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Issuer Flash: Bank of Baroda — Q2 FY2027 Results

Issuer: Bank Of Baroda | Document: Issuer Flash | Date: 2026-11-02 | Event: Q2 Fy2027 Results

Report date: 2026-11-02 Event date: 2026-10-30 Event title: Q2 FY2027 Results

Flash Conclusion

Bank of Baroda, a government-controlled Indian deposit-funded commercial bank, reported unaudited standalone net profit of INR6,532 crore for the quarter ended 30 September 2026, up from INR1,278 crore in the previous quarter and INR4,809 crore a year earlier. The earlier quarter included an NMC-related settlement, while this quarter benefited from a sharp rise in treasury income. Profit recovery is therefore supportive of capital generation but should not be extrapolated as recurring earnings. The bank's global net interest margin (NIM) fell to 2.74% from 2.77% in Q1; deposit composition and the sustainability of lending growth remain the principal counterweights.

Reported asset quality improved sequentially: gross and net non-performing asset (GNPA and NNPA) ratios fell to 1.78% and 0.37%, and fresh slippages declined. Standalone CET1 increased to 14.20% and the bank reported an approximately 133.6% quarterly-average liquidity coverage ratio (LCR). Together these results leave the existing stable senior-credit direction intact, while not eliminating seasoning, funding and margin risk. Government support remains an expectation rather than a verified guarantee of any bond; capital instruments have distinct loss-absorption risks.

Earnings: A Strong Quarter with a Volatile Component

Net interest income (NII) was INR13,026 crore, up 9.0% year on year, and operating profit rose 50.9% to INR11,430 crore. Non-interest income almost doubled to INR6,881 crore, including INR4,093 crore of treasury income versus INR1,086 crore a year earlier. Investment sale gains and investment revaluation contributed INR1,824 crore and INR1,907 crore respectively in Q2. Such market-sensitive gains can reverse or prove less repeatable; they do not establish a comparable improvement in underlying spread income. H1 net profit fell 16.5% year on year to INR7,810 crore, reflecting the prior quarter's disclosed settlement charge as well as this quarter's results.

Global NIM declined 22bp year on year to 2.74%; domestic NIM fell to 2.89% from 3.10%. The global cost of deposits rose to 4.71% from 4.66% in Q1, while the global yield on advances rose to 7.41% from 7.37%. Lending growth supported NII, but the net margin remains below both Q1 and the prior-year quarter. The ability to reprice assets against funding costs matters more to credit than the headline profit increase alone.

Metric Q2 / 30 September 2026 Prior comparison and credit meaning
Net profit / NII INR6,532 crore / INR13,026 crore Q1 profit INR1,278 crore included a settlement; Q2 also benefited from treasury income.
Global NIM / domestic CASA ratio 2.74% / 36.37% Q1 2.77% / 37.72%; lower-cost funding mix and margin remain pressured.
GNPA / NNPA 1.78% / 0.37% Q1 1.99% / 0.50%; recoveries, upgrades and write-offs all affect the movement.
Standalone CET1 / CRAR 14.20% / 16.61% Q1 13.90% / 16.30%; both improved at the reporting date.
Quarterly-average standalone LCR Approximately 133.6% The bank-reported average is a liquidity buffer, not a currency-level maturity ladder.

Funding and the Quality of Growth

Global advances grew 18.3% year on year to INR15,12,448 crore, while deposits grew 16.4% to INR17,45,435 crore. Domestic deposits rose 16.6%, but domestic current and savings accounts (CASA) grew only 10.4%, reducing their share of domestic deposits to 36.37% from 38.42% a year ago. Domestic bulk deposits including certificates of deposit stood at INR2,95,974 crore, below June's INR3,01,473 crore but above the previous September's INR2,58,388 crore. This mix places continuing attention on pricing and depositor retention even while aggregate deposits have grown.

International gross advances increased 39.7% year on year to INR3,24,504 crore; international deposits were INR2,61,915 crore. The presentation says international advances include INR60,527 crore of self-leverage on the bank's Legend FCNR(B) deposits, and domestic FCNR(B) deposits include INR77,270 crore under that product. The growth figures should therefore not be treated wholly as independent third-party international loan demand. The presentation does not provide a currency-by-currency contractual maturity ladder or establish the liquidity availability of each product; the difference between these two international aggregates is not itself a measured foreign-currency funding gap.

Asset Quality, Capital and Bondholder Implications

Global fresh slippages declined to INR2,392 crore from INR3,183 crore in Q1. Domestic MSME, agriculture and retail contributed INR839 crore, INR840 crore and INR676 crore respectively. The improvement in the headline NPA stock also reflected INR1,840 crore of write-offs as well as recoveries and upgrades. Provision coverage was 79.48% excluding technical write-offs, compared with 94.65% including them; these are different measures and should not be conflated. Credit cost increased to 0.55% from 0.29% in Q1. The reported GNPA ratio for personal loans excluding pooled purchases was 4.88%, a reminder to monitor the composition and seasoning of the retail book even though the overall NPA ratios improved.

Standalone CET1 increased from 13.90% at June to 14.20%, and total capital adequacy from 16.30% to 16.61%. The bank reported an approximately 133.6% quarterly-average standalone LCR. These measures provide a meaningful reported buffer at this observation point but cannot alone establish capital resilience through a stress cycle or demonstrate currency-specific liquidity. Senior-credit support still rests on the deposit franchise and potential government support in addition to standalone capacity. The bank's 63.97% government ownership is not proof of an explicit sovereign guarantee for a specific security.

The results directly update the funding mix, NIM, sectoral slippage and capital questions in the 30 May additional discussion. They do not establish the discussion's hypothesis about future bond-spread reactions. For AT1 and Tier 2 investors, capital ratios do not remove contractual and regulatory loss absorption, non-viability and call risks; coupon cancellation is primarily an AT1 concern. Individual security terms and current pricing were not reviewed.

What to Watch Next

Monitor whether CASA mix and NIM stabilise, whether FCNR-related growth persists and how it is funded by currency and maturity, and whether loan seasoning changes slippages, credit cost or CET1. Review detailed Basel III and LCR data, currency-specific asset and liability maturities, individual instrument terms and spreads when available. The detailed Q2 financial-results and press-release PDFs linked on the bank's page timed out during this review; the bank's analyst presentation and NSE standalone iXBRL were directly accessible. The detailed auditors' report and its conclusion were not independently reviewed.

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