PS Jayakumar, MD and CEO of Bank of Baroda (BoB), spoke to CNBC-TV18 about what the capital adequacy after its integration with Dena and Vijaya Bank.
“It was 9.86 on the CET1 level that was the capital that has remained same for BoB and the consolidated company. The infusion of Rs 5,000 crore increases the capital adequacy by 1.02 percent. We still have to recognise the fact that we all work out a different accounting standard and there will be a need to harmonise the standards, so some amount of Rs 5,000 crore would get adjusted in the harmonisation process. We also have the profits for this year flowing into a balance sheet. We are also planning to raise about Rs 1,500 crore or thereabouts through additional tier 1 (AT1) and we are trying to raise another Rs 1,000 crore or thereabouts through the issuance of shares for the employee purchase programme. When we put all of these things together and then assuming some amount of divestiture we can do, it seems to me that we have capital adequate to fund growth for this financial year,” Jayakumar said on Tuesday.
Talking about the lender's growth, he said, “We still talk about 14-15 percent but sometime in Q3 of this year, we would like to go to the market. I am making an assumption here that we will be able to show continued growth. I am also making an assumption here that the amalgamation process would be going smoothly. I think we would be able to raise capital. We had made about Rs 13,000 crore of combined profits of all the three companies closing December, just taking that number and extrapolating it further – I would think we would make an operating profit anything between Rs 18,000 crore and Rs 20,000 crore next year.”
“The credit growth remains robust. We stay with the direction of 15 percent credit growth through the next financial year,” said Jayakumar.
Speaking about non-performing assets (NPAs), he said, “As a part of the competition of the tax swap ratio, we did have a fair amount of work to look at the relative NPA recognition. It doesn’t mean that BoB does not have loans which needed to recognise, there was some recognition that was required so we looked at the whole thing together. So we have a reasonable grip on the extent of provisions required in relation to that. As far as incremental loans are concerned, we had a task force that was multiple taskforces, 18 of them working under executive directors, that essentially rolled out a common product programme for all the three banks together and so starting today except for the pipeline transactions, we are underwriting under the same set of rules or will be underwriting the same set of rules across all the three banks starting tomorrow.”