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Bank of Baroda -- Riding High on Sustainable Performance ( Apr-Mar & Q4, 2009-10) Dr Rupa Rege Nitsure Chief Economist April 28, 2010. Bank of Baroda: Key Strengths.
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Bank of Baroda -- Riding High on Sustainable Performance ( Apr-Mar & Q4, 2009-10) Dr Rupa Rege Nitsure Chief Economist April 28, 2010
Bank of Baroda: Key Strengths • Bank of Baroda is a 101 years old State-owned Bank with modern and contemporary personality, offering banking products and services to industrial and commercial, retail and agricultural customers across the country. Modern & Contemporary Personality Uninterrupted Record in Profit-making and Dividend Payment Overseas Business Operations extend across 25 countries through 78 Offices Strong Domestic Presence through 3, 100 branches Pioneer in many Customer-Centric Initiatives Provides Financial Services to over 36 million customers globally First PSB to receive Corporate Governance Rating (CAGR-2) Relatively Strong Presence In Progressive States like Maharashtra & Gujarat All Domestic Operations Covered under the CBS A well-accepted & recognised Brand in Indian banking industry
Domestic Branch Network • Bank’s network of domestic branches as on 31st Mar, 2010 was 3,100 & no. of ATMs were 1,315. • During FY10, Bank opened 178 new branches & merged four existing branches. • Around 36.3% of the Bank’s branch network is located in rural areas. • New branches are primarily opened in Semi-Urban, Urban & Metro areas from U.P.,Gujarat, Maharashtra, Rajasthan, A.P., Tamilnadu, Uttaranchal, etc. • Bank proposes to open around 400 more branches during FY10.
Robust Technology Platform • Bank achieved 100.0% CBS implementation in its domestic operations in September, 2009. • As on date, 94.0% of its overseas business is covered under the CBS. • All CBS branches are enabled for inter bank remittances through RTGS and NEFT. • Bank’s Retail & Corporate Customers enjoy several facilities like internet banking, phone banking, rapid funds2india – an online money transfer service, e-tax payment, NEFT/RTGS thru’ e-banking, sms alerts, cash mgmt services, online institutional trading, etc. • As on 31st Mar, 2010, Bank had 1,315 ATMs – 841 Onsite ATMs & 474 Offsite ATMs. • An Integrated Global Treasury Solution is implemented in UK, UAE, Bahamas, Baharain, Hong Kong & India. • AML System has been implemented in India & 14 overseas territories. • Bank has created an Online Centralised-Database of its employees, which enables speedy decision-making, promotions, selection, etc. through automated processes. • Payment Messaging Solution has been implemented in 13 overseas territories & all B category branches in India. • A module for School Fee Collection has been implemented. • Debit cards are now CVX2 enabled for online payment & 3D Secure (3DS) has been implemented. • Enterprise wide GL has been implemented in India & 19 overseas territories, providing integrated GL on a press of a button. • All Back-Office functions have now been effectively centralised in Bank of Baroda.
Pattern of Shareholding: 31st Mar, 2010 As on 31st Mar, 2010 • Share Capital Rs 365.53 crore • No. of Shares 364.27 million • Net worth Rs 13,785.14 crore • B. V. per share Rs 378.40 • Return on Equity (annualised): 22.19% • BOB is a Part of the following Indexes • BSE 100, BSE 200 and BSE 500 • Nifty Junior and Bankex. • BOB’s Share is listed on BSE and NSE in ‘Future and Options’ segment also.
