Tag: sanjiv chadha

Bank of Baroda, BFSI News, ET BFSI

Banking & Finance

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Bank of Baroda has been the first of the nationalised banks to have completed the amalgamation of two smaller banks with itself. The bank’s experiences in the merger have helped other consolidating public sector banks to draw their strategy. In an interview with TOI, MD & CEO Sanjiv Chadha speaks of the road ahead…

How has the second quarter been in terms of business?

There have been challenges in credit growth — the investment cycle in particular — for the last few years. Even today capacity utilisation is about 70% and it’s only when it moves up to 80% that you get a serious round of investments. We are seeing some investment in brownfield projects in companies that have gone through an ownership change. We are seeing large capacities in areas like renewable energy. We also have a large investment in electric vehicles. We are seeing progress in going beyond green shoots. For this to gather momentum and become a full-fledged revival of the investment cycle, we might be a few months away.

On the asset quality side, do you see more clean-up happening?

There has been a broad-based improvement in the corporate credit cycle, which we have seen for the last few quarters. Corporate slippage has had come down dramatically compared to what was the case in the previous quarters. Challenges in retail and MSME have got accentuated during the pandemic. Overall, in terms of credit quality for banks, I think we should see an improvement notwithstanding the challenges that we saw with the second wave.

When do you expect RBI to start normalising its monetary policy?

I think there are two pieces to the monetary policy stimulus. One has been in terms of rates and the other has been in terms of liquidity. So, you would expect that the liquidity piece will start getting normalised first. Change in the rate cycle is a few quarters ahead. The distortions in risk pricing due to liquidity surplus should get sorted and we should start seeing credit risk that way it would be in normal times.

You have launched a new digital platform BoB world. What does this mean for customers?

Covid has brought a broad and deep transformation and nearly twice the number of customers visiting the branch, now use the app. So rather than being an adjunct to the bank, it will be the bank and the other parts of the bank will become an adjunct. The thought was to enable everything that can be done in the branch within the app. Therefore, we got down to see what should be the design, branding and positioning of the app. BoB world will be the primary interface at the centre of the bank.

What is the effort that has gone into the back-end?

The bank has been making investments and was identified as the best technology bank of 2021 by the IBA. The integration (of Dena and Vijaya Bank) on a common platform after the merger gave us a robust base to build this strategy.

How scalable is the core banking platform for digital?

Today we 13 million customers using bob World which is a very robust platform and scalable. For the future cloud computing will be a very important element as this will help scale up not only in terms of users but also multiple fintech partners on the platform.

Will bob World be a super app like SBI’s Yono and are you integrating the subsidiaries?

The way the app is being positioned that you can save, borrow, invest and pay. All four capabilities are in the app and are being scaled up every day. In addition to the regular transaction, we are having things like airline ticket booking and comparison shopping across merchants to bring the cheapest proposition to the customers. The other important thing is the benefit programme which depends on the category you choose in terms of the balance you would like to maintain.

How do you as a 100-year bank plan to attract millennials?

The marketing campaign is squarely aimed at millennials. The design is something they will find appealing. They can open the account entirely online through video KYC and the account will have benefits including Amzon Prime.

Will you be part of the account aggregator platform?

It is a conversation that we are still having. But having a platform of this sort gives you a very powerful lever to make sure you can profit from certain engagements.

Will BoB World be restricted to retail?

We’re starting off with retail with about 95% of all retail services now available on mobile. The logical next step is to fashion it for other segments.

On the corporate side are there any gaps in digital banking that you will fill?

The primary banking channel for banks is mobile. Not too far ahead the mobile phone is likely to become an important piece particularly for MSME and that is what we will target next in Bob World.

How do you plan to reach unbanked areas and push the financial inclusion agenda?

It’s a matter of great pride for us that while we have a 6-7% share in banking. Our share in Jan Dhan Yojana is 15%. So one piece of service delivery will be digital but that may not be relevant to people who are on the other side of the digital divide. We have a very aggressive programme for increasing our business correspondent and increase their number from two for every branch to five BCs for every bank branch that we have. We want to double the BC outlets to 50,000.

Would you be hiring people?

The amalgamation has brought about efficiencies, but we have not shed people. Redeployment will help in filling marketing and other vacancies. We will continue to recruit specialists. For instance, we are now recruiting wealth relationship managers. We may also recruit for specific skills like digital banking. But there may not be much of an increase in the headcount.



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Bank of Baroda bets on super app, BFSI News, ET BFSI

Banking & Finance

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Mumbai: Bank of Baroda will position its new digital platform bob World as the main bank and all banking channels will be an adjunct to the primary platform. The public sector lender is adopting a strategy similar to SBI, which is working to integrate all services on its Yono platform.

