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You can view full text of the latest Director's Report for the company.

BSE: 532134ISIN: INE028A01039INDUSTRY: Finance - Banks - Public Sector

BSE   ` 113.85   Open: 117.00   Today's Range 113.50
117.00
-2.60 ( -2.28 %) Prev Close: 116.45 52 Week Range 90.70
179.65
Year End :2018-03 

The Directors have pleasure in presenting the One Hundred and tenth Annual Report of your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and operations for the year ended March 31, 2018 (FY 2018).

Financial Performance

A snapshot of our Bank’s financial performance is as below:

(Rs. in crore)

Particulars

31.03.17

31.03.18

Growth (%)

Deposits

6,01,675.2

5,91,314.8

(1.7)

of which- Domestic Deposits

4,40,092.2

4,66,973.8

6.1

International Deposits

1,61,583.0

1,24,341.0

(23.1)

Domestic Deposits

4,40,092.2

4,66,973.8

6.1

of which - Current Account Deposits

26,761.8

31,193.1

16.6

Savings Bank Deposits

1,46,831.9

1,61,130.0

9.7

CASA Deposits

1,73,593.6

1,92,323.1

10.8

Domestic CASA to Domestic Deposits (%)

39.44

41.18

Advances

3,83,259.2

4,27,431.8

11.5

of which- Domestic Advances

2,77,523.7

3,24,238.5

16.8

International Advances

1,05,735.5

1,03,193.3

(2.4)

Total Assets

6,94,875.4

7,19,999.8

3.6

Net Interest Income (NII)

13,513.4

15,521.8

14.9

Other Income

6,758.1

6,657.2

(1.5)

of which-Fee Income

2,837.4

3,249.7

14.5

Forex Income

975.9

909.2

(6.8)

Trading Gains

2,618.0

1,877.6

(28.3)

Recovery from PWO

326.8

620.7

90.0

NII Other Income

20,271.5

22,179.0

9.4

Operating Expenses

9,296.4

10,173.4

9.4

Operating Profit

10,975.1

12,005.6

9.4

Provisions

8,502.4

14,796.4

74.0

of which:

Provisions for NPAs & Bad debts written off

7,679.8

14,211.7

85.1

Profit Before Tax

2,472.7

(2,790.7)

-

Provision for Tax

1,089.6

(358.9)

-

Net Profit

1,383.1

(2,431.8)

-

Appropriations/

Transfers

Statutory Reserve

345.8

0

Capital Reserve

353.7

0

Revenue and Other Reserves

I) General Reserve

0

(2,431.8)

II) Special Reserve u/s 36 (I) (viii) of the Income Tax Act 1961

350.9

0

Proposed Dividend

332.8

0

(Rs. in crore)

Key Performance Indicators

31.03.17

31.03.18

Average Cost of Funds (%)

4.82

4.56

Average Yield (%)

6.85

6.84

Average Interest Earning Assets

6,15,834.7

6,37,987.0

Average Interest Bearing Liabilities

5,95,250.0

6,16,243.9

Net Interest Margin (%)

2.19

2.43

Cost-Income Ratio (%)

45.86

45.87

Return on Average Assets (ROAA) (%)

0.20

(0.34)

Return on Equity (%)

4.53

(7.64)

Book Value per Share (Rs.)

132.46

120.28

EPS (Rs.)

6.00

(9.19)

The financial year FY 2018 had been an eventful year. The credit growth in the banking sector picked up during second half of the financial year. However, on account of base effect and currency withdrawal in the beginning of the year, the deposit growth during the year touched a multi decade low. With the Insolvency and Bankruptcy Code (IBC) becoming operational and RBI mandating resolution of large part of NPAs of banking system to be resolved at NCLT it provided a momentum to the resolution process. During the last quarter of the financial year, the RBI aligned its guidelines on resolution of stressed assets with IBC repealing its earlier guidelines on resolution of such assets. It front ended the recognition of NPAs in the system and impacted the profitability of banks in the short run. In the above environment, Bank performed well with improvement in core operating efficiency.

The net interest income (NII) of the Bank increased by 14.9% during the year. The other income marginally declined by 1.5% on account of lower treasury gains due to hardening of bond yields in the second part of the financial year. However, core fee income increased by 14.5%. Recovery from technically written off accounts increased by 90%. The operating expenses registered increase of 9.4%.

The Bank posted an operating profit of Rs.12,006 crore registering an increase of 9.4%. Total provisions increased by 74% and higher GNPA pool led to increase in provisions for NPAs by 85%, leading to Bank posting loss of Rs.2,431.8 crore. On account of this, there was no amount transferred to statutory and capital reserves and the loss amount was appropriated from general reserve.

Reflecting on the improved operating performance, the net interest margin (NIM) improved from 2.19% to 2.43%. This was led by reduction in the average cost of funds to 4.56% from 4.82% and almost flat average yield on funds. The cost to income ratio remained steady at 45.87%.

