Year-on-year net profit for BoB increased by 2% due to a rise in other income sources.
Bank of Baroda, one of India's leading public sector banks, has reported improved financial performance in the first quarter of the financial year 2026 (H1FY26), according to Debadatta Chand, the bank's Managing Director and CEO.
The key factors driving this improvement include a focus on stabilising margins, growth in loans and deposits, expansion of the co-lending business, and a strong other income contribution.
Margins Stabilise and Growth Accelerates
Chand expects the net interest income (NII) and net interest margin (NIM) to be under stress in the second quarter but anticipates a positive outlook in H2FY26 as margins stabilise. The bank aims to maintain margins between 2.85-3%.
The bank has shown strong domestic loan growth of 12.4% year-on-year and deposit growth of 8.1% year-on-year. Managing the cost of deposits below 5% in July-September is also a focus.
Co-lending Business Expansion
The bank is focusing on building its co-lending book, currently less than Rs 2,000 crore, which is expected to contribute positively to the financials.
Other Income Growth
There was a sharp rise of 87.9% year-on-year in other income, significantly boosting net profit in Q1FY26, which rose about 2% year-on-year.
Asset Quality Ratios Improve
The asset quality ratios inched up in the reporting quarter. The gross non-performing asset (NPA) ratio increased to 2.28% compared to 2.26% a quarter ago. However, the net NPA ratio increased to 0.6% compared to 0.58% a quarter ago.
Operating Expenses Rise
Operating expenses of the bank rose 13.7% year-on-year to Rs 7,873 crore in the quarter ended June.
Provisions Increase
On a sequential basis, provisions rose nearly 27%. Provisions rose sharply by 94.6% year-on-year to Rs 1,967 crore.
Net Profit Increases by 2%
Despite the increase in provisions, Bank of Baroda's Q1 net profit increased by approximately 2% Year-over-Year (YoY) to Rs 4,070 crore.
The bank has maintained its guidance on loan growth at 11-13% and deposit growth at 9-11% for FY26. The bank aims to keep the cost of deposits below 5% in July-September.
One account of Rs 500 crore in the manufacturing sector has slipped in the international book, and the bank has made 40% provision on this account. The account is under resolution, and the bank is hopeful that the resolution is completed in 210 days.
A large account that slipped in the international book was restructured during Covid and was upgraded later. The global net interest margin for Q1 was 2.91%. The domestic current account savings account (CASA) ratio for the bank was 39.33% as of June 30.
Other Income Boosts Net Profit
Other income for the bank rose by 87.9% YoY to Rs 4,675 crore in Q1, significantly boosting net profit.
In conclusion, the factors driving improved financial performance in H2FY26 are expected margin improvement, sustained credit and deposit growth, expansion of co-lending, and a strong other income contribution. The bank remains optimistic about its performance in the coming quarters.
[1] As reported by Livemint and Business Standard.
- The banking-and-insurance industry is keeping a close eye on Bank of Baroda's focus on stabilizing margins, as reported by Debadatta Chand, the bank's Managing Director and CEO, with an aim to maintain margins between 2.85-3%.
- The finance market is intrigued by Bank of Baroda's co-lending business expansion, currently under Rs 2,000 crore, which is expected to positively contribute to the bank's financials.
- In the Defi and finance realm, the bank has shown strong growth in domestic loans of 12.4% year-over-year and deposits of 8.1% year-over-year, and aims to manage the cost of deposits below 5% in July-September.
- A significant boost to Bank of Baroda's net profit in Q1FY26 was an 87.9% year-on-year rise in other income, making it a key factor to watch in the finance business sector.
