Bank of Baroda Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

4 Beena Vaheed, Debadatta Chand, L. Sridhar Inumella V, Sanjay Vinayak Mudaliar

Analysts

6 Ashok Kumar Ajmera, Gaurav Jani, Jai Prakash Mundhra, Jayant Kharote, Parameswaran Subramanian, Rikin K. Shah

Financials & KPIs

Geographic & Segment Commentary

• Retail, Agriculture & MSME (RAM): Core growth engine - organic retail +18.4%, agri +18.7%, MSME +20.3% YoY, all outpacing corporate growth. Within retail, mortgages (+27.5%) and auto loans (+25.3%) led. Gold loan saw seasonal QoQ dip in both retail and agri buckets; management confirmed no policy change and intends to continue growing the segment.

• Corporate: +15.3% YoY but ~7% QoQ degrowth (only YTD-negative segment). Deliberate strategy to reprice non-MCLR linked corporate book toward MCLR/near-MCLR amid elevated deposit costs, consciously letting go of fine-priced (low-yield) assets. Management termed the strategy "bang on" given changing industry rate structure.

• International: Advances grew fastest at +23.3% YoY vs domestic +16.1%; deposits +8.9%. NMC settlement of USD 600M was paid from overseas jurisdiction using its own resources, insulating the domestic book. International NIM operates at ~1.4-1.5%, with slight improvement.

• Domestic: Advances +16.1%, deposits +14.7% with term deposits (+17.8%) outpacing CASA (+10%). Domestic NIM at ~2.93%, which management characterized as top quartile. CD ratio at 83.3%; CASA ratio 37.7%.

Company-Specific & Strategic Commentary

• NMC Settlement Closure: Out-of-court settlement of USD 600M paid July 1, 2026, fully absorbed in Q1 FY27 P&L (net profit ₹1,278 cr vs ₹5,528 cr ex-item). Agreement reserves all claims without admission of liability; claims against the bank discontinued in both ADGM and UK courts. Recovery claims against the principal individual continue in India and abroad. Floating provision of ₹2,500 crores untouched.

• ECL Migration: Final RBI guidelines reduce earlier expected project-loan pullback from 50 bps to ~15 bps; total transition impact ~110 bps on CRAR (₹12,000 crores). Floating provision of ₹2,500 crores offsets a portion; balance of ~₹9,500-10,000 crores to be amortized as permitted. Run-rate credit cost impact of 15-20 bps.

• Treasury & Duration Positioning: Added duration when yields peaked at ~7.13%; yields subsequently moved down to ~6.75-6.80%, generating revaluation gains (₹365 crores write-back in quarter). Book spread across AFS, HTM and FVTPL to protect against future rate-hike MTM impact.

• FCNR(B) / NRI Deposit Strategy: Raised >$600M to date; targeting total NRI flows of $4-5 billion across FCNR(B), FCCB and ECB routes. Loan-against-deposit structure (rupee deposit cost ~6.4-6.5%) generates margins at both ends - overseas branches lend at their own cost of funds.

• Capital & Technology Investment: ₹8,500 crores equity raise planned over medium term (through March 2028); CRAR at 16.3% provides headroom, timing/price dependent. IT budget exceeds ₹4,000 crores (OpEx + CapEx combined).

Guidance & Outlook

Risks & Constraints

Q&A Highlights

NMC Settlement - Rationale, Provisioning & Aftermath

• Question: Why settle, why no prior provision disclosure, nature of transaction, what about staff accountability? (Gaurav Jani, Jai Prakash Mundhra, Ashok Kumar Ajmera)
• Answer: Case had reached advanced trial stage in ADGM and U.K. courts; settlement was a commercially prudent decision per legal advice, covering litigation against the bank (not credit exposure). No specific provision was permissible on a litigation under negotiation. Terms are confidential; claims against bank discontinued in both courts; recovery claims against principal individual continue in India and abroad. Staff accountability will follow standard government-bank internal processes. (Debadatta Chand)

Growth & Profitability Rebuttal

• Question: Credit/deposit growth and asset quality appear to have faltered sequentially; treasury income inflated the quarter. (Ashok Kumar Ajmera)
• Answer: 17.4% credit growth and 13.8% deposit growth are among the strongest in the industry; treasury income of ₹893 crores is far lower than ₹2,200 crores in Q1 FY26. Sequential GNPA uptick driven by lower denominator (RWA) and conservative write-offs (₹625 cr vs ₹2,200 cr in June 2025); ex-settlement ROA 1.10% and ROE 16.57%. "There is not a single parameter... other than net profit which has shown a decline." (Debadatta Chand)

Treasury Duration & Rate-Hike Protection

• Question: Why increase duration sharply when the next RBI move could be a hike? (Rikin K. Shah)
• Answer: Purchases made at peak yields (~7.13%); yields have since moved down to ~6.75-6.80% locking in upside. Book is split across AFS, HTM and FVTPL, positioning bank to absorb any rate-hike impact. ₹365 crores revaluation gain is yield-movement driven. (Debadatta Chand)

