Bank of Baroda expects margin pressure to last till Q2FY26

State-run Bank of Baroda expects the pressure on its margins to last for two more quarters. At a press conference after announcing the fourth quarter results, Debadatta Chand, MD and CEO of BoB, said, “We will try to operate within a 3% margin. But at the same time, Q1 and Q2 would be slightly pressured, but Q3 and Q4 would pick up because of the liability structure aligning with the lower deposit where the fresh deposit will get replaced at a lower deposit. So, we are fairly confident that the margin will be in a position to maintain.”

Overall, BoB reported a modest increase in net profit but faced challenges with declining net interest income and narrowing margins, leading to a significant drop in its share price. Following the announcement, BoB’s shares fell over 10%, making it the biggest loser on the Nifty PSU Bank index. Analysts attributed this drop to the disappointing net interest income (NII) figures and margin compression, which overshadowed the modest profit growth and improvements in asset quality.

BoB’s standalone net profit for Q4FY25 rose 3% year-on-year (YoY) to Rs 5,048 crore, up from Rs 4,886 crore in the same quarter of the previous year. However, the bank’s NII declined 6.6% YoY to Rs 11,020 crore. This decline was attributed to a 10% increase in interest paid on deposits, while interest earned on loans grew only 3.3%, reflecting tighter liquidity conditions in the Indian banking sector.

The bank's domestic net interest margin (NIM) contracted to 3.02% from 3.45% a year earlier, indicating pressure on profitability. Despite this, BoB showed improvement in asset quality, with gross non-performing assets (GNPA) reducing to 2.26% from 2.92% YoY, and net NPA declining to 0.58% from 0.68% in the same period.

The bank’s gross slippages at the end of the March quarter stood Rs 3,159 crore, up from Rs 2,915 crore in the December quarter. Write-offs also saw an increase in comparison to the December quarter to Rs1,662 crore from Rs1,167 crore.

The PSU bank’s board also announced a dividend of Rs 8.35 per share along with the Q4 results. The record date for the dividend has been fixed as June 6. “The bank has fixed a record/cut off date of 06th June 2025 for the purpose of dividend payment. Hence, shareholders having shares as on the cut date i.e 06th June 2025, shall be eligible for dividend payment,” BoB said.