AGM - Analyst Meet
Latest in AGM - Analyst Meet
Bank of Baroda conducted an analyst meet on 03 February 2014 to discuss the financial results for the quarter ended December 2013 and prospects of the bank. Sushil Munot, CMD of the bank addressed the meet:
- The sharp jump in bad loans mainly impacted the performance of the bank in the nine months ended December 2013. Bank had to step up provisions for bad loans by additional Rs 225 crore in 9MFY2014 over 9MFY2013.
- As per the bank, an increase in bad loans was mainly caused by strong advances growth for last few years. An incremental NPAs were mainly contributed by infrastructure and related services in the large corporate segment.
- Bank has witnessed about Rs 300 crore increase in employee expenses in 9MFY2014, of which Rs 200 crore has been on account of wage revision provided at the rate of 9% and provision for pensions. Bank has opened 151 branches and installed 334 ATMs in 9MFY2014, while also recruited 1400 staff in 9MFY2014 weighing on operating expenses.
- Further, the bottom-lines of the bank were also impacted on account of provision for investment deprecation at Rs 90 crore in 9MFY2014 against write back of Rs 50 crore in the corresponding period last year.
- Fresh slippages of advances jumped to Rs 1393 crore in Q3FY2013, which half of the fresh slippages of Rs 2781 crore in 9MFY2014.
- Fresh restructuring of advances stood at Rs 213 crore in Q3FY2014 and Rs 1308 crore in 9MFY2014.
- Bank expects fresh slippages to decline more than 40% in Q4FY2014 from Q3FY2014 level, while expects
- restructuring to increase to be mainly contributed by Corporate Debt Restructuring (CDR) cells proposals. Bank has already classified these CDR proposals as NPAs.
- Bank has categorized bad loans into different buckets and formed different strategies for each bucket. Bank has started a one-time settlement (OTS) scheme for bad loans below Rs 5 lakh, which has received strong response.
- Bank has formed various groups focusing on NPA management and recovery.
- Bank has also appointed Ernest and Young as consultant for business transformations.
- Bank will focus on retail and SME segment for advances growth.
- Bank proposes to bring back the NIM to original level.
- As per the bank, there is huge CASA potential and it is focusing on new account opening for CASA and strong advertising for improving CASA ratio.
- Going forward, bank is looking for profitable growth, while expects asset quality pressure to ease.
Bank of Baroda conducted an analyst meet on 06 February 2014 to discuss the financial results for the quarter ended December 2013 and prospects of the bank. S.S. Mundra CMD of the bank addressed the meet:
- Bank has witnessed sequential improvement in margins with the shading of bulk deposits, better liabilities structure and easing fresh delinquencies.
- Bank has been prudently making provisions for all necessary items. Bank has been making additional provision of Rs 200 crore per quarter for last three quarters for employee pension with new mortality table, while it is also providing Rs 75 crore per quarter for wage revision under negotiation. Thus, the provision for employee benefit has increased to Rs 275 crore per quarter in FY2014 against Rs 100 crore earlier.
- The outstanding provision for wage revision stood at Rs 330 crore at end December 2013.
- Bank had to make provision of Rs 272 crore for creating deferred tax liability (DTL) on special reserves. In the absence of DTL, net profit would have been higher by 30% in Q3FY2014.
- The DTL estimated at Rs 818 crore till March 2013 has been debited to General reserves, leading to 5-6 bps impact on capital adequacy ratio.
- Going forward, the estimated DTL is expected at Rs 70-80 crore per quarter. Thus, the tax rate is expected to increase to 22-23% from earlier estimate of 18-20%.
- On account of prudent provisioning, the bank as raised the provision coverage ratio during Q3FY2014.
- Bank has maintained the advances growth above the system growth. However, bank would not like to grow ahead of peers at the cost of profitability.
- Bank is focusing on strong CASA deposits mobilization. It is opening more than 7500 CASA account per day.
- Bank has opened twelfth Regional Back Office in Ahmadabad.
- Bank has completed the MTN issue in January 2014, where issue recorded six times subscription and bank retailed the subscription of $750 million. The price compression was also 35 bps below earlier guidance.
- Bank has raised FCNR deposits of $1.9 billion in quarter ended December 2013 under RBI special swap window.
- Bank has been witnessing decline in fresh loan impairments, while expects further improvement in asset quality trends. Bank expects fresh slippages to be under control, while upgradations are likely to improve. Bank is also looking at sales of bad loans to Asset Reconstruction Companies (ARCs).
- As per the fresh delinquencies are fragmented and the largest account restructured was Rs 132 crore, while the largest account that slipped to NPA category was Rs 180 crore.
- Bank has highlighted the slowing down payment cycle ahead of elections as a major concern for asset quality. However, the bank expects fresh restructuring of advances to remain elevated in the range of Rs 1500-2000 crore per quarter.
- Bank expects to meet the overall Priority Sector Lending (PSL) target in FY2015, with some shortfall in agriculture.
- As per rough estimates, the bank estimated the provision requirement for unhedged forex exposure of borrowers at Rs 3 crore, in line with RBI guidelines effective from April 2014.
- Bank proposes to improve the domestic NIM to 3% and RoA to 1% by end March 2014. Bank also expects to maintain the advances growth above industry level.
State Bank of India conducted an analyst meet on 14 February 2014 to discuss the financial performance for the quarter ended December 2013 and prospects of the bank. Arundhati Bhattacharya, Chairman of the bank addressed the meet:
Bank has started to follow a strategy of four-pronged approach, which consists of four focus areas such as (a) NPA control, (b) Cost control, (c) improve other income and (d) raise productivity.
(a) NPA control
- Bank has decided to move stressed assets recovery branches reporting to the national banking group (NBG) to Stressed Asset Management Group (SAMG)
- SAMG of the bank was managing about 12.5% of the total NPAs earlier, mainly hard for recoveries.
- Bank has created new four General Manager positions for south, east, not and west regions to enhance the stressed asset monitoring, which is asked to report to the SAMG.
- All bad loans that are hard for recoveries are transferred to SAMG from stressed asset recovery branches.
- Bank has started focusing not only on existing bad loans, but also the assets which are beginning to show stress and likely to slip into NPA category.
- Bank has constituted various committees to monitor bad loans as well as likely bad loans. Chairman of the bank is heading the committee looking after all accounts of above Rs 500 crore exposure, while senior MD&GE (Corporate Banking) is heading the committee taking care of accounts with the exposure of Rs 100 crore to Rs 500 crore. The committee under SAMG head is overseeing the account of Rs 50-100 crore, circle CGM has to head the committee looking at accounts between Rs 25-50 crore, General Managers with Rs 5-25 crore and DGM with Rs 1-5 crore. These committees are meeting every week.
- Bank has introduced a technological platform giving early warnings on stressed asset, which is connected to various available industry databases.
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