Bank of Baroda Ltd Q4 FY2025-26 Earnings Conference Call

Thanks, Firoza, and all my analyst friends. A very good evening to all of you. I think you will be busy today because three banks announced their financials today, so thank you so much for joining. I will just introduce the management team. I am D. Chand, MD and CEO, Bank of Baroda. With me, Mr. Lalit Tyagi, he is the executive director. He looks after all the corporate credit, international banking, and more importantly, the treasury. We have Mr. Sanjay Mudaliar, he is the executive director. He looks after the IT function of the bank, including the retail asset, which is again a large book as on today, but couple of other platform functions. Then we have Mr. Lal Singh, he is executive director. He looks after the SAM vertical, which is a stress asset management vertical, including HR, and also the MSME department is also a part of his portfolio. We have Madam Bina White. She looks after the operations of the bank. The CCO reports to her, including risk management, many of the platform functions, including compliance and control audit, and also the retail liability, which is again a large franchise for the bank. And we have the CFO, Mr. I. V. R. Sridhar. He has been there for a couple of quarters interacting with all of you. With this, I hand it over to Sridhar.

So, thanks Sridhar sir, and to all my analyst friends. Let me make a couple of qualitative comments on the financials that you have announced for this year and also for the quarter. I think we have very strong growth both on the balance sheet and also on the profit and loss. A couple of numbers that we see on the balance sheet: this year we crossed the league of 30 lakhs plus business, and the business stands at 30.78 lakhs crore as on 31st March. At the same time, couple of other milestones that we see on the financials is that we crossed 20,000 crore of net profit for the standalone entity. The profit becomes 20,021 crore for the financial year. And the profit for this quarter, 5,600, possibly is the highest in any quarter for the bank for many years, maybe for decades. On the advances side, although our guidance was 11 to 13%, but in terms of percentage that you have announced, the global advance growth is 16.2% and the domestic advance growth is 14.5%. At the same time, on the deposit side, we have seen one of the best quarters. A couple of quarters ago, we saw our deposit not catching up to the growth in advances. So, the deposit growth is almost 12% globally, with the CASA at 9.8% and saving growth at 9.1%. I think these numbers map very well with regard to our focus on low-cost deposit and our focus to grow CASA. For many years we were focusing on CASA deposit and we have improved on the services side, product side, bundling of products so as to improve the CASA plan. Both the growth of advances and deposit, if I see, this is the best quarter in the last 10 quarters. We have seen the journey of the industry for the last 10 quarters in terms of growth percentage, but our percentage growth in this quarter has been the best in the last 10 quarters.

On the profitability front, the NII growth has been positive. You would have seen a number saying that the increase in interest income has been higher than the interest expenses. That is something in earlier quarters was slightly going negative in terms of interest income not growing to the extent of the growth in interest expenses. This quarter the trend is different. The interest income growth has been higher than the interest expenses. Consequently, the NII is at 12,495 crore, which is a growth of 8.7%. The NIM domestic at 3.04% and global at 2.89%. This NIM percentage is also higher than that of last quarter. As the CFO said on the employee front, because of the hardening of the yield, the obligation under AS 15 has gone down, but at the same time the bank decided to migrate to the new mortality table, where there is an additional liability requirement of 520 crore, which we have provided for. So, the employee cost that you would have seen, including AS 15, the trend is in line with the system what other banks also would have announced. A couple of numbers in terms of operating profit: more than 7,000 crore. We are announcing more than 7,000 crore on operating profit for the last 14 quarters. This quarter it is 9,069 crore. The net profit we are announcing more than 4,000 crore for the last 13 consecutive quarters.

Similarly, the ROA of more than one, that is one of the guidance numbers we have. We are having more than one for the last 15 consecutive quarters. The accretion to the book value, which is again one of the fundamental factors in terms of what you look as an investor, has improved from 148.8 rupees in March '23 to 251.7 rupees in March 2026. The incremental addition of book value to the extent of 102.90 rupees. Asset quality has been one of the best as far as the numbers are concerned. The GNPA at 1.89%, the net NPA at 0.45%. Both in terms of the slippage ratio and also the credit cost. The credit cost for the full year is 0.46% as compared to 0.47%. Both will be within our guidance range. I think the asset quality and in terms of the credit data in terms of SMA 1 and 2 more than 5 crore, it has gone down from almost 0.36% to 0.18%. So, with this, I think the asset quality has been good as far as we are concerned.

