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Bank of Baroda A Story of Consistency, Credibility And Good Governance Performance Analysis: Q4 & Full Year , 2010-11 (FY11) Dr Rupa Rege Nitsure Chief Economist April 28, 2011. Bank of Baroda: Key Strengths.
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Bank of Baroda A Story of Consistency, Credibility And Good Governance Performance Analysis: Q4 & Full Year , 2010-11 (FY11) Dr Rupa Rege Nitsure Chief Economist April 28, 2011
Bank of Baroda: Key Strengths • Bank of Baroda is a 102 years old State-owned Bank with modern & contemporary personality, offering banking products and services to Large industrial, SME, retail & agricultural customers across the country. Uninterrupted Record in Profit-making and Dividend Payment Overseas Business Operations extend across 25 countries through 85 Offices Modern & Contemporary Personality Strong Domestic Presence through 3, 364 Branches Pioneer in many Customer-Centric Initiatives Provides Financial Services to over 39 mln Customers Globally First PSB to receive Corporate Governance Rating (CGR-2) Relatively Strong Presence in Progressive States like Gujarat & Maharashtra Robust Technology Platform with 100% CBS in Indian Branches A well-accepted & recognised Brand in Indian banking industry
Domestic Branch Network • Bank’s network of domestic branches as on 31st Mar., 2011 was 3,364 & no. of ATMs were 1,561. • During FY11, the Bank opened 266 new branches and merged two existing branches. • 151 brs under the Brach Expansion Plan for FY11 are yet to be opened. • Bank proposes to open 500 new branches in FY12 out of which 269 brs in Tier I and II centres & 231 brs in Tier III to VI centres. • Newly opened branches in FY11 are well-diversified across India though a relatively large no. of brs were opened in UP & Uttaranchal, Northern zone, Gujarat, Sothern zone, etc. • Around 34.8% of Bank’s network at the end-FY11 was situated in rural areas.
Robust Technology Platform • As on 31st Mar. 2011, the Bank’s entire domestic branch network, that is 3,364 branches and 38 extension counters were on CBS. • As on 11th Apr, 2011, the Bank completed 100% CBS implementation for its overseas business. • Moreover, the Bank achieved 100% CBS implementation in its five sponsored RRBs as on 19 Mar, 2011, (1,218 branches & three extension counters in five RRBs.) • Bank has developed IT facilities for online/offline account opening through Business Correspondent under Financial Inclusion. • Bank’s Retail & Corporate Customers enjoy several facilities under internet banking such as fund transfers to self & third party; online payment of bills & taxes, rail-ticket booking, temple donations, online subscription to IPOs/FPOs thru’ ASBA & institutional fee payment. • Bank also offers phone banking, online money transfer services, SMS alerts, Cash Mgmt services, online institutional trading, etc. • As on 31st Mar, 2011, Bank had 1,561 ATMs – Metro: 642, Urban: 508, Semi-Urban: 318, Rural: 93. • Mobile ATMs have been introduced in Ahmedabad, Pune, Lucknow & New Delhi. • Bank has implemented Multiple Accounts being linked to a single Debit Card (verified by Visa, CVV2) and also a Mobile Number registration thru’ ATMs in CBS for SMS alert.
Robust Technology Platform • Internet Payment Gateway for debit/credit cards has been implemented. • Mobile Banking – Baroda M Connect – was partially implemented on 25th Jan, 2011 that offers facilities like balance enquiry, mini statement, linking of multiple accounts, fund transfer, bill payments, ticket booking, shopping, etc. • Anti Money Laundering (AML) has been implemented in India & 20 overseas territories. • Payment Messaging Solution (PMS) is implemented in 20 overseas territories & all authorised branches in India. • Integrated Global Treasury Solution has been implemented in UK, UAE, Bahamas, Bahrain, Hong Kong, Singapore, Belgium & India. • All Back Office functions are effectively centralised in the Bank with the implementation of City Back Offices and five Regional Back Offices. • Bank has developed a Software for National Rural Health Mission (NRHM) for Gujarat & Rajasthan states. • Bank has also taken a Green Initiative for implementation of Solar Power General System in 64 branches.
Pattern of Shareholding: 31st Mar, 2011 As on 31st Mar, 2011 • Share Capital: Rs 392.81 crore • No. of Shares: 391.55 million • Net worth: Rs 19,750.63 crore • B. V. per share: Rs 504.43 • Return on Equity: 21.48% • BOB is a Part of the following Indexes BSE 100, BSE 200, BSE 500 & Bankex Nifty Junior, BankNifty, CNX 100, CNX 500 • BOB’s Share is listed on BSE and NSE in ‘Future and Options’ segment also.