Corporate Degrowth & MCLR Repricing

• Question: Corporate loans degrown ~7% QoQ - is this competitive intensity or strategic shift to MCLR? (Rikin K. Shah)
• Answer: Deliberate strategy in a high deposit-cost environment: moving non-MCLR linked corporate book toward MCLR/near-MCLR and letting go very fine-priced assets. All other segments are YTD positive; corporate degrowth is strategic and seasonal, not share loss. (Debadatta Chand)

Fee Income Decline & Optimization

• Question: Commission/exchange/brokerage income down ~47% YoY - what is dragging it? (Rikin K. Shah)
• Answer: Fees suppressed by all-in yield/pricing approach - higher advances growth booked at lower processing fees and yields. Management acknowledges this needs optimization focus in coming quarters. (Debadatta Chand)

Asset Quality, Write-Offs & Credit Cost

• Question: Should we expect higher write-offs and credit costs next quarter? (Rikin K. Shah)
• Answer: No - write-offs are technical, on fully provided books; conservative ₹625 cr write-off protects PCR (93.28%). Forward indicators strong: SMA 1&2 at 7 bps (vs 40 bps June 2025), collection efficiency at record 99.2%, recoveries (NPL + TW) higher than June last year; no visible stress build-up. (Debadatta Chand)

ECL Migration Impact

• Question: Total ECL impact of ~110 bps CRAR - was it previously lower? Is the run-rate impact 15-20 or 20-22 bps, and why higher than peers' 10-15 bps? (Jai Prakash Mundhra, Parameswaran Subramanian, Jayant Kharote)
• Answer: Earlier estimate was 125 bps minus 50 bps project-loan pullback; final guidelines delivered only ~15 bps pullback, hence net ~110 bps (₹12,000 crores). This excludes AFS/HTM/investment provisions - credit only. Floating provision of ₹2,500 crores offsets; ~₹9,500-10,000 crores to be amortized per guidelines. Run-rate credit cost impact is 15-20 bps, comparable with peers; bank holds capital headroom (CRAR 16.3%) and a raise plan. (Debadatta Chand)
• Follow-up: Should ECL costs be priced into lending spreads? (Parameswaran Subramanian)
• Answer: Retail spread changes are constrained by regulatory guidelines (3-year norms; changes permitted on credit deterioration/force majeure). Where guidelines permit, bank will pass on costs, including on back book. (Debadatta Chand)

NIM Guidance & Drivers

• Question: What prevents NIM from slipping below 2.75% given sequential core NIM contraction? (Jayant Kharote)
• Answer: Non-MCLR corporate repricing upside is already in the book; bulk deposit and CD rates have declined post-FCNR(B) announcement; domestic NIM at ~2.93% remains top quartile. Confidence in holding 2.75-2.95% range. (Debadatta Chand)

FCNR(B) / NRI Flows

• Question: How much FCNR mobilized, what is target, and how does self-leverage impact NIM/PAT? (Rikin K. Shah)
• Answer: >$600M raised to date; targeting total flows of $4-5 billion across FCNR(B)/FCCB/ECB routes. Rupee deposit rates offered ~6.4-6.5%; loans against NRI deposits are provided by overseas branches at their own cost of funds, generating margins at both ends. (Debadatta Chand)

Capital Raise & IT Budget

• Question: What is the IT budget and any equity-raising plans? (Question via operator)
• Answer: IT budget exceeds ₹4,000 crores (OpEx + CapEx combined) (Sanjay Vinayak Mudaliar). Equity: ₹8,500 crores planned through March 2028; CRAR at 16.3% means no immediate need; timing and price dependent near 16-17% sustainable growth. (Debadatta Chand)

Key Takeaway

Bank of Baroda delivered strong Q1 FY27 operating performance with global business at ₹30.5 lakh crores (+15.4% YoY), advances up 17.4% and deposits up 13.8%, led by RAM books (retail +18.4%, agri +18.7%, MSME +20.3%) and international advances (+23.3%). Reported net profit of ₹1,278 crores absorbed the full USD 600 million NMC settlement; ex-item profit of ₹5,528 crores implied ROA/ROE of 1.10%/16.57%. Asset quality remains benign - GNPA 1.9%, NNPA 0.50%, credit cost 29 bps, collection efficiency at record 99.2%. Management retained FY27 guidance (credit growth 12-14%, NIM 2.75-2.95%, ROE 15-16%) and guided ROA above 1% for Q2-Q4 with full-year guidance post-Q2. Key watch points include the 110 bps CRAR impact (₹12,000 crores) from ECL migration with a 15-20 bps annual credit cost run-rate, a planned ₹8,500 crore equity raise by March 2028, fee income recovery, and geopolitical caution tempering growth guidance despite current outperformance.