Bank of Baroda Slumps Most Since August on Bad-Loan Outlook

  • Jefferies, CIMB downgrade stock after results reported Friday
  • Bank to add 50b rupees of nonperforming assets, CEO says

Bank of Baroda shares slumped the most in almost nine months after the Indian lender reported a surprise quarterly loss and its chief executive officer flagged an increase in bad loans over the coming months.

Shares of the nation’s second-largest state bank sank 8.3 percent to 142.30 rupees in Mumbai. Analysts at Deutsche Bank AG, Jefferies India Pvt and CIMB Securities India Pvt cut their recommendations on the stock following the release of the lender’s results on Friday, which included a tripling of its bad-debt provisions in the March quarter from a year earlier.

Three months ago, the bank reported similar results for the December quarter -- a net loss and a surge in provisions for soured credit -- though the stock surged 23 percent as comments from company executives fueled optimism bad loans had peaked. The level of provisions taken for that period was intended to leave “no uncertainty” for the March quarter, Narang Vidyasagar, a general manager for the bank, said at the time.

“Investors were misled” because of the comments made in February, Deven Choksey, managing director at brokerage K.R. Choksey Shares & Securities, said by phone. “Management should clarify what resulted in further slippages in the last quarter.”

Concerns resurfaced after CEO P.S. Jayakumar said Friday that Bank of Baroda expects to add 50 billion rupees ($748 million) in nonperforming assets in its current fiscal year, and may take extra provisions. The lender had 405.2 billion rupees of nonperforming assets as of March, up from 389.3 billion rupees in December, filings that day showed. Gross bad loans at the lender rose to 9.99 percent in the three months ended March 31 from 9.68 percent in the preceding quarter.

Bank of Baroda “crushed all expectations set by the strong commentary post” earnings for the December quarter, HDFC Securities Ltd. analysts including Darpin Shah wrote in a report on Monday.

The end of a central-bank audit of banks’ nonperforming loans in March was supposed to have marked a turning point for bad-debt disclosures, though recent statements from bank officials have pushed those expectations back.

Fitch Ratings, which in a Nov. 3 note predicted stressed-assets ratios in Indian banks to peak by the end of the first quarter, now sees a possible “inflection point” in March of next year, according to Saswata Guha, the agency’s Mumbai-based director for financial institutions.

Bank of Baroda reported a loss of 32.3 billion rupees in the three months ended March 31, compared with a 1.79 billion rupees profit forecast by analysts.

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