Bank of Baroda MD & CEO Sanjiv Chadha told TOI that post-pandemic, the bank has seen a surge in digital transactions and twice the number of branch visits are happening on the app. “So rather than being an adjunct to the bank, it will be the bank and the other parts of the lender will become an adjunct. The thought was to enable everything that can be done in the branch within the app,” said Chadha.

“The way the app (bob World) is positioned, you can save, borrow, invest and pay. All four capabilities are in the app and are being scaled up every day. In addition to regular transactions, we are having things like airline ticket booking and comparison shopping across merchants to bring the cheapest proposition to the customers,” said Chadha. The bank plans to extend use of the app from retail to businesses as well.

For the financial inclusion and to reach out to people who do not have digital access, the bank is also doubling the number of business correspondents to 50,000.

“It’s a matter of great pride for us that while we have a 6-7% share in banking. Our share in Jan Dhan Yojana is 15%. We have a very aggressive programme for increasing our business correspondent and increase their number from two for every branch to five BCs for every bank branch that we have,” said Chadha. The bank will however not be increasing its headcount as it has realised some efficiencies following the amalgamation of Vijaya Bank and Dena Bank, which will enable the lender to redeploy staff.



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Sanjiv Chadha, Bank of Baroda, BFSI News, ET BFSI

Banking & Finance

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The CASA ratio moved up from 39% to nearly 40% over last 12 months. That is one abiding benefit for the bank, not only in terms of margins for this quarter but also going ahead, said Sanjiv Chadha, MD & CEO, Bank of Baroda. Edited excerpts:

Congratulations on a healthy quarter in a tough environment. What has led BoB back to profits with low slippages in the first quarter, as well as lower credit cost on a sequential basis?
There are two major aspects which I think have had CASA improve things. One is on the structural side where we have had very tight discipline both in terms of managing liability franchise and also on the asset side. So, on the liability side, when you have abundant liquidity, it is very impossible that you allow deposit growth to run too far ahead of loan growth which creates pressure on margins. We have tried to be disciplined, make sure that our deposits grow in line with our loan growth.

Because we were choosy there, we have been able to make sure that most of the growth has come from CASA deposits. So, the CASA ratio moved up within a year from 39% to nearly 40% over last 12 months. That is one abiding benefit for the bank, not only in terms of margins for this quarter but also going ahead. Similarly on the asset side, there is a lot of liquidity sloshing around, pressure on margins. We are trying to be disciplined there also.

While both slippages as well as credit cost has been lower sequentially, what is the kind of slippages as well as credit cost that you expect? Where do you see gross net NPAs settle at for the financial year close?
We had guided even before the second wave that we would expect slippages to be below 2% and credit cost to be between 1.5% to 2% and bearing towards the lower end of that scale. We believe that despite the second wave we should be able to deliver on the guidance.

Your overall exposure to NCLT accounts is a little over Rs 48,000 crore and the PCR is 94%. To what extent of this amount do you see resolution? What are the overall recoveries and upgrades you expect for the whole bank and from these NCLT accounts as well?
The NCLT accounts tend to be the very highly provided; upwards of 90%. In terms of you might say anticipating in which quarter would it happen is always very difficult and so we do look forward to the resolutions of NCLT accounts. We are making sure that in terms of our recovery efforts and in terms of our recovery budgeting, we are looking beyond the NCLT accounts also. It is very tough to say what will come in which quarter, but I would believe that there are some accounts which probably will happen within this year and they will contribute significantly to the recoveries.

What is your exposure funded and non-funded to Vodafone Idea, how much you have provided for and what is the provision you expected to make?
Our exposure is relatively small, so it is not something which could significantly impact the improvement in the corporate credit cycle we have knocked off.

Let us talk about return ratios and profits from a two-year perspective. What is the improvement that you can expect on those two fronts and how do you see yourself competing with the modern day players that are coming in and making waves in the space?
The question might have two segments, one in the terms of the improvement in the profitability. I think that is something which is likely to be sustained over the next two years simply because we have built strengths in terms of the business both on the asset and liability side. On the liability side in terms of a CASA ratio, which now pretty much compares with the best in the business. Or on the asset side in terms of retail growth, which again have been better than market. So, we are very positive in terms of the structural story.

As we discussed, the improvement in the corporate credit cycle is likely to sustain over the next two years despite the second wave. We have seen even in this quarter the impact on corporate has been very marginal, therefore we can be fairly confident that the improvement that we have seen should continue going ahead.

The structural improvements in the balance of the bank, the earning power that has accrued to the bank from new businesses, and also the cyclical story should again help us have sustainable improvement and get back to return ratios which are very respectable. Coming back to the second part, in terms of the challenge of fintechs, I think it is an opportunity for banks and it is a great opportunity for us to collaborate with fintechs to create new businesses. Even as we speak, we have a very significant digital initiative which is being rolled out where we are collaborating with a large number of fintechs.

