Bank of Baroda Ltd

NSE:BANKBARODA

Earnings Call Analysis

Strong Growth and Solid Profitability

In the latest earnings call for Q2 FY 2024-25, Bank of Baroda reported impressive growth metrics, showcasing a noteworthy performance in both its top and bottom lines. The bank achieved a profit after tax (PAT) exceeding INR 5,000 crores for the first time, marking a 23.2% year-over-year increase. This positive trend is supported by strong operating profit growth of 18.2%, rising from INR 8,020 crores to INR 9,477 crores. The Return on Assets (ROA) was reported at 1.3%, while the Return on Equity (ROE) reached 19.22%, indicating robust operational efficiency and effective capital deployment.

Asset and Deposit Growth

The bank experienced significant asset growth, with total global advances rising by 11.6% overall, and domestic advances outperforming at 12.5%. This growth was attributed to healthy performance across various sectors, including a remarkable 23% in auto loans and 17.2% in education loans. However, Bank of Baroda has strategically moderated its personal loan growth, reducing it from a high of 39% in the previous quarter to 25%. On the deposit side, total deposits grew by 9.1%, with domestic CASA deposits experiencing a steady growth of 7%.

Marginal Compression in Net Interest Margin

Despite the growth in both assets and deposits, the bank’s Net Interest Margin (NIM) slightly declined to 3.10%, from 3.18% in the previous quarter. This reduction is primarily attributable to changes in penal interest guidelines, which are projected to have a financial impact of about 5 basis points (INR 179 crores). The bank maintains a NIM guidance of 3.15% ± 5 basis points for the upcoming periods, indicating its commitment to preserving margins even in the face of rising deposit costs.

Improved Asset Quality

The bank’s asset quality strengthened, with Gross Non-Performing Assets (GNPA) reducing to 2.5% from 3.32% half-yearly. The Net Non-Performing Assets (Net NPA) also improved to 0.6%, down from 0.76%. This positive trajectory demonstrates the effectiveness of the bank's risk management strategies and proactive measures in controlling bad debt. Additionally, the slippage ratio settled at 1.07%, within the guidance range of 1% to 1.25%.

Revised Guidance for Future Growth

Looking ahead, the bank has revised its guidance for advance growth to a range of 11% to 13% from the previous target of 12% to 14%. Despite this adjustment, Bank of Baroda aims to operate at the higher end of the range, striving for the full-year target of 13%. For deposit growth, they adjusted the guidance from 10%-12% down to 9%-11%, reiterating their intention to enhance performance in Q3 and Q4, which are typically stronger growth quarters.

Strategic Focus on Retail Banking and ESG

Further underscoring its growth strategy, Bank of Baroda has committed to enhancing its retail footprint, recently appointing a prominent cricket legend as its global brand ambassador. The bank is also prioritizing a strong environmental, social, and governance (ESG) aspect, launching various initiatives, including green deposits and tree planting activities. These strategies are aimed at not just growth in market share, but also at responding to evolving customer expectations around sustainability.

Technological Advancements and Customer Engagement

On the technology front, Bank of Baroda is investing in digital customer service enhancements. Their AI-driven virtual relationship manager has been well-received, improving customer engagement. The bank's digital transformation efforts signal a commitment to meeting modern banking requirements, thus appealing to a broader customer base and driving further growth.

Earnings Call Transcript 2025-Q2

[Operator]

Good afternoon, everyone, and welcome to the Analyst Meet for Bank of Baroda's financial results for the quarter ended September 30, 2024. Thank you all for joining us. We have with us today our MD and CEO, Debadatta Chand, and he's joined by the bank's Executive Directors and our CFO.

We will start with a short presentation. We will then have brief opening remarks by Mr. Chand, after which, we will have the Q&A session. Chand sir, over to you.

[Debadatta Chand, executive]

Good evening, friends. Just to introduce the management team. I'm D Chand, MD and CEO of the bank. I have been interacting with you for almost now 6 quarters now. With me, Mr. Lalit Tyagi, he's the Executive Director, looking after the corporate credit, International Banking and also the treasury. And with us, Mr. Sanjay Mudaliar is the Executive Director, he looks up the entire IT of the entire IT infrastructure, IT of the bank, along with the retail asset book of the bank.

With us again Mr. Lal Singh, he's Executive Director, looking after the recovery on the stress asset book and also the HR function, apart from a couple of other platform function.

And the new vis-a-vis the last quarter and this quarter, the new member of the management team is Madam Beena Vaheed. She looks after most of the -- including control and platform function and also the retail liability fee. So with this, Mr. Chayani is the CFO, he's interacting with all of you for 2 quarters now. Over to you, Mr. Chayani.

[Chayani Sundar, executive]

Thank you, sir. And a very good evening to everyone. In advance, I wish you all and your family members a very happy Deepavali. It's my privilege to present before you the financial highlights of Bank of Baroda for the quarter, half year ending September 2024.

You all will be happy to note that bank has crossed a business volume of INR 25 trillion as of 30th September 2024. If I look at the components, the asset side, global advances has grown by 11.6% and especially domestic advances has grown by 12.5%. Component wise, we are executing a robust growth in our organic retail by around 20%. Agriculture is going around 11%, MSME at 12% and corporate at 10.6%.

