Bank Of Baroda Flags Corporate Lending Slowdown But Optimistic Of FY26 Growth
June is typically a slack season for corporate credit, and Bank of Baroda expects growth to pick up over the rest of the year.
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Despite witnessing a slowdown in corporate loan book in the June quarter, Bank of Baroda expects this book to grow at 9-10% in the current financial year as it expects working capital demand and capital expenditure announcements from state-owned entities.
During the quarter ended June, the public sector bank’s corporate book was at Rs 3.7 lakh crore, up over 4% on-year but was down over 10% sequentially.
This has come as companies have tapped the bond market due to cheaper rates and as corporates continue deleveraging their balance sheets, Managing Director and Chief Executive Officer Debadatta Chand said post the earnings call.
“Corporates are able to tap alternate sources at rates lower than the bank’s MCLR (marginal cost of lending rates). Although we’ve cut MCLR, the benefit is lagged due to elevated deposit costs,” Chand explained.
He also said that June is typically a slack season for corporate credit, and the bank expects growth to pick up over the rest of the year.
The state-owned bank has stuck to its guidance of 11–13% credit growth for the current financial year, with sharp focus on retail, agriculture and micro, small and medium enterprises.
“Retail continues to be a strong growth engine. Our retail loan growth has been consistently higher than the industry average,” Chand said. He said that the bank is seeing continued traction in MSME loans, especially in core segments like supply chain finance, trade, government-related schemes and cluster-based lending.
Chand said that the bank expects to grow its MSME loan book by 18-19% on-year.
During April-June, Bank of Baroda’s domestic advances grew 12.4% on-year to Rs 9.91 lakh crore. Within this, retail book grew 17.5% on-year to Rs 2.61 lakh crore, followed by agriculture at Rs 1.61 lakh crore, up 16.2%. MSME loans rose 13.1% on year to Rs 1.35 lakh crore.
On the liabilities side, the bank aims for 9–11% on-year deposit growth in the current financial year.
On profitability, Chand said that the bank expects pressure on net interest income and net interest margin to persist till the September quarter due to sharp policy rate cuts.
However, he expects positive outcome on profitability from the September quarter onwards. Based on this assessment, the bank expects NIM to be around 2.8-3% by the end of FY26.
For the quarter ended June, Bank of Baroda’s NII fell over 1% on Rs 11,435 crore. Sequentially, it was at Rs 11,494 crore.
Consequently, NIM was at 2.91% at the end of June as compared to 2.98% in the prior quarter.
Speaking about provisions, Chand expects the bank’s provisions to be at a run-rate of Rs 500-1,000 crore for the current financial year.
During the quarter under review, provisions jumped 95% on-year to Rs 1,967 crore as an international account worth Rs 500 crore was classified as NPA. The bank made 40% provisions against this manufacturing company account but expects resolution on this matter soon.
While Chand did not name the account, he said the provision is a one-off related to an international borrower. “This provisioning is specific to one international account and is not a reflection of broader asset quality issues,” he said.
Overall, asset quality of the bank remained stable, with gross non-performing assets ratio at 2.28% as of June-end, slightly higher than 2.26% in the March quarter. Net NPA also rose marginally to 0.60% from 0.58% a quarter ago.
