Bank of Baroda Q1 Profit Falls 48% Due to NMC Settlement
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Bank of Baroda''s Q1 net profit dropped 48% to Rs 1,783 cr, impacted by a Rs 5,680 cr payout for an out-of-court settlement in the NMC Group case.
Illustration: Uttam Ghosh/Rediff.com
Mumbai, Jul 24 (PTI) State-owned lender Bank of Baroda (BoB) on Friday said its consolidated net profit dropped 48 per cent to Rs 1,783 crore in the June quarter of FY27, impacted by a Rs 5,680-crore payout for an out-of-court settlement in the UAE-based NMC Group matter.
Without disclosing details of the agreement reached between entities, the bank's chief executive and managing director Debadatta Chand stressed that going for an out-of-court settlement was a commercially prudent decision to end a complex, years-long dispute, which was going on in the courts of Abu Dhabi, England and Wales.
Bank of Baroda (BoB), in a regulatory filing on July 2 said it reached an out-of-court settlement with NMC Health PLC, NMC Healthcare Ltd, and NMC Holding Ltd, with USD 600 million (about Rs 5,700 crore) paid through its Abu Dhabi branch.
The case involved proceedings under Abu Dhabi Global Market (ADGM) and UK insolvency regulations, and the UAE civil law in relation to NMC Health PLC, NMC Holding Ltd and NMC Healthcare Ltd, the filing said.
According to Chand, the bank did not dip into its Rs 2,500 crore floating provision for the settlement payout, which happened in the first week of July, because the money will be required for the Rs 12,500-crore impact the lender is expected to face for transitioning to the expected credit loss-based accounting framework.
The payout does not represent an admission of guilt, and there will not be any future liability on the bank now, he said, adding that the bank's position remains as it is and the progress in the courts and negotiations led it to go for the settlement, which spooked the investors.
"The settlement amount is very low as compared to the overall amount that was sought," Chand said, pointing out that the entities have pledged to keep details of the same confidential.
The NMC matter has led to changes in the underwriting, governance, risk management and compliance processes at the bank, and the same is visible in the nearly 3-times jump in the international book between 2021 and now, he added.
Meanwhile, Chand said that the bank is looking to funnel up to USD 5 billion through the three limited-period windows created for drawing dollars into the country, which will include up to USD 2 billion from the FCNR(B) deposits from the diaspora, USD 1.5 billion in external commercial borrowings and USD 1 billion in dollar bonds.
The bank, which is one of the most internationalised among state-run lenders excluding SBI, has already raised USD 700 million under the FCNR(B) deposits and hopes to end July with up to USD 1 billion, he said.
For the June quarter, it reported a nearly 10 per cent growth in core net interest income at Rs 12,524 crore on the back of an over 17 per cent growth in advances, and the global net interest margin (NIM) compressing to 2.77 per cent from 2.91 per cent in the year-ago period.
Chand said the bank is maintaining its target to grow the loan book at 12-14 per cent and keep NIMs between 2.75-2.95 per cent for FY27.
It is aiming to grow the share of international advances to a fifth of the overall loan pie from the present 16 per cent in two years, and will be aiming to expand its footprint, especially to countries with which India is signing free trade agreements, Chand said.
He said the bank is not upwardly revising its credit growth target for FY27 because of the continuing geopolitical headwinds and also uncertainties over whether it will be able to continue with the deposit growth to fuel the loan side. In Q1, it reported a 13.8 per cent growth in deposits on-year.
From an asset quality perspective, its fresh slippages reduced to Rs 3,422 crore as against Rs 3,686 crore in the year-ago period, while the gross non-performing assets ratio moved up to 1.99 per cent from the quarter-ago's 1.89 per cent.
Overall provisions reduced to Rs 643 crore during the quarter from Rs 1,967 crore in the year-ago period.