In retail, also, our growth trajectory is very significant with respect to the mortgage growing at 13.2%, home loan at 16.2%, education at 17.2%, auto loan at almost 23%. And as you all recall, at last quarter and for the past quarters, we have said that we are moderating the growth in our personal loan book. It has come down from 39% as of the last quarter to 25% this quarter.

Can you please change the slide. Coming to the liability piece, the liability remains a focus area for the banking industry as a whole. Our total deposit has grown by 9.1%, however, two highlights as of 30th September is that consistently in domestic CASA, we are growing at 7% and retail deposit, we are going at 7.2%, which is better than some of our peers. And as far as our CD ratio is concern, CD ratio is is at 83.83% and CASA even strong at 40%.

Please, next slide. Profitability metrics. Operating profit has a Y-o-Y growth of 18.2% and moved from INR 8,020 to INR 9,477. Very happy to submit that for the first time, we have posted a profit after tax more than INR 5,000 crores with a Y-on-Y growth of 23.2%.

One of the strong profitability metrics is return on asset and for the last 9 quarters, we are posting return on assets more than 1% as of 30th September, return on asset on a quarterly basis is 1.30%. Similarly, return on equity is comfortable at 19.22 percentage.

Next slide please. If we come to the half yearly piece, operating profit has grown from INR 15,844 crores to INR 16,638 crores with a growth of 5%. PAT has increased by 16.5% half yearly basis. Return on asset half yearly, it is 1.20%, and return on equity is 17.79%.

Next slide, please. Yield on advances versus Q2 '24, Q2 '25, there is an increase from 8.03% to 8.48%. However, if I compare that with Q1 of '25, there is a slight reduction in the yield on advances from 8.55% to 8.48%.

Cost of deposit remains elevated up to 5.12% as compared to Q1 of 5.06%. Net interest margin has been within our guidance of 3.15% plus minus 5 bps. And as of September, net interest margin is 3.10%. It is more than that of Q2 of '24, with 3 basis points. However, there is a dip as far as Q1 '25 is concerned. This is mainly because of the fact that with the change in the guideline or penal interest to be converted to the penal charges, the interest component has gone down. That has resulted in reduction from 3.18% to 3.10%.

Next slide, please. Asset quality remains strong at 2.5% gross NPA, half yearly basis, it has reduced from 3.32%. Similarly, net NPA has reduced from 0.76% to 0.60%. And provision coverage ratio remains at a stronger point of 93.61% improved from 93.16%.

Next please. If I look at the slippage, slippage is within our guidance of 1% to 1.25%. As of September, it is 1.07%. Credit cost, again, is 0.65% slippage ratio. If I compare H1, then it has come down from 1.28% to 0.90% and credit cost is 0.55%, which is within our guidance.

Next, please. SMA book as of the 30 September is 0.47%, and our collection efficiency remains robust at 98.5%.

Next slide please. The bank is enjoying a strong capital position of CRAR as of 30th September is 16.26% and enjoys a healthy NCR 123.7%. That's all from my side. Over to you, Chand sir.

[Debadatta Chand, executive]

Sure. Thank you very much, Mr. Chayani. Again, to my investor and analyst friend, a very good evening to all of you. And let me -- the CFO covered everything, but make some of the qualitative comments with regard to the financial results we have announced today.

We have again declared a very good quarter, Q2, both in terms of a very strong top line and also a strong bottom line in terms of the net profit going up at 23.2% Y-o-Y and 17.4% quarter-to-quarter. The aspect, which is again important on the book side is that despite like the strong growth on the asset side, we are able to achieve our margin objective and that is what the CFO outlined before all of you.

On the resource side, a couple of qualitative comments. Earlier also, we said like we should not grow book based on the wholesale deposit growth. Our focus was clearly on the retail CASA, the retail term deposit. And the numbers you see for this quarter, which is at 7% and 9.6% for the retail term deposit. And this is the same growth that we had achieved in Q1 also clearly in terms of the -- the peer comparison is clearly we have a very strong performance and that is what the focus is going to be.

We want to optimize on the retail space more in terms of the liability rather than growing on the bond deposit, which again, can be a price -- I mean, price impact for me in terms of margin there.

On the asset book, again, the domestic asset book, the growth is 12.5%. International -- I mean the global is 11.6% because earlier also, we said that the growth of international, which is to very high earlier, we clearly want to moderate. We have seen that the international book growth is only 7.6% this quarter and because of that, the global book is 11.6% but the domestic book, which is a very large in terms of the overall book is still going very strong at 12.5%.

The margin guidance that we had given, that is at 3.15% plus minus 5 bps. In spite of the deposit cost going up at 5 bps, 5 or 6 bps quarter-to-quarter because of the management of the [indiscernible], we are able to maintain the margin guidance. I mean varying that impact of high BPs otherwise, the NIM would have been higher than that we have announced 3.10%, the penal interest or penal charges. Otherwise, the NIM is still very strong and that is what one of the objective in terms of how do we balance the growth and margin, that's clearly our strategy as we move forward.

The domestic margin NIM is 3.27%, which is fairly very satisfactory in terms of the peer comparison also and the kind of margin we are generating out of the book. The net profit has been very significant. Mr. CFO has already announced this is the first quarter where we have crossed INR 5,000 crores of net profit. The net profit growth Y-o-Y is very high, 23% quarter-to-quarter is also quite high.

Obviously, the net profit has been boosted from the recovery out of PWO, which we would have seen that we announced the data to you in the market.