We expect that a large part, particularly on the retail side, should be digitised over the next 12 to 18 months and all of this will happen in collaboration with fintechs who would be our partners. I do not see any competition with fintechs as a zero-sum gain which is at the cost of banks, I think it is a great opportunity for the banks to in fact become much more efficient.



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Will ensure there is no room for accidents in corporate loan book: Sanjiv Chadha, MD & CEO, Bank of Baroda

Banking & Finance

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Bank of Baroda (BoB) will ensure that there are no accidents in the corporate loan portfolio and at same time grow retail loans aggressively, without losing sight of the underlying credit quality, said Sanjiv Chadha, MD & CEO of the bank.

In an interaction with BusinessLine, Chadha emphasised that BoB’s credit quality, retail growth engine and Current Account, Savings Account deposits are resilient and capital position now is much stronger as compared to the beginning of FY21 despite the impact of the Covid-19 pandemic.

Referring to the global markets being flush with liquidity, the chief of India’s third largest public sector bank said when it comes to wholesale loans, it is possible to move the capital from international operations to India and make more money.

Excerpts:

Your corporate advances have come down to 45.5 per cent of gross domestic credit in FY21 from 47.7 per cent. Do you see scope for further change in this proportion?

In FY21, overall credit growth (domestic) was about 5 per cent, with corporate loans growing 0.02 per cent year-on-year (this was partly due to the fact that there was excess liquidity and there was no growth in the economy) and retail loans growing about 14 per cent. Going ahead, I would believe that faster growth will come from retail as compared to the corporate segment because we would want to do two things. First, focus on credit quality in the corporate segment to take full advantage of the credit cycle so that we can bring down our credit cost. The single factor that changes the profit of a bank is the credit cost.

Now, because our credit cost came down by 67 basis points, our profit before tax in FY21 increased to ₹5,556 crore (from -₹1,802 crore in FY20). So, that is what we would want to focus on— making sure there is no room for accidents as far as the corporate book is concerned, but at the same time re-balance the portfolio by being aggressive to the extent possible by keeping the quality intact on retail loans.

So, will you step on the gas vis-a-vis retail loans?

The proportion of retail loans in overall domestic credit would have moved up by about a percentage point in FY21. Going ahead also we should see this kind of progressive movement where the retail loan share keeps on going up while corporate loans come down. But more than the proportion of corporate loans coming down, the credit cost should come down even more and at the same time our margins should improve. If we chase something desperately, our margins will come under pressure, and we will also end up with credit quality which is sub-optimal. We don’t want to get into that game.

So, we would want to grow retail aggressively but without losing sight of the underlying quality (it is possible to do both; I think we have done that —for example we can have low delinquencies in auto loans and make money) and in corporate loans make sure we grow but bring in efficiencies. We have a large corporate book. We will try to see how we can get other income from corporates. Our fee income from cash management was up 75 per cent yoy. And this is what we want to focus on, making sure that while we are lending, we also get our due share of business from corporates.

Why are you betting big on unsecured loans when there are Covid-19 pandemic related salary cuts and job losses?

If we were sitting on an unsecured loan book which was, say, 10-15 per cent of our loan book, I would say “hang on, let’s be very, very careful”. But our base is very small and because of this, any growth shows up as a large percentage of growth. So, I believe, we can be careful. We can have a reasonable growth, which will show up as a higher percentage of growth. But this need not necessarily mean that we are exposing ourselves disproportionately in terms of credit risk.

When it comes to our current delinquencies in the unsecured retail book, they are lower compared to home and car loans. This is simply because of the fact that we are lending only to our existing customers. So, that again gives us a very good handle in terms of quality. These loans are very short tenure, normally a year/year-and-a-half. So, if we believe there any issues, we can quickly re-calibrate in terms of our risk appetite.

What steps are you taking to cut down risk-weighted assets?

I think, the fact is that in FY21 also, we were able to fund our growth entirely through internal accruals —whatever money we earned was enough to take care of our incremental growth. I think, going ahead also, we would want to do that. This means keeping a very tight lid in terms of risk-weighted assets. Now, this will come in two ways. One, where the risk-weight is high in large corporate exposures, we can bring it down. In the international book also, there are asset categories where the risk-weight is high and net interest margins are low. So, I would believe, we would be looking at moving capital, in comparative terms, from the international book to the domestic book because interest margins are higher in the latter.

So, for us, capital management is going to be very important. And we believe that it is possible for the bank in a moderate credit growth scenario (which is what we are likely to see this year and may be the next) to be able to fund the growth precisely by doing what I just mentioned —make sure that we keep our focus on the risk-weight of the assets and also grow in the categories of assets where the risk-weights are low. The moment we move to retail, we are also making sure that the risk-weights come down.

How will you tamp down corporate risk-weights?

