New Delhi: Bank of Baroda's shares Friday fell nearly 7% in early afternoon trade due to heavy restructuring and surge in bad loans despite an increase in its net profit for the quarter ended March 31, 2012.
The bank, India's third largest public sector lender, restructured assets worth Rs 52.81 billion in the fourth quarter (Jan-Mar) alone of the last fiscal year 2011-12, the bank's Chairman and Managing Director M D Mallya said while announcing the financial results Friday.
"The overall portfolio of restructured assets in the current year (2011-12) has aggregated around Rs 8,500 crores (Rs 85 billion)," he said.
A single company accounted for Bank of Baroda's major share of restructuring, Mallya said without identifying the company, while it also restructured assets of a number of ailing state electricity boards (SEBs).
SEBs are reeling under heavy losses on account of poor revenue collections amid economic slowdown. Moreover, new power projects are caught in a logjam due to environmental clearances, while some power generation companies are confronted with shortage of coal.
However, Mallya said that he does not expect the restructured assets to slip into non-performing assets (NPAs) as they are all standard assets that are performing well. Moreover, an expected pick up in the domestic economic condition may also improve the bank's restructured portfolio, he added.
Bank of Baroda's gross non-performing assets (NPAs), or bad loans, increased to 1.53% of advances as on March 31 from 1.36% in the previous fiscal year, while its net NPAs also rose to 0.54% from 0.35%.
The bank's gross slippages in the quarter ended March 31 was at Rs 13 billion, showing a rise of 37% against the Rs 9.5 billion gross slippages in the same quarter last year, Mallya said.
The bank's provisions and contingencies during the fourth quarter surged by 43% to Rs 8.43 billion as compared to Rs 5.90 billion in the year-ago period.
Recently, the Reserve Bank of India had met heads of public sector banks to discuss the issue of their mounting bad loans and asked them to be more cautious while lending to entities in sectors like aviation, steel and mines, textile and power, and step up measures to reduce their NPAs, although it termed the current level of bad loans as manageable.
Meanwhile, global credit rating agency Standard & Poor's cut outlook on 11 Indian financial institutions, including State Bank of India, ICICI Bank and HDFC Bank, while warning of a potential ratings downgrade depending on their asset quality and India's sovereign rating.
Further, Bank of Baroda expects to maintain its net interest margin (NIM) at 3.25%-3.3% for the current fiscal year 2012-13, Mallya said.
Net interest margin (NIM) of the bank was at 2.97% for the quarter ended March 31, 2012.
Shares of Bank of Baroda Friday ended at Rs 687.05 on the Bombay Stock Exchange (BSE), down 6% from the previous close.