ROA has been consistently -- we had given guidance earlier to maintain above 1%. This quarter, it is 1.3% and the half year is 1.20%. And earlier also, we said, while constructing the book, both in terms of the asset liability, we operate the NIM and the ROA as a twin parameters to optimize in that. So we'll continue to have those focus going forward also.

The asset quality has been the GNPA of 2.5%, net NPA of 0.6%. We have improved the service quarter-to-quarter, although we don't give guidance on the GNPA and net in pay, but always we say that we intend to trend it downwards both GNPA and net NPA on the matter.

And on the slippage cost and the slippage ratio and the credit cost, we are within the targeted guidance. The slippage ratio, the guidance is 1% to 1.25% at 1.07%. The credit cost guidance has been 0.75%, which was reduced from 1% to 0.75% last quarter. We're at 0.65% on that.

A couple of other things which are again important for an overall business perspective that as all of you know, that we announced a Cricket Legend as our global brand ambassador recently. And the idea for the phase is to retailize the bank more. So I think with this brand ambassador phase, we are going to have more of retail presence in the entire country. We want to go to each and every customer in the country in terms of retailizing the book for the purpose.

The bank committed big time on the ESG commitment. We have earlier also announced a couple of new initiatives. We are one of the bank having like the first or second to announce the Green Deposit. We have a significant green outstanding loan exposure as of today. We planted trees across country to have a greener planet. Actually, we got some award because of that. On the priority sector lending, the bank is quite strong at. So the ESG is one of the core theme the bank is working on while overall business trying to achieve the business growth, as we said earlier.

Digital is also one of the focus area. And as you know that we announced a virtual relationship but actually Aditi, wherein it was a virtual relationship manager interacting with the customer on a -- based on an AI model. And there are a large number of customers who have onboarded into this model, this customer relationship engagement. And there, we are getting good satisfactory comments from the customer on that.

So let me come to the -- that digital customer service is one of the core theme that the bank is working on. And whatever we are as in today, going forward, we'll try to improve the digital customer service. That is one of the theme that we are working strongly on that. With this, let me come for some of the guidances part of it. As you know, the deposit market is quite challenging at this point of time. Most of the banks, although I think we have done better on quarter-to-quarter on the deposit but it's -- the growth is a challenge because the saver's money going to alternate like capital market and all that is what we have seen in the past. And in case you look at our quarterly quarter-on-quarter growth, it is almost at around 9% or 8.6%.

So with this, actually, earlier, we gave a guidance of 10% to 12% as the deposit growth, but now because on the system has the same issue, then we are slightly lowering the guidance from 10% to 12% to 9% to 11%, although we'll try to operate in the upper band of that, that is at 11%. Currently, the growth is 9%. That means my Q3 and Q4 growth on deposit has to be higher than obviously 9% to achieve the 11% kind of a number going forward for FY '24, '25. Because of the credit growth and the deposit growth is much talked about in the system, so because we are revising the deposit guidance based on the actual numbers we have achieved, although the growth in Q3 and Q4 has to be much higher than the Q1 and Q2.

But then the loan side guidance also, we are revising from 12% to 14% to 11% to 13%, although we'll try to operate at 13% level, precisely for 2 counts. One is that we do not want to increase the credit deposit growth to a level where it's not a sustainable point one, keeping the margin guidance in mind, the number two. Third is that as the deposit is revised, obviously, the credit target has to be revised. The international book is going to moderate. Actually, that is what actually we are talking about the global book, although the domestic book continue to be higher than 12.5% that we achieved. So the guidance on the advances is 11% to 13% with our efforts to operate at 13% for the full year on the -- because we are walking into both very productive quarter, Q3 and Q4, which are the busy season quarter. And I think we'll be in a position to achieve rather surpass the guidance that we are giving on the asset side.

Margin, the same guidance we had given, 3.15% plus/minus 5 bps. The reason being slightly realigning the balance sheet has given positive outcome to us, that we have done that in Q1. And going forward, we are expecting a bit of moderation to happen on the deposit cost based on the liquidity stance or the rate stance possibly that would happen in the economy. So there are Q3 and Q4 available to us. So I think we still maintain the NIM guidance at 3.15% plus/minus 5 bps.

The credit cost continued to be the same below 0.75%. The slippage ratio continued to be same like 1% to 1.25%. The ROA guidance continued to be above 1% and try to optimize at 1.10%. So these are a couple of guidances we have given to the market and I want to reiterate now the same thing. The bank has a significant growth this quarter and Q3, Q4 going to be higher than the growth that we have seen on the asset and liability side in Q1 and Q2. As you know that Q1, we realigned the book slightly, keeping the fine price book on the corporate -- I mean, slightly reducing that book. The corporate growth was 1.6% in Q1. And this quarter, it is 10.6%, very strong and going to again higher than 10.6% to achieve a 10% growth on the corporate so that I achieve the overall advance growth of almost like 13% in the band of 11% to 13%.

With this, I think I've done with regard to my comments. And now over to you, Phiroza, for the question and answer.

[Operator]

[Operator Instructions] The first question is by Kunal Shah.

[Kunal Shah, analyst]

Congratulations. A couple of questions. First, I want to understand on the provisioning side. So obviously, there was recovery from written-off but at the same point in time, provisioning was slightly on the higher side. We did INR 230 crores of floating provisions. But besides that, was there any prudent specific provisioning also done just to make sure that, okay, whatever has been the one-off on the recovery, trying to offset that? And if you can just quantify that amount of specific prudent provision?