The bank has an enabling provision to raise up to Rs 8,500 crore in core equity capital by FY28, but is currently well capitalised with an overall adequacy of 16.30 per cent, Chand said, adding that it may look at raising up to Rs 6,000 crore in tier-2 capital this fiscal.
The BoB scrip closed 1.48 per cent up at Rs 246.60 apiece on the BSE on Friday as against a 0.43 per cent correction on the benchmark.
Without disclosing details of the agreement reached between entities, the bank's chief executive and managing director Debadatta Chand stressed that going for an out-of-court settlement was a commercially prudent decision to end a complex, years-long dispute, which was going on in the courts of Abu Dhabi, England and Wales.
Bank of Baroda (BoB), in a regulatory filing on July 2 said it reached an out-of-court settlement with NMC Health PLC, NMC Healthcare Ltd, and NMC Holding Ltd, with USD 600 million (about Rs 5,700 crore) paid through its Abu Dhabi branch.
The case involved proceedings under Abu Dhabi Global Market (ADGM) and UK insolvency regulations, and the UAE civil law in relation to NMC Health PLC, NMC Holding Ltd and NMC Healthcare Ltd, the filing said.
According to Chand, the bank did not dip into its Rs 2,500 crore floating provision for the settlement payout, which happened in the first week of July, because the money will be required for the Rs 12,500-crore impact the lender is expected to face for transitioning to the expected credit loss-based accounting framework.
The payout does not represent an admission of guilt, and there will not be any future liability on the bank now, he said, adding that the bank's position remains as it is and the progress in the courts and negotiations led it to go for the settlement, which spooked the investors.
"The settlement amount is very low as compared to the overall amount that was sought," Chand said, pointing out that the entities have pledged to keep details of the same confidential.
The NMC matter has led to changes in the underwriting, governance, risk management and compliance processes at the bank, and the same is visible in the nearly 3-times jump in the international book between 2021 and now, he added.
Meanwhile, Chand said that the bank is looking to funnel up to USD 5 billion through the three limited-period windows created for drawing dollars into the country, which will include up to USD 2 billion from the FCNR(B) deposits from the diaspora, USD 1.5 billion in external commercial borrowings and USD 1 billion in dollar bonds.
The bank, which is one of the most internationalised among state-run lenders excluding SBI, has already raised USD 700 million under the FCNR(B) deposits and hopes to end July with up to USD 1 billion, he said.
For the June quarter, it reported a nearly 10 per cent growth in core net interest income at Rs 12,524 crore on the back of an over 17 per cent growth in advances, and the global net interest margin (NIM) compressing to 2.77 per cent from 2.91 per cent in the year-ago period.
Chand said the bank is maintaining its target to grow the loan book at 12-14 per cent and keep NIMs between 2.75-2.95 per cent for FY27.
It is aiming to grow the share of international advances to a fifth of the overall loan pie from the present 16 per cent in two years, and will be aiming to expand its footprint, especially to countries with which India is signing free trade agreements, Chand said.
He said the bank is not upwardly revising its credit growth target for FY27 because of the continuing geopolitical headwinds and also uncertainties over whether it will be able to continue with the deposit growth to fuel the loan side. In Q1, it reported a 13.8 per cent growth in deposits on-year.
From an asset quality perspective, its fresh slippages reduced to Rs 3,422 crore as against Rs 3,686 crore in the year-ago period, while the gross non-performing assets ratio moved up to 1.99 per cent from the quarter-ago's 1.89 per cent.
Overall provisions reduced to Rs 643 crore during the quarter from Rs 1,967 crore in the year-ago period.
The bank has an enabling provision to raise up to Rs 8,500 crore in core equity capital by FY28, but is currently well capitalised with an overall adequacy of 16.30 per cent, Chand said, adding that it may look at raising up to Rs 6,000 crore in tier-2 capital this fiscal.
The BoB scrip closed 1.48 per cent up at Rs 246.60 apiece on the BSE on Friday as against a 0.43 per cent correction on the benchmark.
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