quarters. So, that's something driving us to be slightly more optimistic with regard to growth guidance. And many of the factors of profitability including some of the fee that we talked about on the remittance. So, I think we have to watch for June quarter just to slightly revalidate, rehouse couple of assumptions that we have taken internally as a house view and projecting all these numbers.

See, cybersecurity is something core to the bank's resilient system. So, we have been preparing, measuring ourselves vis-à-vis the cyber threat. And these risks are elevated not at today, it was also a couple of months like these risks always to be elevated. So, as a bank, we are quite prepared to deal with all these challenges going forward. And I'm referring to the particular threat that you are referring, actually the IBA, where we are part of the IBA, it has been tasked to measure and prepare a holistic plan for the banking system. So, we are contributing our because of the global operation, wherever there have been some of the significant guidances issued on the matter. We are helping IBA, we are supporting with data to figure out holistic measures for banks. But as a bank, we are well prepared. We have all the cybersecurity measures in place. And this is not only, actually a year back, the threat was much higher elevated at that time. Also, the system dealt with that. So I think the banks are well prepared to deal, but again cybersecurity is something always take our attention in terms of how to create a resilient system and we are preparing ourselves for that.

You said right. As far as Bank of Baroda concerned, we had our AI journey for last five six years. We prepared ourselves long back with regard to AI. AI has been used by us in multiple, whether it is product management, underwriting, customer care service; we have been extensively using AI in terms of creating efficiency, productivity, and customer service. The only thing that we experimented, maybe not experimented with, deployed rather, is to bring AI at the front end interacting with the customer. So, I think you may be aware that we do have a concept of a physical branch wherein there is an AI model called Aditi, which is a humanoid which interacts with the customer on a real time basis and does financial and non-financial transactions. We are unique to position in that space for interacting where the AI is interacting with customer. So in that way, we recently introduced a communication tool AI powered, wherein the customer can speak in any language and my employee can speak in any language but they can seamlessly interact with each other. So we have been off late we are deploying the AI into directly at the front of the customer so that the customer gets the due value of AI. But back end we have been using that for last five years and significantly derived value out of it.

Well, let me address the fund raise part. In terms of capital, we have announced that 6,000 crore is the amount of money that I want to raise through AT1 and tier 2. I had also enabling provision of raising almost 8,500 crore of equity over till FY28 any point of time as equity capital. So, 14,500 is the capital raise. Beyond that, resource raise we keep on doing like recently we issued a green infra bond, one of the first in India to raise a green infra bond. So, we infrastructure bond last year we almost raised 12,000 crore. So, there are alternate resources that we keep on doing just to manage the asset liability profile and so as to manage the duration of the liability profile. Saying so, the overall liquidity gap is because the base of advances and the deposit are different. If you look at the LDR, which is the credit deposit ratio, which is one of the factor where you measure, the domestic city is something around 83 or 83.1, right? We're comfortable operating in that range, reason being we also hold excess SLR of 4 and a half percent. So, any money we raise at this point of time, we're not necessarily to put money into SLR. So, considering all these factors, we are quite comfortable operating in the LDR or the CD ratio of around 83. At the same time, running a growth of let's say 15% on the advance side and 12 and a half percent on the deposit side. At the same time, the LCR has been quite comfortable at 127%. So, I think we're quite well positioned in terms of managing all these factors as far as the bank is concerned.

Look, ECL when there was a draft guidelines I articulated the impact both on the CRAR and also on the credit cost, right? That was done by me when we announced the December number. But now the final guidelines has been issued, so we need to really compute this at transaction level to figure out the impact. So I'm not articulating any number as far as the final ECL guidelines, but my sense as on today that whatever we announced earlier after December, these numbers are not going to be off the track of those numbers.

Our retail, agri, and MSME continue to be the main driver. I mean, they have been the main driver for the bank for last many years now. The growth has been in excess of 15% for last many years as far as the retail is concerned. The retail we crossed a 3 lakh crore of book this year. That is one of the significant scale on the retail book. So retail continue to be around 20%, agri MSME also would be in those range. Saying so, the corporate normally look the growth of 11% to 11.2% corporate growth for this year, I mean, FY '26. The core corporate growth is 14% and the mid corporate growth is 24% and the PSU is 8%. And looking at this, our focus going to be on the core corporate and the mid corporate. Because PSU segment is a high-rated borrowers, but then always you have to take a call on the pricing, right? So in that way, the focus on the corporate book going to be on the core corporate and also on the mid corporate.

Thank you very much. Thank you.