Bank of Baroda (NSE:BANKBARODA)

The Hindu Business Line Jun 5
Our BureauBank of Baroda on Tuesday said it will up its marginal cost of funds-based lending rates (MCLR) across tenors by five basis points with eff
The Economic Times Jun 5
The other lenders in the consortium are State Bank of India (through merged group entities), Union Bank of India, Bank of Baroda, Indian Bank, Canara Bank and Syndicate Bank.
The Hindu Business Line Jun 4
Shares of Bank of Baroda fell as much as 4.1 per cent to Rs 131.35, in their sharpest intraday fall since May 16, as the government is considering t
The Economic Times May 30
Buy Bank of Baroda at a price target of Rs 163.0 .
The Economic Times May 29
Mallya was also engaged extensively with the government as Indian Banks’ Association or IBA chairman.
The Hindu Business Line May 28
Bank of Baroda Ltd rose as much as 3.7 per cent to Rs 146.50, its highest in nearly three weeks. India's third largest state-run bank on Friday poste
The Economic Times May 28
The bank had posted a profit of Rs 154.72 crore in the same quarter last year.
The Hindu Business Line May 25
Sharp rise in provisioning led to the loss
Reuters May 25
Bank of Baroda and IDBI Bank reported big fourth-quarter losses on Friday, continuing the losing streak of state-run lenders which have been hit by tighter central bank rules on bad loans.

Reuters May 25

The Economic Times May 25

The Times of India May 25
The Hindu Business Line Apr 17
The CBI has questioned six former senior officials of Bank of Baroda, including its former Chairman-cum- Managing Director (CMD) M D Mallya, in conn

Bank of Baroda (BSE: 532134) is one of the oldest banks in India and the third largest commercial public sector bank after State Bank of India and Punjab National Bank in terms of net profit and total business.[1] It is the fourth largest lender with a net profit growth of 32% and total business growth of 24%. The bank does most of its business in the non-urban market where the competition is low but the risks are comparatively higher. In Q4 2009, the bank’s net profit grew by over 172% to Rs. 7.52 billion, the highest growth rate registered by any bank in the fourth quarter.[2] This was largely due to its sustained net interest margin which was further aided by the minimal fall in the current account and savings account (CASA - also known as low cost deposits) deposits (34.8% in 2009) among the public sector banks.[3]

In the period FY2005-FY2009, the bank’s balance sheet has grown at a compounded average growth rate (CAGR) of 24.50% per year. The bank's loan book has been increasing at a rate in excess of 25%, but deposits have been growing at a slower rate. A higher portion of deposits is extended as advances in the last five years have helped the Bank improve its credit-deposit ratio to 82.36% in FY 2009 from 51.20% in 2005.[4]

Company Overview

Bank of Baroda offers the following services:

Personal banking

  • Deposits
  • Gen-next services
  • Retail loans
  • Credit cards and debit cards
  • Services and lockers

Business banking

  • Deposits
  • Loans and advances
  • Services and lockers

Corporate banking

  • Wholesale banking
  • Deposits
  • Loans and advances

International business

  • Non-resident Indian (NRI) services
  • Foreign currency credits
  • Offshore banking
  • Export and import finance
  • Correspondent banking
  • Trade finance
  • International treasury

Over the years the bank has transformed itself from focusing on core banking activities to universal banking solutions.[5] Bank of Baroda offers a wide array of products and services to corporate and retail customers through a variety of delivery channels and specialized subsidiaries and affiliates in the areas of investment banking, credit cards and asset management.[6]

As of April 2009, Bank of Baroda had a worldwide network of over 3000 branches, out of which 637 were located in Metro cities, 540 in Urban areas, 649 in Semi-Urban locations, 1100 in Rural areas and 74 outside India.[7] By March 2009, the Bank completed Core Banking Solution (CBS) rollout in 2049 domestic branches, accounting for 94% of its business. All CBS branches of the Bank are enabled for interbank remittances through Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT), enabled online transfer of funds to any bank or branch in India. [8] During 2008-09 the bank launched several new IT products and services such as Phone Banking Service, Corporate Cash Management System, Payment Messaging Solution and Global Treasury etc., to increase customer convenience and also to reduce transaction cost.