Awards & Accolades in FY11 • Bank of Baroda has received several awards during FY11, for its consistent outstanding performance (both business & financial), superior management, dedication to excellence and contribution to rural economy & financial inclusion. Awards received in 2010 (Apr-Dec) • DSIJ –PSU Award for Excellence in Performance & Contribution to Indian Economy by the PSUs – by Dalal Street Investment Journal • FE Best Nationalised Bank Award; Rank II • Silver Award by Dainik Bhaskar Group (DNA) under its Annual India Pride Award, 2010 • Business India – Best Bank Award, 2010 • National Award 2010 for Excellence in the field of Khadi & Village Industries Central Zone for PMEGP • Bank of the Year for 2010 for India – by The Banker (London) Awards received in 2011 (Jan-Mar) • President Zuma Award – for Outstanding Contribution to Advancement of South Africa at Durban • IBA- Banking Technology Award 2011 – Runner Up – Award given by Dr APJ Abdul Kalam • Business Standard Best Banker Award to Mr M.D.Mallya, CMD – given by the Prime Minister Dr Manmohan Singh • Best SME Business Start-up Scheme Award in the Banker Middle East Product Awards, 2011 ceremony at Dubai.
India’s Macro Health: Mar’10 to Mar’11 e: estimated
Economic outlook for FY12 • The IMF’s World Economic Outlook (Apr 11, 2011) projects world output to expand 4.5% in both 2011 & 2012 – down modestly from 5.0% in 2010. • But downside risks continue to outweigh upside risks. • For EMEs like India – downside risks are from commodity prices esp. oil and from overheating & booming of goods & asset markets. • IMF projects real GDP growth for India at 8.25% in 2011 and 7.75% in 2012. • Infrastructure will remain the key contributor to growth in India; corporate investments are expected to accelerate with supportive financial conditions. • Inflationary risks are growing with inflation becoming more generalised; headline inflation is expected to average around 7.5% for India in FY12. • Positives for India in FY12: Improved agricultural output & prosperity in FY11, a broad-based revival in credit demand, strong private consumption, a sustained robust growth of exports, relatively stable currency and a healthy position of foreign exchange reserves. • Negatives for India in FY12: High level of core inflation; second round effects of higher food & fuel prices, more rounds of rate hikes & expected tightness in liquidity, higher subsidy burden on account of fuel & fertilisers and a likelihood of an upward revision in borrowings.
Bank’s Profitability: FY06 to FY11 • During the last five years, the Bank’s Net Profit has grown at the robust CAGR of 38.7%.
Bank’s Business Performance: FY’10 to FY’11 • Share of Domestic CASA hasshrunk marginally to 34.4% due to a sharp increase in retail term deposit rates.
Bank’s Profits & NII: Jan-Mar, FY10 & FY11 • The Bank’s NII grew sequentially from Rs 1,744.95 crore in Jan-Mar’10 to Rs 1,857.99 crore in Apr-Jun’10 to Rs 2,038.14 crore in Jul-Sept’10 to Rs 2,292.26 crore in Oct-Dec’10 to Rs 2,613.88 crore in Jan-Mar’11 reflecting a consistently healthy growth in credit and prudent management of liabilities.
Key Financial Ratios : FY11 versus FY10 • Return on Average Assets at 1.33% [1.21% in FY10] • Earning per Share at Rs 116.37 [Rs 83.96 in FY10] • Book Value per Share at Rs 504.43[Rs 378.40 in FY10] • Return on Equity (ROE) at 21.48% [22.19% in FY10] • Capital Adequacy Ratio at 14.52% with Tier I Capital at 9.99% • Cost-Income Ratio declined from 43.57% to 39.87% (Y-o-Y) • Gross NPA ratio stable at 1.36% • Net NPA ratio stable at 0.35% • NPA Coverage at the healthy level of 85.0% (including technical write-offs) • Incremental Delinquency Ratio contained at 1.06% in FY11.
Bank’s Treasury Highlights: Q4 and Full Year, FY11 • Treasury Income stood at the healthy level of Rs 266.91 crore in Q4, FY11 and at Rs 958.47 crore in FY11. • The Bank’s Trading Gains Stood at Rs 120.86 crore in Q4, FY11 and at Rs 443.70 crore in FY11. • As of March 31, 2011, the share of SLR Securities in Total Investment was 87.95% • The Bank had 83.66% of SLR Securities in HTM and 15.81% in AFS at end-March 2011. • The per cent of SLR to NDTL as on 31st March, 2011 was 26.79%. • While the modified duration of AFS investments is 2.81 years; that of HTM securities is 4.97 years. • Total size of Bank’s Domestic Investment Book as on 31st March, 2011 stood at Rs 68,001 crore. • Total size of Bank’s Overseas Investment Book as on 31st March, 2011 stood at Rs 3,337 crore.
Overseas Business: FY11 • As on 31st Mar, 2011, the “Overseas Business” contributed 24.6% to the Bank’s Total Business, 17.1% to its Gross Profit and 32.1% to its Core Fee income. • While the Cost-Income Ratio for Domestic Operations stood at 42.84% in FY11, it was more favourable at 19.72% for the Bank’s Overseas Operations. • While the Gross NPA (%) in Domestic Operations stood at 1.62% at end-March, 2011, that for Overseas Operations was lower at 0.62%. • The Gross Profit to Avg. Working Funds (%) for Overseas Operations stood at 1.56% in Q4, FY11 and at 1.43% in FY11. • NIM as % of Interest Earnings Assets in Overseas Operations improved from 1.31% in Q1, FY11 to 1.33% in Q2, FY11 to 1.40% in Q3, FY11 to 1.41% in Q4, FY11. • During FY11, the Bank raised US $ 350 mln in Apr, 2011 & US $ 500 mln in Feb, 2011 at the finest terms under its MTN programme and also US $ 225 mln as Syndicated loans to finance the expansion of its overseas assets.