[Debadatta Chand, executive]

See, Kunal, you said right, we have INR 230 crores of floating provision. With this, the floating provision has gone up to INR 600 crores now outstanding floating provision therein. As you would have seen that bit of prudential provisioning we have taken both on the standard asset side and also on the NPA side, right? So exact quantum, I can't tell you at this point of time but then in case you can provide you subsequently. But then clearly, we have taken a bit of extra provisioning both -- that is a prudential provisioning, obviously, specific provision that is both on the standard asset and also on the NPA side.

[Kunal Shah, analyst]

Okay. Because despite write-off, our coverage is still sustained, which is a good thing. And I think that's more the prudent specific provisions seems like. Okay. And secondly, if you can quantify this impact of penal charges on NIM. So from 3.18% to 3.1%, how much was the exact impact because of this penal charges?

[Debadatta Chand, executive]

Yes. As you said that it's an impact of almost 5 bps. The amount is almost like INR 179 crores, INR 180 crores on that. So that has moved from -- on the interest income to the other income in that way.

[Operator]

The next question is from Param Subramanian.

[Parameswaran Subramanian, analyst]

Yes. Sir, just a question again on the write-offs. So we saw high write-offs this quarter and then higher recovery from written-off as well. Is it -- are both of these linked? Is it part of one settlement where we see a higher write-off and then recovery from written-off because one of the large private sector banks also talked about this previously, yes?

[Debadatta Chand, executive]

No, actually, they are not linked in that way. There are different accounts for the write-off and different accounts for the recovery that happened. There is one large NCLT account where actually we got a good amount of recovery out of that because that got resolved. Write-off is typically linked with the level that you can do on the write-off. And based on that, we have done that. Actually, that's part of the normal that we have been doing for many quarters now. This quarter slightly may be elevated because it does allow me because there was a substantial PWO recovery, allow me to have a higher write-off on that. Anything, Mr. Lal Singh, you want to add on this?

[Lal Singh, executive]

Yes, sir. So there is a guideline and accordingly, as per the guidelines of DFS and RBI, we can -- we have the provision of writing-off the accounts up to the recoveries done in the quarter.

[Operator]

The next question is from Mahrukh.

[Mahrukh Adajania, analyst]

Sir, I have two questions. Firstly, that was there any penal interest reversal even last quarter, it would have been smaller but was there any?

And then my other two questions -- sorry, I'll slip in one more. So my other two questions are that a lot of state banks are seeing some central government accounts and some of them are even talking about state government accounts either slipping or becoming SME. So without naming what would be your collective exposure to these accounts because your SMA has not gone up. So you may not have any significant exposure or maybe you have and it's not part of SMA already.

So if you could throw some color on any potential SMA or slippage you are likely to see from any central government accounts, at least some color on the exposure there. So that's my second question.

And sir, my third question really is, how do you see your cost of deposits given that a lot of competition is still happening and there are so many new festive offers now, the real impact of which will be seen in the next quarter in terms of deposits? These were my questions.

[Debadatta Chand, executive]

See, Mahrukh, the first aspect in the penal interest in the last quarter, which got reversed into charges, that was only around INR 13 crores therein. So a major part in the Q2, like almost INR 170 crores -- INR 176 crores in the Q2 only, not in Q1.

The second aspect of the SMA book that you are talking about, yes, if you look at our billing data, SMA 1 and 2, there is a bit of increase therein, and there are 2 state PSU accounts therein. But these are purely technical delay, which typically would be -- I mean, recouped into standard at the earliest, so absolutely no challenge therein. There -- the state PSU accounts, a couple of and the amount would be in the range of around INR 3,300 crores, INR 3,400 crores on that. So there, actually, it's more of a technical overview, which can immediately pull back based on the past track that we have seen. So there is no slippage of any state PSU or central PSU in any manner as far as Bank of Baroda is concerned. So absolutely, we have a very good book on that.

Thirdly, on the cost of deposit, as you would have seen that Q2, the cost of deposit has gone up by 6 bps. Q1 over March was almost flat, but it has gone up. With this actually, I believe the repricing impact of the deposit is almost over by this time. And there are two outlook as a house view we are working on. One is a case wherein there may be a bit of cost moderation that can happen maybe towards the late of Q3 or the early of Q4. Considering that, the RBI changed the stance from withdrawal to neutral now.

And the liquidity in the system, we have seen October is much better than September. September is much better than August. So a scenario where the liquidity comes back, actually, we have seen the CD rates going down substantially till the wholesale deposit and the retail has been kept high because the growth has not been substantial, so the festive campaign is going on. I believe broadly, the cost of deposit side is fairly balanced. And in any scenario, as we are keeping the same margin guidance, that means through the ALM, asset liability management, I think we'll be able to maintain the margin case where cost of deposit goes up, then we have to pass on to the borrower. If it goes down, we'll pass also the benefit to the borrower.

So in that scenario, for the full year, we are keeping it balanced. So I don't think much of impact coming out of the cost of deposit going forward, although the levels are elevated, no doubt about it. But then somewhere maybe late Q3 or early Q4, we are hoping for some kind of a moderation considering better system liquidity.

[Operator]

We have got to Ashok Ajmera.

