To discuss the quarterly results of Bank of Baroda, I have with me the MD and CEO Debadatta Chand ji. Sir, welcome to the business. Sir, my first question: if we talk about net profit, we see it has fallen by around 72%. Is this solely due to the one-time settlement with NMC?
Thank you. You have correctly said that the net profit is down due to exceptional items. We have also provided data that if you do not take this exceptional item, the net profit would have been 5,520 crore, which is comparable to the net profit of earlier quarters and shows growth. One thing you will see in this quarter is that the bank’s business growth is very strong. Advances growth is 17.4%. Deposit growth is 13.8%, almost 14%. The bank’s net interest income has grown by 9.5%. Operating profit is in alignment with earlier quarters. Net profit has been impacted because of the exceptional item. But the bank’s core profitability track is intact and it is doing well.
And sir, this one-time settlement, will we see any impact of this in the coming quarters, even if it is legal? And also, this settlement is larger than your loan exposure. What was the reason for settling such a large amount, over 5,000 crore? Did you want to close this chapter, or was the litigation or legal process becoming too expensive?
Look, this is a settlement. There were two cases, both in the Abu Dhabi Global Market Court and the one in the UK, this is a settlement of those. One should see this settlement in the context of the court cases. The stage was trial settlement, and based on legal advice, we have settled it. So its impact is in this quarter only. In the next quarter, this is a full and final settlement. In both jurisdictions, both court cases, and this is regarding the bank’s overdraft, which was dated as you know. So this gets resolved in the bank’s overdraft that was in the balance sheet. So this is a full and final settlement, and going forward, its impact is only as far as these two court cases are concerned. It will not be there in the future.
And sir, as you mentioned at the beginning, the bank’s core business is quite robust. Talking about net interest income, we see an increase of around 9%. And sir, now the impact of the 100 basis points relaxation given by the RBI has started to show. So, this growth we are seeing, do you think it is sustainable in the coming quarters, and what kind of guidance will you give regarding margins?
Look, our advances growth over the last four years, particularly, was 16.2% as of March 26, and this time it is 17.4%, which is quite strong. We have two things. Last time also I gave a statement that the bank’s advances growth is also linked to deposits. And I gave a statement that we are encouraged by the fact that deposits are returning to the banking system. That trend is still visible, which we have seen in this quarter. Because our growth is almost 14%. So, I mean, suppose we take the liquidity scenario, deposit growth in the banking system, and the demand, I expect that this will continue in the coming quarters. There are two things we should keep in mind. One, the geopolitical crisis is still there. Secondly, we also have to track the monsoon. Regarding that, although we have always outperformed our guidance, we have kept our credit growth at 12 to 14. We will see one or two quarters and if we need to upsize it further, we can do that. But domestic demand is quite high. You must be seeing the economic reliance and parameters. You must be seeing the EMI score, capex, and we have done an analysis of 260-270 companies’ revenue growth, which is good. So in that way, we are quite positive that the system demand is such that the bank’s growth will also be good and will remain in this trend. But I must add two things: we should be watchful of the geopolitical impact, and also watchful of the monsoon impact.
So sir, on which sectors do you see this impact? Where have you analyzed that stress could come from?
Look, as of today, the geopolitical situation, the Indian system is resilient. I mean, no sector is impaired. One thing, for the MSME sector, we were seeing that the government’s ECLGS scheme has done it. There is quite good demand. We have sanctioned almost 11,000 crore, disbursed 7,500 crore, and have a pipeline of 3,600 crore under the ECLGS. So in that way, I think the system is quite resilient and all sectors are doing well. Our MSME growth this time is 20%. So in that way, I don’t think there is any challenge on any sector. But one thing is that in India, the geopolitical impact has today a first-order effect. And because of the resilient system, it will continue to be a first-order effect. But suppose this geopolitical situation further aggravates, affecting the global economy, then possibly there is a second-order impact. At that time, we may have to see the growth guidance and the impact on the economy.
And sir, from which sector are you seeing the most demand?
Our demand is broad-based. Agriculture growth is almost 18-20%, MSME 20% growth, retail 18.5%, corporate 15.4%. It is completely broad-based.
And sir, the RBI has announced many measures to boost NRI deposits. If we talk about FCAR, what kind of response are you getting?
Look, initially we had targeted to raise 4 to 5 billion. That included FCAR, ECB, FCB. As of today, in FCARB alone, we have achieved roughly around 650 to 670 million. And this month we are expecting to cross 1 billion. In that way, our original plan of 4 to 5 billion, I think we are on track.