Secondly, a couple of initiatives that I want to highlight before you. The bank recently raised a 10,000 crore green infra bond. This is the first in India to raise a green infra bond. The response was 3x of the amount that we wanted to mobilize. We have an outstanding green deposit as on today to the extent of 1,899 crore, and I think by far it is the highest deposit in the system. We also announced this time that we are going to raise capital in the form of AT1 and Tier 2 to the extent of 6,000 crore in this financial year. I will also remind you of an earlier announcement wherein we announced that the bank would be keen to raise 8,500 crore of equity capital over a medium term up to FY28. So, in terms of capital raise, it is almost like we have room to raise 14,500 crore, consisting of 8,500 crore pure equity and 6,000 crore of AT1 and Tier 2 for this year, 2026-27.

Let me reiterate a couple of guidances we normally give. The loan guidance we are up-sizing from the earlier guidance of 11 to 13% to 12% considering our performance, subject to global headwinds not impacting the Indian market big time. The deposit growth is from 9 to 11% earlier, now up-sized to 10 to 12%. The NIM we achieved 2.89% this quarter, but we are slightly looking at a probable repricing of asset liability, projecting a 2.75 to 2.95% for the full year. The ROA continues to have more than one, same guidance as before. The slippage ratio we still keep at the same level of 1 to 1.25% and the credit cost below 0.60%. So, these are a couple of ideas important for you. With this, I am done with my opening remarks. We will open for questions and answers.

Okay, thanks, Nitin. Coming to the margin and particularly the yield on advances and the cost of deposit, the denominator for both things are different. The NIM takes care of the full asset side. So, the spread and margin are different. We should not compare spread and margin because that would give a different picture. At the same time, I do agree there is a line item with regard to the IT refund. Earlier also I said, since we have a large provision on IT, we keep on getting this as a normal flow. It can be higher or lower in a particular year. Precisely for that reason, although we had a 2.89% NIM for this quarter, we projected at 2.75 to 2.95. That accounts for any volatility that may be because of the IT refund. For me, the NIM is core NIM, and what we announce is the core NIM. We should not get confused with spread and margin because margin computation is different.

No, actually we don't have a number. I don't have a number. You can offline, can I get a number? But again on the same thing, I reiterate because there are significant refunds coming every year that we have seen. The amount can be higher and lower. Precisely for that reason, I have given a lower guidance at 2.75.

But whatever amount, it is very insignificant to the overall income base of almost 1 lakh 26,000 crores. So, that is not very significant to impact the margin. Cost of deposit, you are right. It is getting sticky at this point. If I compare March over December, although the cost of deposit for us is one of the lowest in the market at 4.78%, going by the liquidity scenario prevailing because suddenly in the March quarter the geopolitical issue came, and which is still persisting. So, my sense is that the cost of deposit is going to be sticky. Maybe there is a scope of realigning on the asset side, but as of today I don't see cost of deposit further going down at the current scenario if liquidity continues to be the same. So, slightly mindful of the repricing effect of the asset rather than the deposit because deposit has been fully repriced as on today based on the current level. On the modality, I think the CFO would be the right person, but before that, madam, may I anything you want to say on the cost of deposit?

So, Mr. CFO, can you just address the modality table and what is the benefit?

That is what I said actually. When I said the deposit is sticky, that means the only scope for us is to realign the asset pricing. When the rates were really low, many MCLR linked loans got repriced with the external benchmark, more particularly T-bill. With the elevated rate structure prevailing because of the geopolitical issue, I think there is a scope for realigning that portfolio, and that is our strategy to look into those pricing very closely.

Yeah, thank you very much for that. Actually, earlier it was a draft guideline, so it was possible to estimate those impacts. Now there is a final guideline. Our stance is that unless and until we compute fully on that, it is not proper to quantify at this stage. But my sense is that whatever guidance we had given earlier, it would be aligned to those numbers. I am not expecting any significant change vis-à-vis the earlier tentative calculation. But we want to see the real impact and then possibly articulate it better. That is what I said in the media meet also and I am saying it to you.

You are right. One thing we are assuming for this quarter at least is that the cost structure is going to be sticky. As I said, cost of deposit further moderation going by the current scenario we are not looking at. So, the only way we can manage the NIM is with regard to realigning the asset pricing, and that will be one of the key focuses of our management work. But at the same time, why we have given a conservative number is because the IT refund is a flow which is continuous but can go up and down every quarter depending on the refund order we get. Keeping everything in mind, we have given a slightly conservative guidance on the lower side. Not necessarily it would happen in Q1, maybe in a later quarter. It all depends on how we match together to protect the margin.