Capital Adequacy Ratio (CAR) in %

31.03.17

31.03.18

Capital Adequacy Ratio -Basel III

12.24

12.13

CET-I

8.98

9.23

Tier - I

9.93

10.46

Tier - II

2.31

1.67

The capital adequacy ratio of the Bank at 12.13% continues to be above regulatory requirements as of March 31, 2018. The Tier 1 capital was 10.46% and Common Equity Tier 1 (CET-1) was 9.23%. The consolidated group capital adequacy ratio was higher at 12.87%.

During the year, Bank made preferential allotment of 34,13,56,534 shares of Rs.2 at a price of Rs.157.46 per share amounting to Rs.5,375 crore to Government of India. Accordingly paid up equity share capital of the Bank increased by Rs.68.27 crore. Bank also raised Rs.1,350 crore through issuance of Additional Tier-1 bonds.

Bank’s net worth as of March 31, 2018 was Rs.31,820.2 crore comprising of paid-up equity capital of Rs.530.36 crore and reserves of Rs.31,289.9 crore (excluding revaluation reserves, foreign currency translation reserves and other intangible assets). The book value of the share (FV Rs.2/-) was Rs.120.28.

Dividend

Bank is not eligible to pay dividend for the financial year 201718 on account of not meeting the eligibility criteria stipulated by Reserve Bank of India for this purpose.

Dividend Distribution Policy

As required under Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements), 2015, Bank has dividend distribution policy in place which sets out the parameters and circumstances that will be taken into account by Board in determining distribution of dividend to its shareholders. The policy is given in this Annual Report and is also available on the Bank’s website at www.bankofbaroda. com/download/Dividend.pdf

Board of Directors (Appointment /Cessation of Directors during the year)

Appointments

Shri Lok Ranjan was nominated as Director w.e.f. August 26, 2017 by The Central Government u/s 9 (3) (b) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 to hold the post until further orders.

Smt. Soundara Kumar was elected as Shareholder Director under section 9 (3)(i) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, for a period of 3 years from December 24, 2017 to December 23, 2020.

Shri Bharatkumar D Dangar was elected as Shareholder Director under section 9 (3)(i) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, for a second term of 3 years from December 24,2017 to December 23,2020.

Cessations

Shri Mohammad Mustafa Director, ceased to be a Government Nominee Director w.e.f. August 26, 2017 on the appointment of Shri Lok Ranjan in his place.

Shri Prem Kumar Makkar Director, ceased to be a Non Workmen Director w.e.f. September 19, 2017 on completion of the tenure of -3- years.

Dr. R. Narayanaswamy Director, ceased to be a Shareholders Director w.e.f. December 24, 2017 on completion of the tenure of -3- years.

Board Evaluation

In FY 2017, the Bank engaged a reputed external consulting firm to conduct an independent evaluation of the Board, its committees and individual directors. In FY 2018, this evaluation was followed up by an independently administered questionnaire by the same consulting firm. The questionnaire was completed by all the directors. The questionnaire included a range of topics to evaluate the performance of the Board. These includes:-

- Composition & Effectiveness

- Governance

- Relations with Management Committees

- Continuous Improvement

The responses received from the Board members were compiled and a report was submitted by the consulting firm to all Directors on the Board. The Directors discussed the Report and agreed on a set of actions to drive further improvement in Board effectiveness.

Auditors’ Compliance Certificate on Corporate Governance:

The Auditors Compliance Certificate regarding the compliance of the conditions of Corporate Governance for the year 2017-18 is annexed with this report pursuant to “Part ”E” of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Business Responsibility Report

Business Responsibility Report as required by SEBI has been hosted on the website of the Bank (www.bankofbaroda. co.in). Any member interested in obtaining a physical copy of the same may write to the Company Secretary of the Bank.

Directors’ Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the Financial Year ended March 31, 2018:

a) The applicable accounting standards had been followed along with proper explanation relating to material departures if any;

b) The accounting policies framed in accordance with the guideline of Reserve Bank of India were followed and the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for that period;

c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of applicable laws to the Bank for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d) The directors had prepared the annual accounts on a going concern basis; and

e) The directors had ensured that internal financial controls followed by the Bank are in accordance with guidelines issued by Reserve Bank of India in this regard and that such internal financial controls are adequate and were operating effectively.

Explanation. For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the Bank for ensuring the orderly and efficient conduct of its business, including adherence to Bank’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgements

The Directors place on record their appreciation for the contributions made by the outgoing Directors viz. Shri Mohammad Mustafa, Shri Prem Kumar Makkar and Dr. R. Narayanaswamy.

The Directors express their sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, other regulatory authorities and the overseas regulators for their continued co-operation, guidance and support.

Bank would like to take this opportunity to express sincere thanks to its valued clients for their continued patronage and support.

The Directors acknowledge with deep appreciation of the cooperation extended by all shareholders, banks and financial institutions, rating agencies, stock exchanges and all the well wishers in India and abroad.

The Directors also take this opportunity to place on record deep appreciation for the hard work and dedication of the employees of our Bank which enabled our Bank to record growth with quality year after year despite economic challenges and consolidate its position as one of the premier banks in the country.

For and on behalf of the Board of Directors,

P. S. Jayakumar

Managing Director & CEO