Bank of Baroda profit drops 72% on NMC; Shriram gains
Indian financial sector results for the June quarter diverged sharply as Bank of Baroda took a massive hit from a legacy settlement, while Shriram Finance and Bank of India posted strong profit growth driven by improved margins and cheaper funding strategies.
Bank of Baroda posted a 72% drop in first-quarter net profit to ₹1,278 crore, dragged down by a legal settlement tied to the collapsed NMC Health group. The bank was accused of failing to conduct proper due diligence and anti-money laundering checks.
Chief executive Debadatta Chand said the payout was a commercially prudent move to eliminate lingering legal uncertainties. "This decision was taken after assessing the stage of trial and negotiations in this case," Chand said. "It is a commercially prudent decision to close a legacy case based on the amount claimed from the bank. The decision to settle is based on evaluating the time, cost and legal uncertainties. It allows us to close a legacy case and focus on sustaining our growth."
Profit was further pressured by a 26% decline in other income to ₹3,470 crore. This was driven by a 60% plunge in treasury income and a 20% drop in fee-based earnings compared to the same period a year earlier.
The non-banking financial sector painted a different picture. Shriram Finance, recently backed by a major investment from Japan's Mitsubishi UFJ Group, reported a 60% surge in standalone net profit to ₹3,445 crore. Net interest income rose 33.7% to ₹8,056 crore and the net interest margin expanded to 9.04%.
Asset quality metrics at Shriram Finance showed mixed but largely positive trends. While gross stage 3 assets ticked up to 4.64% from 4.53% a year earlier, net stage 3 assets improved to 2.33% from 2.57%.
Provisions and contingencies fell sharply to ₹3,059 crore from ₹14,441 crore, significantly boosting the lender's bottom line.
State-owned Bank of India offered another bright spot, with net profit rising 36% to ₹3,068 crore. The lender is actively targeting cheaper funding, seeking to raise $1.2 billion through the Reserve Bank of India's foreign currency non-resident deposit window.
Managing director Rajneesh Karnatak noted the bank has already secured $200 million through this channel. “This would help us substitute the reliance on bulk deposits and therefore the cost of deposits may come down,” Karnatak said. The bank also plans an additional $2 billion in overseas borrowings.
Meanwhile, SBI Life Insurance posted a 22% rise in net profit to ₹720 crore, driven by strong premium growth. Annualised premium equivalent rose 36% and the value of new business increased 29% to ₹1,410 crore.
The insurer's value of new business margin contracted slightly to 26.2% from 27.4% as lower-margin group term insurance weighed on profitability. However, the company continued to shift its product mix toward non-ULIP and non-participating policies, with ULIPs dropping to 46% of individual annualised premium equivalent.
