Earnings Outlook
Bk of Baroda PAT seen down on NII fall after RBI rate cut
This story was originally published at 17:28 IST on 24 July 2025
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By Vaishali Tyagi
MUMBAI – Bank of Baroda is expected to report a fall in its net profit for the quarter ended June due to a decline in net interest income, according to analysts. Yields on advances are expected to have outpaced the fall in cost of deposits, weighing on the bank's net interest income. The bottom line is expected to fall 5.6% on year to INR 42.08 billion for the Apr-Jun quarter, according to the average of estimates from 14 brokerages.
The net profit estimates range from INR 34.67 billion to INR 47.10 billion. Shares of the bank have risen nearly 8% since it declared its earnings for the March quarter in the beginning of May. At 1341 IST, shares of the lender traded at INR 243.50 on the National Stock Exchange, up 0.2% from the previous day.
Kotak Institutional Equities gave the lowest net profit estimate. It expects operating profit to decline 5% on year as there would be pressure on revenue due to slower loan growth which would pull down net interest income.
The net interest income of the public sector bank is seen falling marginally from the previous quarter to INR 108.52 billion, according to the average of estimates from 14 brokerages. On an annual basis, the net interest income is seen falling 6.5%. In the previous quarter, the bank's net interest income had fallen 6.6% on year to INR 110.20 billion. It was below analysts' expectation of INR 117.05 billion.
Tracking a fall in the net interest income, the net interest margin of the bank is also expected to moderate in the June quarter. "We are building NIM to decline 10 bps on quarter to factor the rate cut," Kotak Institutional equities said in a note. The net interest margin of the bank moderated to 2.86% in Jan-Mar from 2.94%, the bank reported in Oct-Dec. Bank of Baroda's domestic net interest margin during Jan-Mar was 3.02%, lower than 3.11% reported in December quarter.
The Reserve Bank of India has cut the policy repo rate by 75 basis points in the June quarter ended June, which lead to lower yield on advances on banks' external benchmark rate linked lending book. This leads to pressure on the banks' margins as deposits take longer to reprice in a falling interest rate regime, brokerages said.
In the March quarter, Bank of Baroda had posted a net profit of INR 50.48 billion, up 3.3% on year, thanks to a jump in other income. Sequentially, it was up 4.4%. The bank's other income during the quarter went up over 24% to INR 52.10 billion, led by treasury income of INR 15.59 billion, over double the year-ago figure.
The fall in yield on advances is expected to have supported credit growth in the June quarter and is expected to do so going ahead as well, brokerages said. According to the provisional figures released by the bank, global advances were up 12.6% on year at INR 12.07 trillion and deposits were up 10.3% as on Jun. 30. Of the domestic advances, retail loans accounted for INR 2.61 trillion at the end of June, which were up over 17% on an annual basis.
While most of the brokerages did not comment on the asset quality of the bank, Motilal Oswal Financial Services and Prabhudas Lilladher expect the asset quality to improve marginally. "Expect cost ratios to remain under control and expect asset quality to improve," Motilal Oswal said. Most brokerage estimate slippages of the bank to remain range bound.
The bank reported fresh slippages of INR 28.73 billion in the March quarter, while recoveries and upgrades in that quarter totalled INR 19.43 billion, up slightly from INR 18.21 billion a quarter ago but down from INR 20.10 billion a year ago. In the March quarter, Bank of Baroda's slippage ratio was 1%, 10 bps higher from the December quarter but 12 bps lower from the March quarter of FY24.
The bank's net non-performing assets ratio fell by 1 bps to 0.58% at the end of March, while gross non-performing assets ratio fell 17 bps to 2.26%. The bank's provision coverage ratio was 93.29% as of Mar.31, 22 bps lower than the quarter ago figure and 1 bps lower than the year-ago figure. Within its total provisions, the bank also held floating provision to the tune of INR 6 billion based on its floating provision policy. Credit costs are expected to remain healthy at 0.50%, according to analysts.
Brokerages expect the bank's bottomline to receive support from a consecutive rise in other income and low growth in operating expenses compared to business growth.
Analysts will track the business growth of the bank. Of the eighteen brokerages tracking the lender, sixteen have a "buy" rating with an average target price of INR 283. Only two have a "hold" rating with a target price of INR 243.
Bank of Baroda will release its quarterly results Friday. Following are the Apr-Jun earnings estimates for the bank in INR million, based on reports from fourteen brokerage firms in descending order of net profit:
Brokerages | Net Interest Income (in INR million) | Net Profit (in INR million) |
Nuvama Wealth Management | 105,800.00 | 47,100.00 |
Nomura Equity Research | 104,500.00 | 45,900.00 |
YES Securities (India) | 110,747.00 | 45,734.00 |
Anand Rathi Share and Stock Brokers | 108,551.00 | 45,723.00 |
Dolat Capital Market | 109,148.00 | 44,096.00 |
IIFL Capital Services | 105,800.00 | 43,500.00 |
Antique Stock Broking | 111,772.00 | 42,077.00 |
Emkay Global Financial Services | 108,202.00 | 41,890.00 |
Motilal Oswal Financial Services | 107,886.00 | 41,744.00 |
JM Financial Institutional Securities | 111,221.00 | 41,420.00 |
Nirmal Bang Equities | 106,807.00 | 40,882.00 |
Prabhudas Lilladher | 113,933.00 | 37,465.00 |
InCred Research Services | 108,000.00 | 37,000.00 |
Kotak Institutional Equities | 106,951.00 | 34,671.00 |
Average | 108,522.71 | 42,085.86 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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