MUMBAI: Shares of Bank of Baroda have underperformed its peers measured by the BSE Bankex over the past three weeks. Its shares have fallen 4% compared with a 3% rise in the Bankex after its June 2012 quarter numbers showed asset quality and profitability continue to be concerns for the bank. It currently trades at a price to book value multiple of 0.9 times.
Bank of Baroda, the country's second largest public sector bank by market value posted a 22% increase in net interest income. Net interest income is the difference between interest earned and interest paid. Other income grew 20% to Rs 770.8 crore. its net profit grew 10% to Rs 1138.86.
The bank's advances grew 23% whereas its deposits grew 22%, higher than the industry average of 16-18%. Despite the challenges in the domestic macro environment, the bank expects to grow its loan book at 1.5 times faster than the industry average.
But this was not enough to cheer investors as the bank reported a decline in its net interest margin, higher non performing assets or bad loans and a fall in its CASA ratio.
The net interest margin, which is the yield on advances over cost of deposits, fell from 3.89% in June 2011 to 3.22% at present - mainly due to the rise in the cost of funds.
Its non performing assets (net) as a percentage to total advances increased from 0.44% in June 2011 to 0.65% at present. The rise was primarily from its agri and small small scale industry lending, to which it has a 14% and 17% exposure, respectively. Loans worth Rs 770.57 crore were restructured during the quarter.
Its CASA ratio, which is the bank's current and savings account deposits to total deposits, fell from 16% in June 2011 to 11.6%.