[Ashok Ajmera, analyst]

Compliments to you, sir, for a very good quarter of -- very good set of numbers, especially like many times, we just plainly look at the bottom line and the bottom line in these difficult times when even the market is also going down for the last few days, gives a very good feeling like if that has improved. Of course, a major part of it is contributed by the other income. And I think in your initial comment and giving the answer of the first question, you had said that there is some smart -- I mean, recovery from some account and the other income has gone up to INR 5,081 crores this quarter as compared to INR 2,487 crores.

So my first question is only on the I mean, considering that the NIM and other thing is not going to change much. I mean, you are still continuing your target of 3.15%. Going forward, in the coming 2 quarters, what kind of bottom line we see like your operating profit is growing rapidly. So naturally, and the provisions are -- should be under control if there is no chunky account. So where do you see the profitability of the bank going forward? Are we matching this quarter going -- improving it? So this is my -- just the first question. And basically, your little more broader guidance on that?

And my second question is on the treasury is also doing very well sir, treasury income, even from the trading gains are to the range of INR 550 crores as compared to last quarter of INR 164 crores. And overall treasury profit even on the revaluation of the investment has also gone up. So whether that trend is going to continue in coming 2 quarters, especially when we see that the rates might come down in December review by the regulators. So on that, whether this is going to continuously help the profitability of the bank. So this is on the second thing.

And third is, sir, on the deposit front and overall business growth front, many of the senior bankers in last couple of months have been saying that a lot of money has flown to the capital markets. And because of that, there is a pressure on the -- especially on the CASA side. But now since the market has gone down, like some of the stocks have gone down to maybe 15%, 20%, 25% and maybe the appetite of the people might come back to keep the deposits with the banks. So going forward, what do you see this pressure on deposits will continue or it may a little bit eased out. So these are the certain -- some questions and some of your guidance and observations, sir.

[Chayani Sundar, executive]

Thank you, Ajmera. Actually, I was looking for when you will come, I'll answer on the treasury side. Actually, that's something very good to, I believe, you and me. First, with regard to -- you talked about profit guidance. Actually, normally, we don't provide any profit guidance. Only guidance we provide on the ROA. So we are looking at an asset growth of almost 11%, 12% and keeping the ROA at 1.1%, you can estimate in terms of that because profit actually, we don't know neither but always try to optimize that at any point of time. But the guidance that I can provide is on the ROA. ROA continue to be -- we have achieved 1.3% this time. And full year is 1.10%, although guidance is above 1%, but we'll try to full year 1.10% on the ROA. So that is something I can tell at this point of time.

On the treasury side, this has been a good quarter, but our trading profit is only by the bond, not equity. So equity maybe a couple of IPO has given some money, but then mostly on the bond side. So still with the outlook prevailing in the -- although the market has bit of discounted some of the cuts that are likely to happen, but then I think the bond market would be fairly stable going forward. And even if the rate cut and all happening, then still it will be very positive because equity, we don't have much of exposure in that way. So in that way, I'm not very largely influenced by what is happening on the equity market.

One positive that I would say that actually, last time when we interacted, the treasury gain was slightly less than the many of the peers. I said that please look into an element of the AFS reserve, right? And again, I would -- again, I request you or as if it is not captured in the analyst, my people would give you the data. We have added almost INR 1,200 crores or INR 1,300 crores of AFS reserve this quarter and that's significant. And let's say, a scenario we're all migrating to Ind AS and the treasury impact coming into books. So we are very well prepared on that. And that very significant -- the outstanding book would be almost INR 2,800 crores, INR 3,000 crores on the AFS. That's why the capital has also gone up, I mean, CRAR.

So that's something very fundamental to us. So we want to have a balance out my treasury gain at the same time, keeping the reserve well in the book so that we are there for the long-term, I mean, opportunity on that, right? So that is what.

You also talked about deposit constraint. That's the issue that slightly why I reduced the deposit guidance because on the Q1, the growth was almost 8.5%. Q2, it is almost at 9.6%. I had given a guidance of 10% to 12%, which again something not happening. And all of us know the deposit constraint happening in the system because of alternate like savers are also preferring capital market big time on that. So it's impacting us.

So we reduced that guidance. But then at the same time, we also said earlier that we are one bank on the deposit, innovating, bundling and trying to capture the market sentiment therein. So if you say that SIP mutual fund is a flagship, now I introduced a product called SDP, which is a recurring deposit scheme, but we are marketing well, getting good traction from many of the savers who coming to this product. This quarter itself, we raised almost INR 250 crores on the SDP. I think the public would appreciate well in case this picks up and some correction happening in the capital market, I think people would more come to the deposit market.

So I think it will be fairly -- although I've given a 9% to 11% deposit for the full year but then I think we can operate at a top notch of 11%. That is what our -- that means Q3 and Q4, I need to have a higher deposit growth and higher advance growth to achieve my revised target, both on the deposit and advances.

[Ashok Ajmera, analyst]

Sir, just one question comes to my mind, some old. I think in the aviation account that one large -- you along with the Central Bank, I think you or two are the main bankers to that. And we have been in earlier -- I mean, a couple of quarters back, we were talking very, very strongly about that, that we have got a lot of collaterals and the losses ultimately will be very less or we will recover the whole amount. So I just remember that we have not talked about that in the last quarter also and I think previous to that also. So what is the development on that account? And is there any chances of some major recovery happening or something has already happened? Or where do we stand on that account on the recovery front, sir?