All four quarters together, I think we should not be breaching this lower threshold of 275.

Be zero. I never said zero.

We have some estimate of the IT refund for the full year based on the orders and the seasonal past trend. So, based on that is the guidance.

No, the AS 15 impact already articulated by the CFO. I think the CFO can now just go ahead with your AS 15 impact. So, that is the only opex that may be slightly you may be interested to know.

So, thanks, Kunal. You said right with regard to we said earlier maybe 2-3 years back that we want to reduce the dependency on bulk deposit. When I said dependency, at that time bulk used to be almost 23-24% of total deposits. And we went down to almost the level of 17% at some point of time, maybe two or three quarters prior to this. Having said so, because of bulk deposit dependency, the balance sheet size has continued to grow strong. The strategy was to replace the bulk with low cost deposit. We have been doing consistently well for the last many quarters. In this quarter also, you would have seen our saving growth is 9.1%. You can compare with many banks who have declared and what is the growth they have done.

So, the strategy has really worked in terms of focusing on the saving and that's why we have one of the highest CASA percentage within the pure banks. I mean currently also it is almost at 39% and you have the comparison available so you can make it out how the strategy worked. On the balance sheet we have grown significantly. But in the same time we could able to achieve the bulk percentage from bulk to low cost side. For the March quarter particularly the geopolitical what has happened, there was a liquidity possibly the loan growth has been very at a 16.2%. So, you need to be there in terms of managing both your liquidity at the same time. Maybe you need to mobilize bit of a deposit both from the bulk and CD together. We have a component of CD in the bulk the number that you see 320 or 321. So, CD as you know these are like again slightly the duration less with the cost also lower than that of bulk deposit because typically bulk deposit is a one year deposit. So, in that way the bank is managing the liability profile in a manner which is again optimal in terms of liquidity, optimal in terms of pricing, optimal in terms of margin. So, that we have been doing since long and I think that's something a project positive trajectory of the bank for last many quarters and years now. On the floating provision, the provision has been created typically to buffer the balance sheet for any extraordinary scenario. Not for tagging with any ECL provision policy. Reason being this floating provision cannot be touched unless and until there is regulatory approval for that. So, it's basically buffering the balance sheet strength to create floating provision rather than tagging with any particular ECL impact. If ECL impact is to be taken in the books directly, we'll take it in the books directly without floating provision. So, I mean, these two are not linked with that, but obviously, yes. Any headwinds that can create both the globally also, any such headwinds, I mean, because of the geopolitical issue we're mindful of buffering the balance sheet in terms of creating balance sheet strength. Third, with regard to, you said, right? The TWO this time has been higher as compared to because normally we give a normalized guidance of around 750 800 crore. This time, obviously, March quarter is always a productive quarter in terms of slightly making your efforts more in terms of recovery, and that has resulted into a higher recovery particularly from TWO. And I'll continue to have the same normalized guidance of 750 to 800 crore. Mind it, my TWO book is almost 62,000 crore. So, estimating any such recovery, quarter to quarter, is, I think, it's a appropriate and reasonable one. So, these are a couple of

There are many, actually. It all depends upon when the resolution happened and when you recover money. There are legal processes, NCLT processes, multiple such things. So, purely pinpointing that it can happen in a quarter is not possible, but then we are hopeful because the kitty is quite 62,000 is quite a large amount.

Not any chunky one. It is a mid-size, some of the exposure which has mid-size, maybe 200 to 250 crore, couple of such accounts there.

Thanks, Kunal.

It is 127%.

It is so, yeah. It accounts in interest income and also on the recovery on that. So, roughly around 100 crore interest income on this.

100 crore has gone to the interest income part.

Okay.