Indian Macro Scene Quite Mixed in FY10 • Indian economy passed through many “pluses” and “minuses” in FY10 • A worst drought in last three decades gave rise to a decline of 8.0% in foodgrains & 5.0% in oilseeds production (y-o-y). • A strong recovery in Mfg, Mining & Services sectors, however, is likely to give a real GDP growth of 7.2% in FY10 (Official Estimate). • Both Govt. and Pvt. Final Consumption Expd. slowed down but investment demand (gross fixed capital formation) showed a gradual recovery. • WPI-based inflation, after remaining subdued during H1, FY10, increased at a faster pace in the second half and reached 9.90% (y-o-y) in Mar’10. • Both exports & imports returned to positive zones by Nov-Dec, 2009 after contracting for 12-13 months. But a fall in invisibles’ surplus has led to a higher current account deficit in FY10. • Equity markets surged on higher FII inflows at US$ 29 bln. Even FDI during Apr-Feb, FY10 amounted to US$ 33.1 bln. • In nominal terms, Rupee appreciated by 11.5% in FY10. • Record market borrowing programme and rising inflation gave rise to hardening of bond yields. Yield on 10-year GoI benchmark paper increased from 6.94% at the beginning of FY10 to 7.17% by mid-FY10 to 7.85% by end of FY10. It hovered above 8.0% for several days during the month of March, 2010.
Bank’s Profitability: FY06 to FY10 • Bank’s Net Profit has grown at a strong CAGR of 38.7% between FY06 & FY10
Bank’s Asset Quality: FY04 to FY10 Gross NPA Net NPA
Bank’s Business Performance: FY10 over FY09 • Share of Domestic CASA improved from 34.87% at end-Mar’09 to 35.63% at end-Mar’10.
Bank’s Business Performance: FY10 over FY09 • Excluding loans to Retail Trade (that is included under the SME sector as per the new RBI guidelines) the growth in SME advances works out to 28.2% (y-o-y) in FY10.
Bank’s Profits & NII: Yearly & Quarterly for FY09 & FY10 • Net Profit for FY09 includes an exceptional item of Rs 95.01 crore due to winding up/dilution of Bank’s holdings in its subsidiaries & Net Profit of FY10 includes an exceptional item of Rs 81.45 crore due to sale of stake in UTI AMC & UTI Trustee companies.
Key Financial Ratios : FY10 • Return on Average Assets at 1.21% [1.09% in FY09] • Earning per Share (annualised) at Rs 83.96 [Rs 61.14 in FY09] • Book Value per Share at Rs 378.40 [Rs 312.61 in FY09] • Return on Equity (ROE) at 22.19% [19.56% in FY09] • Capital Adequacy Ratio at 14.36% withTier I Capital at 9.20% • Cost-Income Ratio declined from 45.38% to 43.57%(Y-o-Y). • Gross NPA ratio increased marginally from1.27% to 1.36% (Y-o-Y). • Net NPA ratio increased marginally from0.31% to 0.34%(Y-o-Y). • NPA Coverage at the healthy level of 74.90% & Incremental Delinquency Ratio at 1.13% in FY10.
Other Highlights: FY09 & FY10 • NIM indicates Net Interest Income as % of Interest Earning Assets.
Other Highlights: Jan-Mar, FY09 & FY10 • Sequentially, the NIM has improved from 2.37% in Q1, FY10 to 2.63% in Q2, FY10 to 2.95% in Q3, FY10 & 2.97% in Q4, FY10 in global operations & from 2.57% to 2.89% to 3.40% to 3.50%in domestic operations.
Bank’s Treasury Highlights: FY10 • Treasury Income stood at the healthy level of Rs 1,109.20 crore in FY10 despite volatile bond and currency markets. • As of Mar 31st 2010, the share of SLR Securities in Total Investment was 86.78%. • The Bank had 80.13% of SLR Securities in HTM and 19.56% in AFS at end-Mar 2010. • The per cent of SLR to NDTL as on 31st Mar., 2010 was 26.91%. • While the modified duration of AFS investments is 2.18 years; that of HTM securities is 4.70 years. • Total size of Bank’s Domestic Investment Book as on 31st Mar 2010 stood at Rs 57,912 crore. • Total size of Bank’s Overseas Investment Book as on 31st Mar 2010 stood at Rs 3,487 crore.
Overseas Business: FY10 • In FY10, the “Overseas Business” contributed 23.8% to the Bank’s Total Business, 19.6% to its Gross Profit and 36.0% to its Fee-based income. • While the Cost-Income Ratio for Domestic Operations stood at 47.11% in FY10, it was just 22.15% for Overseas Operations. • While the Gross NPA (%) in Domestic Operations stood at 1.64% at end-Mar, 2010, that for Overseas Operations was just 0.47%. • “Gross Profit to Avg. Working Funds” ratio for Overseas Operations was 1.57% in FY10 comparable to 2.11% for Domestic Operations. • The ROAA of overseas operations was at 1.42% and the ROE at 24.0% in FY10. • During FY10, the Bank raised FE resources in the form of syndicated loan of USD 175 mln for 3 yrs; bilateral loan of USD 100 mln for 3 yrs and MTN funds of USD 350 mln for 5.5 yrs for deployment in its overseas business.