[Chayani Sundar, executive]

No. As I said earlier, the exposure -- 1/3 of the exposure was that based on the guarantee cover it had. And now we have received the full amount on the guarantee. So the exposure has gone down to 2/3, right? So out of the 2/3, there are, again, collaterals over there. There are some primary over there and some litigation finance money also can be expected. So in that way, fairly collateralized for us to recover money to the extent -- full extent possible. Quite hopeful on that. Processes are going on because some of the process takes time. But as far as the outlook on the account is concerned, we are fairly confident that we can recover to a very large extent out of this account. 1/3 guarantee we have already received.

[Ashok Ajmera, analyst]

So the -- in terms of absolute numbers, the balance outstanding is about INR 800 crores to INR 1000 crores.

[Chayani Sundar, executive]

No, something around INR 1,100 crores to INR 1,200 crores.

[Ashok Ajmera, analyst]

Alright. INR 1,100 crores to INR 1,200 crores.

[Operator]

We'll now go to Jai.

[Jai Prakash Mundhra, analyst]

Sir, we had said about that this year is going to be the year of fee and float. We have done reasonably well in the corporate growth pickup in this quarter. And yet the commission exchange brokerage has not picked up to the extent or commensurate with the credit offtake. Any sense there, sir?

[Debadatta Chand, executive]

No, actually, yes, you said right. Actually, that is one area we are trying to optimize, although we could not get it to the desired outcome on that precisely for two reasons. One is that on the -- actually, the corporate book and the commission income is getting a proportional increase therein. But on the retail side, because we are running a lot of campaigns in terms of all this, so the waivers are there on the processing fee and all those stuff. We had the monsoon campaign and then immediately after that, the festival campaign. Both on the liability side and asset side, there are some, what you can say, lower growth happening on that commission exchange on those things.

A lot of market, again, on the operational side has moved to digital. So we are not getting on the requisite commission out of those. Slightly on the wealth business, we again, slightly, we restricted the business, as you know that the guidance has been to move to focus on the core business. So there is a dip in the wealth income therein leading to an overall -- the growth is -- I mean, there is a growth, but the growth has not been substantial to tell us that the fee inflow really impacted the book big time.

But on the corporate side, there has been good traction on that. The CMS fees and all going up significantly. Beyond the corporate, now we are targeting all this MSME account to get into the CMS. And there actually, we onboarded a large number of accounts, the outcome would come later. So as an action point, clearly, internally as a management take also, yes, we have not optimized on the SEBI. We'll try to optimize going forward. But a couple of aspects, which again has given a lower growth, we'll focus on those, and that is the action point on the management take on this.

[Jai Prakash Mundhra, analyst]

Sure, sir. On your personal loan book, which is INR 32,000 crores, if you can share the outstanding GNPA here and maybe the slippages if you have on this INR 32,000 crore loan book?

[Debadatta Chand, executive]

Yes. Our outstanding NPA, we have said possibly somewhere, I don't know, it is around 3.18%. My retail NPA is around 1.5%, the book as a whole. And actually, there are two things, actually, personal loan -- the digital personal loan is something around INR 1100 crores -- INR 1000 crores, INR 1100 crores. The remaining all is a branch underwriting where it has been there, not only recently, it was there earlier.

So if you talk about a couple of segments because, again, personal loan is a data-driven thing. So looking at the outcome, we immediately take action like on a digital small ticket, we have completely stopped it now. On the physical sourcing, there are segments which are salaried, there are segments which are nonsalaried. Actually, we have tightened the nonsalaried portion. The growth actually, if you look at, it has come down from 100% to almost a normalized 25% now on the personal book. So clearly, we're acting on that. The asset quality is much better, okay? Obviously, the slippage would be -- suppose you compare the personal loan slippage now and a year back, now would be higher than that.

Let's say, on a number, if I give you, let's say, it was INR 100 crores earlier, 6 quarters back, the slippage, now it will be INR 250 crores out of the total slippage of INR 2,700 crores. So it's insignificant in terms of impacting anything, but a bit of elevated as compared to earlier because the moment the book gets aging, then also the slippage do happen. So in that way, it's a small book as compared to many of the peer banks. So we have taken action on that. And I think going forward, the same kind of outlook we have for the personal book.

[Jai Prakash Mundhra, analyst]

Right. So just to get it clear, sir, you said this 3.1% kind of a GNPA for the unsecured retail book, right, which is INR 32,000 crores?

[Debadatta Chand, executive]

Yes, yes. Yes, yes, absolutely. My overall GNPA of the retail is 1.5%, 1.49% something. So it is only for the unsecured personal, it's 3.18%...

[Jai Prakash Mundhra, analyst]

Right. And the slippages, you said is around from INR 100 crores, it has moved out to like INR 250 crores per quarter?

[Debadatta Chand, executive]

Yes, yes, yes. And INR 100 crores, I'm talking about 1.5 years back when we never discussed on the issue because there was an elevated concern on that, right?

[Jai Prakash Mundhra, analyst]

Right, right. And lastly, sir, on corporate yield, right? So what is the -- on your corporate book, right, which is, let us say, I mean, the entire corporate book, what would be the blended yield here? And if you have the loan mix by yield also? I mean, what is the blended outstanding corporate yield? And if you have the percentage of loans for overall loans into EBLR, MCLR, fixed rate and others?

[Debadatta Chand, executive]

Mr. Tyagi, can you take it off this question?