Business and Financial Metrics

Second Quarter 2010 Results (ended June 30, 2010)[9]

During the second quarter of 2010, Bank of Baroda reported revenue of Rs. 4,726.96 crore, compared to Rs. 4,353.84 crore in the second quarter of 2009. Interest income for the quarter was Rs. 2,868.9 crore, compared to Rs. 2,608.89 crore in the prior-year period. Bank of Baroda reported gross profit of Rs. 1,527.87 crore, compared to Rs. 1,547.33 crore in the second quarter of 2009. Likewise, EPS was reported to be Rs. 23.50 compared to Rs. 24.79 a year ago.

Metric (in Billions INR)[10] 2005 2006 2007 2008 2009
Total Interest Income64.3171.0092.13118.13150.92
Non - Interest Income13.0511.9213.8220.5127.58
Total Revenue77.3682.92105.94138.65178.49
Cost Income ratio46.24%55.43%51.30%50.89%45.38%
Net Profit6.76810.5010.2614.3622.27
Credit - Deposit Ratio55.82%67.15%74.35%77.32%82.36%
Net NPA's(%)1.45%0.87%0.60%0.47%0.31%
Return on Average Assets (%)0.71%0.73%0.72%0.80%0.98%
Total Assets946.641,133.931,431.461,796.002,274.07
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Bank of Baroda Total Revenue and Net Income in the last five years

Fiscal 2009 Results

In FY2009, Total revenue grew by 28.7% to Rs.178.55 billion from Rs. 138.64 billion in FY2008, led by 33.10% and 34.50% growth in its total interest and Non-Interest Income respectively. In the period from 2005-09, the bank grew by 28% every year, and interest income growth outpaced the non interest income growth.[11] During 2008-09, Non-Interest income growth was largely driven by strong growth of 39.50% in fees income.[12] Despite the healthy growth in advances, the bank was able to maintain current account and savings account (CASA) at 34.90% reduced marginally from 35.80% in FY2008, which is still the smallest fall[13] compared to its peers.[14] The highest low-cost deposit among public sector banks helped the Bank achieve a net interest margin of 2.91% compared to 2.90% in FY2008.

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Indian Bank Total Revenue and Operating Profit Breakdown by Segment during the year 2008-2009.[15]

Where other large banks (Canara Bank, Punjab National Bank) achieved less than 30% growth in advances[16] [17], Bank of Baroda’s advances portfolio grew 34.90% to Rs.1439.86 billion, which was the highest growth recorded in FY2009. Overseas loan book have grown by 56% largely due to rupee depreciation during the year. Even in the financial crisis, the bank was able to increase its return on assets to 1.09%, from 0.89% propelled by 34.90% increase in total advances.[18] Due to its diversified loans portfolio and better asset management skills, the Bank reduced its Non-Performing Assets (NPAs) to 0.44% from 0.59%, which was lowest among its peers like State Bank of India and Punjab National Bank.[19]

In FY09, the Bank reported a net profit of Rs 22.75 billion driven by strong growth in advances, higher treasury, and loan provisioning. The expenses on salaries and other operating heads grew by 21.8% and 10.9% respectively in the fourth quarter of 2009. The Bank managed expenses growth at lesser rates than growth in interest and other incomes which is one of the most important reasons behind its high profit growth.[20]

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Advances Portfolio Distribution (as of 31st March, 2009)

Business Segments

Wholesale Banking (29.40% of Revenues, 16.80% of Operating Profit)

Under Wholesale Banking, corporate customers are identified as Large and Mid corporate; those having annual sales turnover of over Rs. 5 billion are classified as Large Corporate and those with annual sales turnover from Rs. 1 billion to 5 billion are classified as Mid Corporate. [21] For the fiscal year ended 2009, the Bank’s wholesale revenue grew by over 24% to Rs. 52.48 billion from Rs. 41.57 billion in 2008, constituting 29.4% of its total revenue. While operating profit from corporate banking rose by 382% to Rs. 8.45 billion in FY2009 from Rs 1.75 billion in FY2008.[22]

During the year, the bank launched a number of Credit Campaigns for Direct Agriculture and SME sectors, organized credit camps at the branch level and provided credit facilities to borrowing customers in the form of customized products and services. The Bank has identified 350 trust branches with potential for agriculture lending and has been pursuing the Business Facilitator Model for canvassing agriculture loans.[23]

