Bank of Baroda shares slump most since November on bad-loan outlook

Bank of Baroda shares slump most since November on bad-loan outlook

Mumbai: Bank of Baroda shares slumped the most since November 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 as much as 9.7% to Rs.139.80 apiece, before closing 8.36% lower at Rs.142 apiece. Analysts at 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% 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.

Concerns resurfaced after CEO P.S. Jayakumar said on Friday that Bank of Baroda expects to add Rs.50 billion in non-performing assets in its current fiscal year, and may take extra provisions. The lender had Rs.40,520 crore of non-performing assets as of March, up from Rs.38,930 crore in December, filings that day showed.

“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.”

The end of a central-bank audit of banks’ non-performing 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 3 November 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.