[Lalit Tyagi, executive]

So thank you very much. So in fact, we may provide you the data, in fact, if CFO is having right now. Otherwise, offline, we can provide. Largely the pack is the highest yielding assets are RAM. Within that, agri and MSME are the highest than retail and then finally come to the corporate. Within corporate also, we have been able to manage the yield. That's how in Q1, we allowed slower growth because we managed the book well. Q2, probably we have some traction and we grew. That is visible in the 10.5% growth. However, that was managed well despite the fact that there were challenges on the yield side. So exit corporate yield, we can provide you open.

[Debadatta Chand, executive]

So there are two things here, actually, if I say that slightly, the corporate yield, if you compare the Q2 and Q1, it has gone down because of the penal interest and charges accounting, that's one. Secondly, actually, in terms of the composition of the book, almost 47% is MCLR, 33% is EBLR. Roughly around 80-odd percentage has been the floating rate side. So that there is the ability to pass on is much higher with the bank at different market conditions, right?

As Mr. Tyagi said, right, Q1, we wanted to realign the book, and that was the beginning of the quarter, allowing us to realize -- realign only on the corporate side because of the fine price book and then how do you want to -- I mean, how much margin importance you give and how much book growth you want. So we wanted to realign. The growth of 1.6%. Clearly, this quarter, some of the price point was pulled up in the sense that the market was offering a higher rate on those advances, so then we went ahead with that. So it's a balanced view in terms of pricing. But clearly, when we construct the book, clearly, our margin is one of the objectives we keep that in mind. So that's something the margin, RAROC, these are all important, what you can say, parameters for us to consider when we increase the book.

[Jai Prakash Mundhra, analyst]

Right, sir. And if I may ask one more question allowed. Sir, I mean, your segmental GNPA suggests that the corporate GNPA is now only INR 600 crores, right? And you have INR 10,000 crores of MSME and slightly higher in agri. But corporate GNPA are like almost 0. And you still said that you would want to keep bringing down net NPA. So I mean, you have already 0.6% net NPA. So what is the thought process there of...

[Debadatta Chand, executive]

Yes. Yes, please.

[Jai Prakash Mundhra, analyst]

No, no, sir, that is I wanted to check.

[Debadatta Chand, executive]

I'll tell you, actually, before to this, there was a media meet and everybody was asking a guidance on the net NPA. We said that we do not give net NPA guidance, but always we try to trend it downward. That is what -- so the trending downwards is up to what extent and what actually the time and market would tell or the position would tell. So corporate side, actually, I mean, there is not much of scope in terms of the NPA outstanding. Although the recovery out of TWO, there is a good kitty on that actually but then this is clearly less. The focus that we are giving much of the slippage that happened that you have seen, it is more of a less than INR 5 crore segment where the slippages happened. And these are again retail book or an MSME book or agri.

So the probability of, again, getting them upgraded is quite high as compared to the corporate loan book because the moment corporate goes down because the exposure is huge, the market conditions are different, very difficult to put it back unless and until you get into a resolution process or like the [ IDC ] process. So I think the recovery out of the small loans, which slipped in last 2, 3 quarters, although the level is very less as compared to the bank is concerned, INR 2,700 crores is the normal run rate kind of a slippage, but then we'll try to again optimize on that. So one of the -- that when I was talking to the media on the same thing, our recovery target is INR 12,000 crores for the full year, but as the slippage we need to contend at INR 9,000 to INR 10,000. So giving us INR 2,000 crores at least a delta in terms of reducing all these percentages. But having achieved 2.5% and 0.6%, I'm absolutely clear that it's a difficult move to again bring substantially down on this ratio.

[Operator]

The last question for today from Rakesh Kumar.

[Rakesh Kumar, analyst]

So just a couple of questions I had. Firstly, on the interest income from the [indiscernible] recovery, has it not been that great considering that we had written-off recovery of INR 2,500 crores and margin was slightly soft. So that was the first question.

Second question, 18% of our loan book, the overseas loan book has quite a lot of volatility on the margin front. So if you could help us on that front.

And third question is basically, we used to have the provision write-back with this restructured book being upgraded. I think that did not happen this quarter and this was a regular thing in our provision line item. So -- and the nature of agri slippage, the last question, sir.

[Debadatta Chand, executive]

So I'll take the second, which is with regard to the international margin. International, actually, if you look at the international market, at some point of time, the returns were quite high. So we almost achieved a NIM of almost 2.13% or 2.14%, which has gone down to 2% now. What is happening in the international market is there are a lot of repricing happening at this point of time, right? Because there is a Fed cut, rate cut, there are overall pulling of the rate of interest in those markets. So that's why the growth, if you look at, we have clearly moderated, keeping this in mind that the repricing pressure. And since overseas market, both asset liability are floating, there is a bit of lag in terms of repricing on the deposit side. So that would eventually catch up, putting the margin. And normally, on the international, internally, we target something around 1.9% to 2% as an ideal margin level to maintain going forward. But the advance growth clearly have moderated. The growth has been lower this quarter. On the interest from the [indiscernible] Mr. Chayani, can you take this question or you can provide later on?

[Chayani Sundar, executive]

So sir, the interest Rakesh, what you were talking about the other interest income and the comparison between the Q2 of FY '24 versus Q2 of FY '25, there is a reduction in the interbank placement of around INR 13,000 crores. Hence, there is a dip what you are observing. And if any further clarification or queries, please contact with me, I'll provide that.