Retail Banking (30.20% of Revenues, 27.90% of Operating Profit)

In FY2009, Retail Banking revenue of the bank increased by 36% to Rs. 53.83 billion from Rs. 39.60 billion in FY2008, driven by modest growth in its housing loans, auto loans and personal loans. In FY2009, the Bank posted a retail credit growth of 16.3% year-on-year to reach Rs. 196.51 billion and formed 17.9% of total gross domestic credit.[22] The Bank’s Home Loans increased by Rs 983.67 crore during the year, registering a growth of 13.51% over March, 2008. The advance against mortgages, education loans and car loans grew by 31.47%, 32.67% and 51.24% respectively during the year ended March 2009.[24]

During the year 2008-2009, the bank took many initiatives by introducing new products both on assets, and liability sides such as Loan for Earnest Money Deposit, Baroda Additional Assured Advance to NRIs, and Baroda Bachat Mitra. In order to mobilize fresh retail business, the Bank adopted an aggressive market strategy and launched Retail Loan Festival Campaigns offering various concessions during the campaign period. MoUs were signed with a number of car manufacturing companies, and tie-up arrangements made for providing Life Insurance Cover to Education Loan and Home Loan customers sanctioned under special packages.[25]

Treasury (24.90% of Revenues, 20.20% of Operating Profit)

In FY2009, Treasury revenue of the bank increased 24.20% to Rs. 44.42 billion from Rs. 35.76 billion recorded in FY2008. The financial year 2008-09 experienced huge volatility in financial markets across various asset classes and the bank’s operating profit rose by 29% to Rs. 10.19 billion, from Rs. 7.89 billion in FY2008.[22] The bank has an integrated treasury, which covers both domestic and global markets and funds the balance sheet across various locations.

Other Banking Operations (15.60% of Revenues, 35.10% of Operating Profit)

In order to strengthen its non-interest income, the bank has been consistently focusing on expanding its financial services. At present it provides NRI, Wealth Management and other services. Revenue from other banking operations increased by 27.90% to Rs. 27.76 billion in FY2009, from Rs. 21.70 billion recorded in FY2008, while operating profit grew by 18% y-o-y to Rs. Rs. 17.69, from Rs. 15.0 billion in 2008. [22]

International Operations

Bank of Baroda is one of the few banks which have a significant international presence. As of March 2009, the bank’s 74 international branches covered 25 countries and contributed 22.55% to the Bank’s global business. During the year 2008-09, the Total Business (Deposits + Advances) of the Bank’s overseas branches registered a growth of 46.23%,Customer Deposits increased by 56.03%, Total Deposits by 38.68% and Advances by 56.22%. In spite of the huge requirement of provisioning due to ‘Mark to Market’ of Investments, Net Profit from International operations during the year increased by 23.17% (year-over-year), Gross NPAs came down to 0.51% of total advances against 0.55% in the previous year, and Net NPAs were maintained at almost zero.[26]

Share Holding Pattern

Bank of Baroda share holding pattern [27]
Entity Percentage
Government of India 53.80%
Domestic Institutions 22.10%
Foreign Institutional Investors 14.2%
Others 9.90%

Trends and Forces

Narrowing Net Interest Margin to put pressure on Public Sector Banks' Profitability

Since October 2008, (when the global financial turmoil began), PSU lenders have cut loan rates faster than deposit rates, thus squeezing their net interest margins (the difference between interest earned on loans and interest paid on deposits). Between October-June 2009, Public sector banks saw a cut in lending and deposit rates between 100-250 basis points, and 50-200 basis points respectively compared to private lenders who reduced their lending rates by only about 50 basis points and deposit rates by about 75 basis points.[28] During 2008-09, Bank of Baroda has performed efficiently and saw its NIM improved marginally to 2.91% from 2.90%, due to smallest fall in CASA ( falling marginally to 34.8%, from 35.10% in 2008) and strong global presence. Also in order to ease its cost of funds, Bank of Baroda had retired high-cost deposits worth nearly Rs 35 billion in the last six months which has helped the Bank in achieving better than industry's NIM.[29] Also, in order to give a boost to the Indian economy, the Government has been exerting continuous pressure on public sector banks to cut interest rates further which will act as a spur to loan growth, but this will also put additional pressure on the Banks’ profitability due to narrowing NIM and growing uncertainty in NPA.

