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Informist, Friday, Oct. 31, 2025

 

By Vaishali Tyagi

 

MUMBAI – State-owned Bank of Baroda's net profit is expected to fall sharply in the September quarter on a yearly basis due to contraction in net interest margin and weak non-interest income, particularly treasury income, according to brokerages tracking the lender.

 

The lender is expected to report a net profit of INR 41.87 billion in the September quarter, down almost 8% from the previous quarter and 20% from the corresponding quarter a year ago, according to the average of estimates of nine brokerage firms. Estimates for the bank's net profit were in the range of INR  35.92 billion to INR 47.99 billion. Kotak Securities Ltd. provided the lowest estimate for net profit, while the highest was by Emkay Global Financial Services Ltd. Bank of Baroda will announce its financial results for the September quarter on Friday. 

 

The bank had reported a net profit of INR 45.41 billion for the quarter ended June, up 1.9% on year. Sequentially, however, the net profit of the bank was down over 10%. 

Most brokerages expect a moderation in net interest margin due to the Reserve Bank of India's Monetary Policy Committee's rate cuts. The MPC has lowered the policy repo rate by 100 bps between February and June to 5.50%. Nirmal Bang Equities Pvt. Ltd. expects the bank's net interest margin to decline 44 bps on year from last year to 2.6%, with the sequential fall of 13 bps. 

 

"We are building NIM to decline 10 bps quarter-on-quarter to factor the rate cut," Kotak Securities said. The brokerage firm expects NIM to fall 40 bps on year. However, Nuvama Wealth Management Ltd. expects the margin to remain unchanged sequentially, while forecasting a 19 bps fall from last year. The net interest margin of the bank moderated to 2.91% in Apr-Jun compared with 2.98% a quarter ago. 

 

Brokerage firms expect a slight decline in net interest income — the difference between interest earned and interest expended — for the September quarter, due to a contraction in the net interest margin. The bank's net interest income is expected to decline by around 2% on year to INR 113.89 billion, according to the estimates. Sequentially, the net interest income is seen as broadly stable. The net interest income of the lender fell 1.4% on year to INR 114.35 billion in the June quarter.

 

Bank of Baroda's net profit is expected to decline in the September quarter due to a sharp fall in non-interest income, driven by weak treasury income, according to brokerages. Non-interest income is expected to drop 36% on year and 30% on quarter, with treasury income constituting only 5% of profit before tax, compared to 30% in the previous quarter, according to Kotak Securities.

 

"Treasury gains may not cushion the decline in net interest income for the quarter," Kotak Securities said for the banking sector. "Increase in yields in this quarter indicates that treasury gains will be much more muted in this quarter compared to Apr-Jun. This might add further pressure to this quarter's profitability. However, this is contingent on how each bank has managed duration and rebalancing amid rising yields."

 

Nuvama expects Bank of Baroda's non-interest income to decline 25% on year and nearly 16% sequentially. The brokerage firm expects the bank's treasury income to decline nearly 63% on a quarter basis, despite a 1.2% on-year rise. In contrast, the bank's non-interest income surged 88% on year to INR 46.76 billion, driven by treasury income of INR 22.26 billion, up from INR 2.95 billion a year ago and INR 15.59 billion a quarter ago.

 

Brokerages were divided on Bank of Baroda's asset quality, with some expecting a decline in the slippage ratio and others anticipating a rise. Analysts at Nuvama see the bank's slippage ratio declining 21 bps on year and 37 bps on quarter to 1.03%, while Kotak Securities sees a rise in the slippage ratio of the bank in the September quarter by 8 bps sequentially and 12 bps on year. "Slippages will be around 1.3% (INR 38 billion), mostly driven by retail and small and medium enterprises," the brokerage firm said. In Apr-Jun, Bank of Baroda's slippage ratio was 1.16%, 16 bps higher than the March quarter and 11 bps higher from the June quarter of FY25.

 

Despite being divided on Bank of Baroda's slippage ratio, almost all brokerages expect the bank's provisions to decline in the September quarter. The bank's provisions are expected to fall sequentially in the September quarter, according to analysts at YES Securities. 

 

Motilal Oswal Financial Services Ltd. also expects Bank of Baroda to maintain lower provisions in the September quarter at INR 14.1 billion, down from INR 19.7 billion in the previous quarter and INR 23.4 billion last year. Nuvama expects provisions to fall almost 34% on year and a little over 21% on quarter to INR 15.5 billion. Provisions during Apr-Jun were up over 94% on year at INR 19.67 billion, which weighed on the bottom line. 

Analysts expect Bank of Baroda's credit cost to decline in the reporting quarter. Kotak Securities expects a sequential drop of 10 bps and a yearly decline of 31 bps to 0.56%. Nuvama anticipates a steeper fall of 16 bps sequentially and 33 bps year-on-year. In contrast, Nirmal Bang Equities expects a sequential rise to 0.6%, though it forecasts a yearly decline of 5 bps. The credit cost stood at 0.55% in the June quarter, up 11 bps from Jan-Mar and 8 bps from the previous year.

 

Most brokerages expect Bank of Baroda to report a rise of over 12% in loans and a deposit growth of over 6%, aligning with the bank's provisional filing for the September quarter. The bank reported a net loan growth of INR 12.8 trillion, up nearly 12% on year and global deposits increased 9% on year to INR 15.00 trillion, in a filing to exchanges.

 

Analysts will watch for the bank management's commentary on margins and the outlook for loan and deposit growth. At 1130 IST, shares of the bank traded 1.6% higher at INR 277 on the National Stock Exchange.

 

The bank's shares have risen by slightly over 15% since its June quarter earnings were announced on Jul. 25. Of the 21 brokerage reports on the bank available with Informist, 18 have a 'buy' rating with an average target price of INR 288 per share while two have a 'hold' rating at a target price of INR 245. Only one brokerage report has a 'sell' rating on the bank's share with a target price of INR 240. 

 

Following are the Jul-Sept earnings estimates for Bank of Baroda from nine brokerages in descending order of the estimate of net profit in INR million:

 

Brokerage	Net interest income	Net profit
Emkay Global Financial Services Ltd.	114,187.00	47,989.00
Nuvama Wealth Management Ltd.	118,900.00	44,800.00
Nomura Equity Research	117,600.00	43,900.00
Anand Rathi Share and Stock Brokers Ltd.	112,669.00	43,759.00
Motilal Oswal Financial Services Ltd.	109,910.00	42,943.00
YES Securities (India) Ltd.	115,057.00	41,328.00
Nirmal Bang Equities Pvt. Ltd.	110,832.00	39,656.00
Prabhudas Lilladher Pvt. Ltd.	113,831.00	36,505.00
Kotak Securities Ltd.	111,994.00	35,916.00
Average	113,886.67	41,866.22

 

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

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