Okay. So, first thing you talked about LCR I answered. Secondly, on the IT refund, let me address growth out-pacing deposit. Look, on a sustained basis, you have the capital, right? So, you have a lot of other alternative resources where you can take refinance, you can raise bonds. So, we as a bank clearly focus on creating a stable resource base and not say deposit base. So, while maintaining, even you would have seen the CD ratio almost at domestic around 83 point something on that. The improved service last quarter anyway on the CD ratio. So, the growth percentage, the base of deposit is a larger base as compared to the base of advances. That is point one. Secondly, in a scenario where banks are holding like a bank like us holding more excess SLR, any deposit we raise need not be put that into SLR because the entire money can go to deposit. And that is what a scenario we are seeing in many last couple of years where because you are holding excess SLR, the money incremental deposit we are raising is straight going into the advances. So, in that way, I think this gap of two and a half 3% is sustainable one in terms of growth of advances and growth of deposit. So, that covers the advances out-pacing deposit. At the same time, obviously, bank would like to augment the resource base and want to grow higher on deposit. Interest on IT refund earlier also I said yes, it's a line item which is as per the clearly as per the accounting, but can be volatile, yes. So, I do not estimate with regard to what is the year this year, what is going to be a year next year. These are all based on the actual tax refund. So, that's why accounting for the estimate, we give a margin guidance. And that's why having achieved 2.89 also, I'm giving a guidance 2.75 to 2.95 accounting for the same amount of money which you got this year. Possibly may or may not be in the next year based on the available what is the refund that we expect. And that issue is covered in the margin guidance. That is what we typically don't get into quantifying because it's a line item always there in the income as per the normal accounting norms. So then why should I segregate that amount as a different amount? Yes, it is volatile. I do agree. But then we account this estimate in terms of how much you get in this year in the margin guidance.

I mean, look at our tax rate. Yeah, I'll give you the guidance next year again. So as far as this year guidance, I'm very clear that there is going to be good amount coming, right? So next year suppose I see there won't be any money, then I possibly won't account this and give a different guidance. So my guidance for tax refund is based on this only 1 year. So perpetuity will discuss maybe in the next year.

So that is what we said earlier actually. Look, when the draft guidance was there, we were able to estimate or guestimate with regard to the likely impact and that we articulated in terms of absolute number also in terms of percentage both on the CRR and also on the credit cost. But having issued the final guidance, it won't be proper to without really running computation transaction wise difficult to say with regard to any quantification. We'll do that. But we'll do it slightly once we implement and then have a number possibly one quarter number coming very clear on that. So I'm not articulating any number, but my sense again today when I look into the final guidelines and the draft guidelines, we'll not be off track from the number that we estimated earlier. It will be aligned to those numbers, but actual I mean, once you slightly implement at transaction level and get a clear picture at least for one quarter, I will be in a position to quantify everything on the ECL impact.

I mean, possibly have to recollect. I can't recollect. But whatever we said, I think my sense is that it's not going to overshoot significantly.

Thank you.

See, you're right. The treasury management, the bank is running one of the largest book, actually. We are among the top three or four in terms of holding. So, at some point of time, the SLR holding was almost 26, 27% but subsequently, as on today, it's around 20, 22.5% or 23%. It's going on floating. But while managing this SLR, it is not one way that we surrender. I mean, we sell or we put that on OMO. We keep on buying at different level as per the market condition. So, whenever we feel the levels are elevated, we get into the market. So, it's a churn happening. Maybe 1, 2% on the SLR is a continuous churn that happening in terms of buying and selling. So, in that way, it's always optimization game rather than a single selling that SLR and make profit. So, in that way, I think we are managing treasury well and I think that something is part of the treasury management because the trading profit comes out of all these churn. It's not necessarily you sell only your book and make profit. You have to buy and sell and then only you can make profit. So, our strategy on that would continue. But in terms of a comfort range you want because see, the advantage of excess SLR is that it generates liquidity, right? That's the very potent or very important purpose of running excess SLR. And that helps in liquidity, right? So, that's very clear. So, bank would like to, now as against 18% you are at 22. That means you're almost running 4 and 1/2% excess SLR. We like to operate at a safety threshold of maybe 3, 3 and 1/2% at all point of time. Because the purpose is not only on an investment in terms of generating profit, the purpose is also generate liquidity at the right time in case you require to. So, I think that would be one of the strategy as far as the bank is concerned. Mr. Tyagi, anything you want to add on this?

Yeah.

Yeah, Mr. Tyagi will answer this.

Thank you.

Thanks there. Thank you very much. The capital already we have announced actually 81 and tier two for this year. I mean I'm talking about 26 27. We have announced that we'll be raising 6,000 crore. But in case you don't raise then it can also go to the subsequent year because we have used a word if expedient on that. Earlier we announced an equity raise of almost 8,500 crore to be as an enabling provision to raise the FY22 2028. So we can raise that money in any year up to 28. So almost 14,500 crore is the plan raise of capital both from the equity and also on the 81 tier two which is slightly I mean it can be on this year or subsequent year. So we have taken a medium-term plan of FY28. Beyond this capital also we normally keep raising infra bond and other those are also part of the resources where we have to announce to the exchange. So those if there is a requirement to do that because sometimes we look at the duration of your liability book as a whole. And somewhere we find that because we compute the duration of asset also and the gap between duration of asset full book. I'm not talking about only investment. So in case you want to tweak something as a asset-liability management purpose we keep raising long-term resources also. So it's all the ALM management that would decide whether we need to raise long-term resources in the form of infra bond and other bond. If that be the case then we'll announce to the market at that point of time. What is already announced approved by the board is enabling 8,500 equity and 6,081 and tier two.