Bank of Baroda saw only a modest drop in Current Account and Savings Account (CASA) deposits

Current Accounts and Savings Accounts, or low cost deposits are the cheapest source of funds for banks, and a higher share of CASA helps banks to reduce their interest outlays. With a significant expansion of their branch and ATM network, strong technology infrastructure, superior range of products, and high quality retail and wholesale banking services and strong presence in rural and semi-urban ares (55% of the Bank's total branches), during 2008-09 Bank of Baroda saw its CASA falling marginally to 34.8%, from 35.10% in 2008, the smallest fall among public sector banks.[3] Thus its cost of funds increased just 6bps to 5.81% during 2008-09.[30] This has helped the Bank in increasing its Profitability and also during the year the Bank moved up to third position from fourth in 2008 in terms of net profit.When compared to its top peers, State Bank of India and Punjab National bank saw their CASA reducing by 4% each.[3]

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Net Interest Margin of Indian Banks in 2Q'09 & 3Q'09[31]

Lower Non-Performing Assets (NPAs) aiding PSU Banks to grow faster than private and foreign banks even in a slowing economy

As of March'09, Bank of Baroda had the lowest NPA's (0.31%) among the five top banks and therefore has been expanding loan activities aggressively. During 2008-2009, its advances and deposits grew by 34.94% and 29.59% respectively, well above the industry average. The Bank has been consistently focusing on marketing its activities by launching various new products based on customers’ demands. Moreover, during 2008-2009 the bank achieved a milestone by moving up to the 3rd position from 4th due to its aggressive business activities.[32]In the past, Private and foreign banks advances growth has outpaced the growth of PSB's. Deposits of private sector banks grew at a CAGR of 26% during FY04 – FY08, as against an overall CAGR growth of 20.5% by all SCBs. However, in the recent credit crunch PSU banks have been lending aggressively due to lower NPA in their books. As of March 27, 2009, public-sector banks' deposits grew by 24.1% year-on-year versus private-sector banks deposit growth - 8%, and foreign banks - 7.8%. A year earlier, public-sector banks' deposit growth was 22.9%, private-sector banks' 19.9%, and foreign banks' 29.1%. In the same period, PSU banks advances grew by 20.4%, compared to private-sector banks with 10.9% growth, and foreign banks at just 4% growth. The corresponding figures for 2008 were 22.5%, 19.9% and 28.5%, respectively.[33]


  • State Bank of India - State Bank of India, a public sector bank, is the largest bank in India. Besides personal and corporate banking, SBI is also involved in NRI (Non Resident Indian) services through its network in India and overseas. Its 11,000 branches and 5,600 automatic teller machines give it a reach throughout the length and breadth of the country; its work force of 200,000 dwarfs all other banks in India.[34]
  • ICICI Bank – ICICI Bank is India's largest private sector bank and second largest overall in terms of assets. Together with its subsidiaries, ICICI Bank offers a complete spectrum of financial services and products ranging from commercial banking to investment banking, mutual fund to insurance. The bank, headquartered in Mumbai, has a network of about 1,400 branches and 4,530 ATMs in India and a presence in 18 countries. ICICI Bank is also the largest issuer of credit cards in India.
  • Punjab National bank - Punjab National Bank (PNB) is the second largest government-owned commercial bank in India with about 4,500 branches across 764 cities. This financial institution offers services in personal and corporate banking, including industrial, agricultural, and export finance, as well as international banking. It competes with Indian Bank mostly in retail lending and wholesale businesses.[35]
  • HDFC Bank - Housing Development Finance Corporation Limited Bank Limited or HDFC Bank is one of the largest private banks in India.[36] The company competes with Indian Bank in each segment, over a wide range of banking services covering commercialand investment banking on the wholesale side and transactional/branch banking on the retail side.[37] HDFC's Standard Life Insurance company competes with ICICI's insurance subsidiaries. Their mutual fund and asset management businesses are also in direct tussle.
  • Canara Bank - is one of the oldest commercial bank in India which has been in operations for over 100 years. The Bank is the third largest public sector bank in terms of assets with a total asset base of over Rs. 2,196.46 billion.[38] Among the nationalized banks, Canara Bank holds the largest Automated Teller Machine (ATM) network comprising over 2000 ATMs across India. As of March 2009, the Bank had a total of 2,733 branches spread across all geographical segments. All the branches of Canara Bank are enabled with Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) transaction facilities, ensuring smooth and swift money transfer across the country.[39]

As of 31st March 2008, total advances was estimated at Rs. 21,815.50 billions. Bank of Baroda with total advances of Rs. 1,067.10 billion had a market share of 4.89%.