[Debadatta Chand, executive]

He has also a third question, what is that you said agri slippage has been broad-based actually. That's sometimes seasonal also. The moment you migrate to Q3, actually, this is the time where the crop harvesting and the money they get, actually, the portion improved significantly in Q3 and Q4 as far as Agri book is concerned. But these are all small ticket diversified across the country kind of [indiscernible] nothing specific with regard to that. And anything else you wanted, Rakesh?

[Rakesh Kumar, analyst]

Just one question, sir, that was the provision write-back we used to do in the standard asset provisioning?

[Debadatta Chand, executive]

Okay. Actually, if you look at the standard asset provisioning this quarter, there is a bit of prudential provisioning has happened actually. That is what actually if you look at the outstanding, not increasing the NPA level, but there is a prudential provisioning. So the standard asset provisioning has gone up marginally, I mean, maybe around INR 300 crores, that is what we see from Q2 and Q1. Rakesh, is that okay with you this question that we have answered that.

[Unknown Analyst]

Saket Kapur here. Sir, when we look at the other income component for this quarter, that has seen a big jump year-on-year also and quarter-on-quarter also. Sir, taking into account the nature of other income, what should be [indiscernible] going for H2? Because sir, if we remove the increase, then the expenses on -- the interest expenses are not commensurating with the bottom line, which we have posted if we remove that increase in the other income. So if you could give us some more color how this line item is going to shape up or what factors led to this huge jump in the other income component, sir?

[Debadatta Chand, executive]

See, there are three components. One is the fee-based income, treasury income and other noninterest income, which typically the write-back we got it because of the recovery in TWO account. And on a normal scale, this run rate is almost INR 800 crores as compared to INR 2,500 crores, like INR 2,600 crores that is for Q2. The normal run rate on this is around INR 800 crores, INR 850 crores on a quarter-to-quarter basis, right? The fee-based income, it's mainly the CV and other income that's a steady state kind of a thing. We're going to focus on this, it may see a 5% or 10% increase.

Treasury income is again market dependent. One thing while talking to [indiscernible], I was telling that our AFS reserve is quite significant, like from the since the start of the accounting from 1st April, we built up substantial AFS reserve therein. That means the book has in money position significantly. So that can be in a scenario where the market is not good, we can still leverage that. So it's component-wise, difficult to give you a clear run rate on the -- but the item which has seen a significant jump, that is the other income from the recovery out of the written-off accounts, TWA accounts, there, the run rate is around INR 800 crores, INR 850 crores maximum.

On a normal scenario, if we get again a couple of other recovery that can happen. So we have a large kitty. TWO kit is also substantially large. Suppose you get, then it can further add to that, like it happened in this quarter.

[Unknown Analyst]

But other than that, sir, you are lowering your growth target for H2. That is what -- can you repeat in terms of the advances and the increase in the loan book? We are lowering our expectation for H2 by what basis points, if you could just repeat once?

[Debadatta Chand, executive]

Yes. Actually, I start with the deposit actually. You would have seen the deposit growth for Q1 and Q2 has been around 9% or 9.6%, and the guidance earlier was 10% to 12%. And always debated in the market a lot the gap between the credit growth and the deposit growth, right? So we wanted to take a call at this point of time. So the 10% to 12% on the deposit, we have aligned to 9% to 11%, although we tried to grow at 9%. This is on the backdrop of a Q1 where we realigned the book where the growth has been much lower. So in case to achieve 11% growth in deposit, actually, the Q3 and Q4 is much higher than the Q2 growth, right? Then only we'll achieve 11%.

So very clearly, the growth in Q3 and Q4 would be much higher than the Q2, forget about the Q1. Once because on the deposit year, we have to recalibrate the advance growth forecast. And that is what actually it was 12% to 14%. We have reduced by 1 percentage point, making it more realistic from 11% to 13%. Although again, as I'm saying earlier also, we'll try to operate at the upper band, that means at 13%. Current growth is 11.6% globally, 12.5% domestic. Domestic continue to be strong. That means the growth has been higher than 12.5% for Q3 and Q4.

Internationally, since we are moderating, as I said, because of a couple of other reasons, the overall growth would be again at the 13%. So the 1% reduction is not a reduction per se on the growth forecast. It's something realigning or calibrating the growth outlook based on the deposit growth, which you'll appreciate that it's not for Bank of Baroda rather we have done well vis-a-vis the peers. In case you have the data as on today, the bank has done well on the deposit front. But since there is a change, so we are expecting asset growth to realign, keeping the margin at the same level. So that's very important when I'm saying that there is a growth, the margin. So one of the objective is to clearly keep the margin into consideration, particularly on the corporate loan book side. So these are a couple of -- we want to be more realistic as compared to what we can give a guidance of not lowering the growth in that way, right?

[Operator]

Yes, sir. Chayani sir, we request you to give vote of thanks, please.

[Chayani Sundar, executive]

Thank you all for sparing your time and guiding us for our future prospects. Due to shortage of time, we may not have answered some of your queries or clarification. Please do connect with me or connect with my office any time to have more clarity on any matter. And with all your good wishes, the bank is going to achieve new heights every quarter. And lastly, on behalf of our management, I wish you all and your family members a very happy Diwali. Thank you.

[Debadatta Chand, executive]

Thank you all, once again, thank you very much.

[Operator]

Thank you.