Treasury losses, low provision: What to expect from Bank of Baroda's Q1 nos

Analysts would track Bank of Baroda's commentary on asset quality, and future growth trajectory of return on equity (RoE), loan growth and NIM

Bank of Baroda Q1 preview: State-owned Bank of Baroda (BoB) may report a dent in its earnings at the net profit level for the April-June quarter of fiscal 2022-23 (Q1FY23) as treasury losses may more than off-set gains due to lower provisions. The lender is slated to report its result for the June 2022 quarter on Saturday, July 30.

The lender had posted net profit of Rs 1,208.6 crore in the corresponding quarter of the previous fiscal (Q1FY22), and of Rs 1,778.8 crore in the March quarter of FY22 (Q4FY22). Further, net interest income (NII) during the respective quarters stood at Rs 7,891.7 crore, and Rs 8,611.7 crore, respectively.

Net interest margin (NIM) was 3.2 per cent in Q1FY22, and 3.1 per cent in Q4FY22. It is expected to stay flat this quarter.

Analysts expect slippages at 2.2 per cent (Rs 4,500 crore), which they expect to be set-off by a meaningful quantum from recoveries and upgrades from the retail and SME portfolio. They would track commentary on asset quality, and future growth trajectory of return on equity (RoE), loan growth and NIM.

Here’s what key brokerages estimate from BoB’s Q1FY23 results:

JPMorgan

The global brokerage foresees single-digit growth in the lender’s revenue on yearly (9 per cent) and quarterly (5 per cent) basis at Rs 11,698 crore. On the contrary, net profit is seen at Rs 1,613.4 crore, up around 34 per cent year-on-year (YoY) but down 9.3 per cent quarter-on-quarter (QoQ).

Kotak Institutional Equities

The brokerage expects operating profits (pre-provision operating profit) to decline 32 per cent YoY and QoQ to Rs 3,818.8 crore due to massive treasury losses.

For the quarter under review, treasury losses may balloon to Rs 1,850 crore from Rs 630 crore incurred in Q4FY22. During the same quarter last year, BoB had treasury gains of Rs 950 crore in its books. Given this, net profit is pegged at just Rs 351 crore, down 71 per cent YoY and 80 per cent QoQ.

The brokerage, however, anticipates strong loan growth at 18 per cent on year, leading to 12.5 per cent YoY NII growth at Rs 8,878.2 crore.

Emkay Global

The brokerage, too, believes muted operating income growth, and treasury hit will lead to moderate profitability during the quarter. It pegs PAT at Rs 1,490.7 crore, down 16 per cent sequentially.

Edelweiss Securities

The brokerage bakes in treasury losses of Rs 900 crore, and non-interest income of Rs 1,290 crore (Rs 1,910 crore YoY/Rs 2,390 crore QoQ) to project net profit of Rs 970 crore.

NII is seen growing 11.5 per cent YoY and 2 per cent QoQ to Rs 8,800 crore on the back of around 19 per cent growth in loan book.

Gross non-performing loans are expected to be around Rs 54,600 crore, up from Rs 54,100 crore in Q4FY22.