Capital Adequacy & Capital Raising: FY10 • Bank’s CRAR as on 31st Mar, 2009 stood at 14.36%; of which Tier1 was at 9.20% and Tier 2 at 5.16%. • The size of Bank’s risk-weighted assets as on 31st Mar, 2010 was Rs 1,56,091 crore. • Bank proposes to maintain its CRAR in the band of 13.0% to 13.5% in the coming years (with the Tier 1 at 8.5% to 9.0%). • Bank has raised Rs 1,900 crore during FY10 by way of the following issues. • Subordinated Upper Tier II Bonds: Rs 500 crore in June, 2009 • Subordinated Upper Tier II (Fixed Rate) Bonds: Rs 500 crore in July 2009. • Fixed Rate Perpetual Bonds (Innovative): Rs 300 crore in Oct, 2009 • Fixed Rate Perpetual Bonds (Innovative): Rs 600 crore in Nov, 2009
Restructured Loans : FY10 • During 24 months (1 Apr’08 to 31 Mar’10), Bank has restructured 61,174 accounts amounting Rs 5,113.62 crore. • Within this, the loans worth Rs 463.26 were restructured in Q4, FY10. • For the period of 24 months, out of the total amount restructured Rs 2,682.11 cr belonged to wholesale banking, Rs 1,272.69 cr to SMEs, Rs 557.58 cr to retail and Rs 601.24 cr to agriculture sector. • About 79 accounts above Rs 25 lakh restructured during the last 24 months slipped during FY10 and they were Rs 417.88 crore. • Industry-wise break-up shows that-- Bank’s restructured accounts are well spread over different sectors, the major ones being cotton textiles, engineering goods, iron & steel, food processing, infrastructure, etc. • Bank has primarily helped genuine borrowers who suffered from temporary cash flow problems due to global crisis. These accounts are restructured looking into their internal strength & after ensuring their financial viability.
Emerging Economic Scenario • Global economic recovery, currently underway, faces risks because of large public debt in advanced countries. • Advanced countries still suffer from loss of capacity output, high unemployment rates, impaired financial systems, etc. • However, Asia is much better placed as domestic demand in Asian countries is replacing exports as the main growth driver, led by China & India. • While India is likely to post the growth around 7.2% in FY10, the growth is expected to rebound to 8.0% in FY11 backed by stronger than expected growth momentum in industry & services. • Food inflation- a major macro concern for India until the next normal monsoon season. • With both growth & inflation heading towards 8.0%, the pace of monetary tightening is going to increase putting upward pressure on interest rates. • Indian currency is headed for appreciation despite faster widening of current account deficit. • Key risks: high food & oil prices, a double-dip, etc. • Positives: strong net capital inflows (both FIIs & FDI) & good signs of investment rebound.
Bank’s Guidance & Vision • The Bank would continue with its thrust on sustainable & qualitative growth -- • Will try to grow at above industry average to steadily expand its market share. • The Bank would protect the current soundness of its key financials like ROAA, ROE, EPS, BVPS, NPL Position etc., through its dedicated focus on CASA Mobilisation, Efficient Pricing of Retail Deposits & Loans, Steady Reduction in Bulk Business and Credit Origination & Monitoring. • The Bank would try to grow its Fee-based Income in tandem with its Loan-Book growth. • The Bank is building Strong Foundation for Future Growth by • Recruiting the best possible talent in the country from the Premier Institutions • Working on BPR project in consultation with Mckinsey & Co. so as to achieve the optimum use of technology and right skilling of the manpower to yield maximum customer satisfaction. • Aggressively launching a series of marketing campaigns to promote its Brand value, such as the recently launched Baroda Next Reinforcement Campaign – II.