Market Share by Total Advances as of 31st March, 2008.
Market Share by Total Advances as of 31st March, 2008.[40]
Metrics/Company (figures in Billions INR) Axis Bank ICICI Bank HDFC Bank State Bank of India Punjab National Bank Bank of India Bank of Baroda Indian Bank Canara Bank
Revenue Metrics
Net Revenue (net of interest exp.) 43.8161.8375.11264.275.3285.5159.6230.6058.46
Net Interest Income 25.8573.0452.3170.2155.3454.9939.1120.5435.38
Revenue Growth from 2007 71.50%45.18%50.70%12.43%8.49%70.92%20.21%19.08%5.50%
NIM 3.47%2.20%4.40%3.07%3.58%2.97%2.90%3.45%2.42%
Opearating Metrics
Net Income 10.7141.5715.967.2915.4130.0714.3510.0915.65
Net Profit Margin 24.45%25.69%21.17%25.47%20.46%35.17%24.07%32.98%26.77%
Total Operating Income 22.2672.4337.65138.1140.0654.5730.2716.5929.59
Other Key Industry Metrics
Total Assets 1095.783997.951332.515665.651990.481788.31795.99705.081805.29
capital Adequacy Ratio 13.73%14.92%13.60%13.47%12.96%12.95%12.91%12.74%13.25%
Return on Assets 1.24%1.10%1.32%1.01%1.15%1.25%0.89%1.64%0.92%
Net NPAs 0.36%1.49%0.47%1.78%0.64%0.52%0.47%0.24%0.84%


  1. Business Standard - BoB pips Canara Bank to become third-largest PSU bank
  2. Economic Times - Corporate-round-up
  3. 3.0 3.1 3.2 Meri News - CASA holders can't be taken for granted
  4. FY 2008-09 - Annual Results – Page No – 6
  5. Etintellignce – Knowledge forum
  6. Event Avenue - Bank Profile
  7. FY 2008-09 - Annual Results – Page No – 27
  8. Bank of Baroda Website – IT Infrastructure
  9. Rediff Money Wiz: "Bank of Baroda - Research Center"
  10. Moneycontrol - Financials
  11. FY 2008-09 - Annual Results – Page No – 5
  12. FY 2008-09 - Annual Results – Page No – 31
  13. rupeetimes
  14. FY 2008-09 - Annual Results – Page No – 14
  15. Bank of Baroda Website – Annual report - 2009
  16. FY 2008-09 - Annual Results – Investor Presentation, Slide 7
  17. Punjab National Bank
  18. FY 2008-09 - Annual Results – Page No – 20
  19. FY 2008-09 - Annual Results – Page No – 27
  20. FY 2008-09 - Annual Results – Page No – 11
  21. Bank of Baroda website – Wholesale banking
  22. 22.0 22.1 22.2 22.3 Bank of Baroda website – Audited Financial Results - 2008-09
  23. FY 2008-09 - Annual Results – Page No – 15
  24. FY 2008-09 - Annual Results – Page No – 13
  25. FY 2008-09 - Annual Results – Page No – 2
  26. Bank of Baroda Financial Results FY2008-09 and Q4
  27. Bank of Baroda Website - Shareholding pattern
  28. My Digital Lfc - psu-banks-may-see-more-pressure
  29. The Business Line
  30. FY 2008-09 - Annual Results – Page No – 5
  31. The Business Line
  32. FY 2008-09 - Annual Results – Page No – 17
  33. Indian Knowledge Wharton - As Foreign Banks Detour, Public Banks Forge Ahead
  34. Businessworld article on SBI
  35. Punjab National Bank profile on Hoover's
  36. HDFC Bank website
  37. Livemint news article on HDFC
  38. FY 2008-09 - Annual Results – Investor Presentation, Slide 9
  39. Press release for quarter and year ended March, 2009, Page 3
  40. Profile of Banks Reserve Bank of India - A Profile of Banks : 2007-2008