It is really a question of the choices we make. When we are saying that we would want to make sure there are no future accidents, this can happen in terms of growing loans in the higher-rated categories. In terms of incremental growth in FY21, nearly 70 per cent growth came from ‘A’ and above rated accounts where risk weights are obviously low. In retail, a large proportion of the growth has come from home loans where risk weights are low. So, I think, it is possible to have a reasonable growth ambition but at the same time, we make sure that we control the risks as well as utilise the capital efficiently.

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Bank of Baroda posts net loss of Rs 1,047 cr in Q4, BFSI News, ET BFSI

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State-run Bank of Baroda reported a standalone net loss of Rs 1,047 crore in the quarter ended March 2021, as it shifted to a new tax regime.

The lender had reported a standalone profit-after-tax of Rs 507 crore in the year-ago period.

For the full year, net profit grew 52 per cent to Rs 829 crore from Rs 546 crore in FY20.

The bank booked a profit before tax (PBT) of Rs 2,680 crore during the quarter against a loss of Rs 1,723 crore in the year-ago period. PBT stood at Rs 5,556 crore for FY21 against a loss of Rs 1,802 crore in FY20.

“Given the fact that we had a PBT of Rs 5,556 crore (in FY21), we thought this is the right time to transit to a lower tax rate regime. But the movement to the new tax regime means we have to make a DTA (Deferred Tax Assets) adjustment, which was of the order of Rs 3,500 crore for the full year. Because of that, we are reporting an accounting loss of around Rs 1,000 crore in Q4 FY21.

“But for the DTA impact, we would have a profit after tax of Rs 2,200 crore in the last quarter,” the bank’s managing director and CEO, Sanjiv Chadha, told reporters.

Net interest income (NII) rose by 4.54 per cent to Rs 7,107 crore compared to Rs 6,798 crore a year ago.

Global net interest margin (NIM) improved to 2.72 per cent from 2.63 per cent in Q4 FY20 led by margin expansion in international business to 1.57 per cent in Q4 FY21.

Domestic NIM declined to 2.73 per cent as against 2.76 per cent in the fourth quarter of FY20.

Gross NPA ratio fell to 8.87 per cent as against 9.40 per cent and net NPA ratio to 3.09 per cent from 3.13 per cent.

Fresh slippages during the quarter stood at Rs 11,656 crore in the fourth quarter of FY21.

The lender’s slippage ratio declined to 2.71 per cent in FY21 from 2.97 per cent in FY20. Credit cost decreased to 1.68 per cent in FY21 from 2.35 per cent in FY20.

“Slippages will come down very significantly during the current year (FY22) despite the second wave. I would believe that we should be trending towards 2 per cent or lower in FY22,” Chadha said.

He expects credit costs to be in the range of 1.5-2 per cent in FY22.

Total provisions and contingencies declined 46.03 per cent to Rs 3,586 crore in the fourth quarter of FY21 from Rs 6,645 crore in the year-ago period.

Domestic advances increased by 4.91 per cent year-on-year led by domestic organic retail and agriculture loans which grew by 14.35 per cent and 13.22 per cent respectively.

Within retail loans, auto loans increased by 27.79 per cent year-on-year and personal loans grew at 27.21 per cent year-on-year.

Chadha said collection efficiency of the bank improved to 93 per cent during the March quarter. He expects some impact on collections during the April-June quarter of FY22.

He said despite the impact of the second wave, the bank’s corporate book is likely to remain strong.

“Last year, we were not confident about what would happen to the corporate sector. This time we can say with confidence that the second wave has largely left the large corporate businesses untouched. Even in terms of accounts which were relatively weaker and had got restructured, I do not believe we would need to revisit restructuring in most cases,” Chadha noted.

He, however, said the area of concern for the bank remains the MSME sector and to a lesser extent, the retail sector.

“What we have experienced is people, particularly in the retail segment, may fall back on some instalments but ultimately they pull through. Our assessment is that a very large percentage of our retail borrowers will pull through and, for a minority, we may need to do some kind of restructuring. But when it comes to MSME, the impact is larger and restructuring will also be larger,” he added.

Chadha expects a credit growth of 7-10 per cent in FY22 for the bank, if the economy witnesses a double-digit growth.

On capital raising plans for the current fiscal, he said a major portion of the funding requirement will get done through internal accruals.

The bank’s capital to risk (weighted) assets ratio (CRAR) stood at 14.99 per cent in FY21 against 13.30 per cent.

Speaking about the RBI’s announcement on an on-tap liquidity window of Rs 50,000 crore to support healthcare infrastructure, he said the lender has received a board approval on this and it is engaging with the companies.

The bank is targeting a 50 per cent growth in its loans to the healthcare sector.

“Our current exposure to the sector is Rs 7,000-8,000 crore. I would believe we should be looking at targeting a growth between Rs 3,000-5,000 crore there,” Chadha said.



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