Capital Adequacy & Capital Raising in FY11 • The Bank’s CRAR (Basel II) as on 31st Mar., 2011 was at 14.52%; of which Tier1 was at 9.99% and Tier 2 at %. • The size of Bank’s risk-weighted assets as on 31st March, 2011 was Rs 2,09,890.48 crore. • The Bank proposes to maintain its CRAR in the band of 13.0% to 13.5% in the coming years (with the Tier 1 between 8.0% and 8.5%). • The Bank raised Rs 2,211.50 crore during FY11 by way of the following issues. • Subordinated Upper Tier II Bonds (maturing in 2025): Rs 500 crore in May, 2010 • Subordinated Upper Tier II Bonds (maturing in 2025): Rs 500 crore in June, 2010 • Subordinated Upper Tier II Bonds (maturing in 2025): Rs 500 crore in August, 2010 • Perpetual [IPID] (maturing in 2020): Rs 711.50 crore in August, 2010 • During the last month of FY11, the Bank has received Rs 2,461 crore from the Government of India (GoI) that has increased the GoI shareholding from 53.81% to 57.03%.
Cumulative Position of Restructured Assets (Domestic) • During the past 36 months (1 Apr’08 to 31 Mar’11), the Bank has restructured 71,411 accounts amounting Rs 6,711.43 crore. • Within this, the loans worth Rs 1,597.81 crore were restructured in FY11, Rs 2455.05 crore in FY10 & Rs 2,658.57 crore in FY09. • For the period of 36 months, out of the total amount restructured, Rs 3,715.97 crore (55.4%) belonged to wholesale banking, Rs 1,659.79 crore (24.7%) to SMEs, Rs 578.62 crore (8.6%) to retail and Rs 757.05 crore (11.3%) to agriculture sector. • About 63 accounts (of Rs 1 crore & above) restructured on/after 1st Apr, 2008 with aggregate outstanding of Rs 819.19 crore slipped to NPA after restructuring and most of them belonged to the SME segment. • Industry-wise break-up shows that the Bank’s restructured accounts are well spread over different sectors, the major ones being iron & steel, cotton textiles, engineering, infrastructure, real estate, etc. • The Bank has primarily helped genuine borrowers who suffered from temporary cash flow problems due to the global crisis. These accounts are restructured looking into the internal strength and the financial viability of such borrowers.
Bank’s Guidance & Vision • The Bank would continue with its thrust on sustainable & qualitative growth -- • Would maintain its growth above the industry average to further expand the market share. From Mar’07 to Mar’11, the Bank’s market share in Deposits has gone up from 3.70% to 4.04% and in Credit from 3.53% to 4.01%. • The Bank would grow its deposits in the band of 20% to 22.0%; credit in the range of 23.0% to 24.0%, fee-based income in line with the loan-book and overall profitability by 25.0%, factoring in various downside risks stemming from the economic environment. • The Bank is building Strong Foundation for Future Growth by • working aggressively on enhancing the HR capabilities • working in a dedicated fashion on its BPR project in consultation with Mckinsey & Co. • focusing on development of marketing and sales & service culture • expanding the market share in both Indian and overseas territories • raising capital at every appropriate opportunity
Bank’s BPR Project - Navnirmaan • Project Navnirmaan has altogether 18 activities covering both BPR & Organisational Restructuring, aimed at transforming the Bank’s branches into a sales & service centres to make possible a sustained sales growth, superior customer experience and alternate channel migration. • The most important initiatives were • Conversion of all metro & urban branches into Baroda Next branches within a timeline [156 branches rolled out so far across five zones & 14 regions] • Creation of automated & leaner Back Offices like: • City Back Office (Automated cheque processing introduced in Mumbai on 17 Jan., 2011) • Regional Back Office [five more offices are being opened coupled with technology changes for faster account opening]. • Establishment of two Call Centres • Introduction of frontline automation at select branches for customer convenience • Creation of an Academy of excellence • Organisational Restructuring • The initial impact of Baroda Next migration has been found to be rewarding both in terms of increased customer satisfaction and CASA growth.
Bank’s HR Initiatives • Recruitment during FY11 • Probationary Officers – 1,200 • Specialist Officers (in various specialised disciplines) – 319 • Clerks – 2,000 • Campus Recruitment – 605 • (Bank visited nearly 102 institutes including some of the premier Business schools of the country) • Recruitment Plans for FY12 • Probationary Officers – 1,200 • Campus Recruitment – around 600 • Specialist officers (in various disciplines) – 200 • Clerks – 2,000 • New Hires Planned for Recruitment in FY12: 4,000 • Bank has launched two massive Leadership Development Programmes for 1,200 of its branch heads, 300 AGMs/DGMs – unparalleled in industry & first of its kind for an Indian state-owned Bank.