Yes, it is on. It is always on table and it will depend upon the time at which we really want to tap it actually, based on the market conditions and the requirement of capital for the bank for different, I mean, any scenario going forward. Maybe geopolitical or anything. If there is a need, we'll raise it immediately. But then, it's a enabling that is applicable till FY28.

I don't have data on this. In case you want, we can offline provide you. But the issue is that actually I was just giving a context in one of the earlier conversation wherein in 2-3 years back we had a larger percentage of bulk as a percentage of total deposit. I mind the denominator because people compute in different way then get confusion. So, it was almost 24-25% at some time and we reduced that to 17% of total deposit couple of quarters back. Now, as you know, the liquidity scenario in March quarter is always a different scenario because of the geopolitical inducing bit of a liquidity tightness. So, then from 17 it went to 19% but still below 20% which is my very normal what you can say the guidance with regard to bulk deposit. So, we'll continue to optimize based on the need for liquidity, need for the growth on the asset. At the same time, the pricing impact also will be mindful while doing this. So, it's overall concept of liquidity management that decide how much bulk we need to have going forward.

Yeah, I'm not predicting any increase in deposit rate, but one thing I've said that the cost of deposit which we are one of the lowest in the system. If you look at the numbers of 4.78 that's going to be sticky in Q1. Sticky in the sense I'm not expecting that to go down further.

But then again,

No, I'm talking about the domestic. Domestic is 4.99, right? That's still below five. Not many banks below five.

In the two year I mean sticky means I'm not expecting to go down. Actually, going up would depend upon the liquidity scenario in the market.

PLI I'll check just one second. Give me a moment. Yeah, we have made provision for that actually. We made provision.

It's 500 crore. 500 here.

So, it is under staff cost.

Look overseas, the trade is normally up to 20% because we don't allow trade book to significantly go up because the trade has a fine pricing because that also impacts your name. So I think on a percentage basis the trade is below 20%. Exactly if I know more I can give you because that's what we prescribe for overseas to have continued doing business. The remaining exposure are mostly on a local syndication that particularly some of the markets were very big over there. Like US even gift city has a big market and these are all global syndication where we participate with high street bank in terms of taking those exposure. Big books in US, Australia, I mean Singapore for the matter and all those. So I think as of today there is no impact in terms of their asset quality on this. Particularly Middle East yes we do have exposure because Middle East we have a large retail operation over there. And then the outstanding can be in the range of around 50-60,000 as of today but that's again spread over multiple countries which are again some of the countries are A rated as of today. So, the direct impact of this I mean all those country right the regulator also they have announced some kind of measures like the ECLGS we have done in India to sustain their operations. So, real impact we not get to know until we just see but as on today there is no concern with regard to asset quality because these are the corporates having quite a strong balance sheet. And our large percentage of exposure on local syndication which are global local syndication where market names in the book. And they are very big some of them are Fortune 500. So, I don't think any challenge as on today with regard to the global international book. But yes, particularly this operation we need to be slightly watchful for corporate borrowers.

So, I think our book is 160 is the MSE book and 55-60% working capital and taking almost like everybody won't go up to 20% maybe on a 15% scale I think 12,000 plus would be amount that will be disbursing on the ECLGS.

Yeah, I don't see a PSU outlook here but as far as the bank is concerned we'll continue to grow on auto loan. Reason being look auto loan is not a productive asset to generate revenue. I mean it based on the cash flow a person is having from which he pays the money. So, our selection of borrower in terms of auto loans are mostly looking into cash flow salary class where we have done a bulk transaction means bulk tie-ups. So, I think in that way the growth has been good and as of today whether I track the stress book or the GNPA percentage, I think these are all benign and very very small at this point of time because the possibly the ability of the cash flow to support the payout is still continuing the same way. So, going forward in case there is anything that we see at an elevated level of risk over there, actually we do portfolio review every quarterly on all the books. And these are all being done at a very senior level board level committee and all. So, anything we see an incipientness in this sector which I don't see as of today and then possibly we'll develop. But as of today my guidance will continue the same way like we're continuing on auto loans.

Thank you very much. Thanks. Thanks all of you.