Detailed Narrative
Robust Advances Growth Driven by RAM Segments
Bank of Baroda reported a strong global advances growth of 12.6% YoY, reaching ₹12.07 lakh crores as of June 2025. This growth was primarily propelled by the RAM (Retail, Agri, MSME) segments, which grew by 18% YoY. The retail book expanded by 17.5%, agriculture by 16.2%, and organic MSME by 13.1%. The RAM portfolio now constitutes 62.7% of the overall book, up from 57% two years ago, reflecting the bank's strategic focus on retailizing its book.
Operating Profit Surges Amidst NII Pressure
Despite a ~1.4% degrowth in Net Interest Income (NII) due to industry-wide rate transitions, the bank's operating profit for Q1 FY26 surged by 15% YoY to ₹8,236 crores. This strong performance was largely attributed to a substantial increase in non-interest income, particularly from treasury operations. Net profit for the quarter stood at ₹4,541 crores, marking a 1.9% YoY growth, and the bank has consistently posted net profits exceeding ₹4,000 crores for the last 10 quarters.
Resilient Asset Quality with Improved GNPA/NNPA
The bank maintained robust asset quality, with its Gross Non-Performing Assets (GNPA) improving by 60 bps YoY to 2.28%. Net NPA also saw an improvement, standing at 0.60%. The provision coverage ratio, including technical write-offs, remained comfortable at 93.18%. The slippage ratio for Q1 FY26 was 1.16%, and the credit cost was 0.55%. Management noted that excluding a specific international account, the slippage ratio would be 0.99% and credit cost 0.47%.
NIM Compression Expected to Stabilize in H2 FY26
Net Interest Margin (NIM) for Q1 FY26 was 2.91%, a 7 bps reduction from the reclassified March 2025 figure of 2.98%. This compression is in line with industry trends, which saw an average NIM cut of 17 bps. Management anticipates continued pressure on NIM in Q2 FY26 but expects a positive outlook from Q3/Q4 as 70-80% of the deposit book is repriced by September, leading to a 15-17 bps moderation in the cost of deposits. The full-year NIM guidance is set at 2.85-3%.
Strategic Focus on Liability Management and CASA
Total deposits grew by 9.1%, with domestic deposits increasing by 8.1% and international deposits by 14.8%. The domestic CASA (Current Account Savings Account) deposits grew by 5.5%, contributing to a strong CASA ratio of 39.33%, which is considered top quartile among large peers. The bank has actively worked to reduce its dependency on bulk deposits, with a reduction of ₹23,000 crores this quarter, and is implementing innovative products and digital offerings to attract and retain CASA.
Corporate Loan Growth and Pipeline Outlook
Corporate loan growth was muted at 4.2% YoY in Q1 FY26, attributed to seasonal factors, corporate deleveraging, and companies opting for cheaper bond/ECB market funding. However, management expects corporate growth to accelerate in H2 FY26, targeting 9-10% for the full year. The bank has a robust pipeline, with sanctioned but undisbursed loans of ₹30,000-35,000 crores and cases under consideration totaling ₹25,000-30,000 crores, driven by demand from renewable energy, data centers, and road projects.