Bank of Baroda Faces Margin Pressure, Plans to Expand Treasury and Wealth Services
Net interest margin to fall, Bank of Baroda can look to upsize treasury, wealth business
The Economic Times
Image: The Economic Times
Bank of Baroda's net interest margin (NIM) is expected to decrease due to sticky deposit rates and limited room for raising lending rates. Despite this, the bank aims to enhance non-interest income through its treasury and wealth management services, with a focus on expanding its debt capital market business.
- 01Bank of Baroda's net interest margin is projected to range between 2.75% and 2.95% this fiscal year.
- 02The bank plans to invest ₹2,000 crore in its newly launched primary dealership business.
- 03An extra ₹1,500 crore floating provision has been set aside to buffer against potential credit losses.
- 04The bank aims to increase non-interest income by upsizing its treasury and wealth management services.
- 05Credit cost guidance for the current fiscal is set at below 0.6%.
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Bank of Baroda, the second-largest public sector bank in India, anticipates a decline in its net interest margin (NIM) due to persistent deposit rates and limited capacity to raise lending rates. CEO Debadatta Chand indicated that the bank's NIM could range from 2.75% to 2.95% this fiscal year, slightly lower than the previous year's 2.89%. To counteract this margin squeeze, the bank plans to enhance its non-interest income by expanding its treasury and wealth management services, including a ₹2,000 crore investment in a new primary dealership business aimed at the debt capital market. Additionally, the bank has set aside an extra ₹1,500 crore in floating provisions to cushion against expected credit losses, with a credit cost guidance of below 0.6% for the current fiscal year. The bank is also focused on improving its subsidiary operations, particularly with BoB Cards and Nainital Bank, to strengthen its market position.
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The decline in net interest margin may affect the bank's profitability, potentially leading to changes in loan rates for customers. However, the expansion of non-interest income sources could stabilize the bank's financial health.
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