Increased earnings in the first quarter of FY26, but not as much as expected, BoB stands at a net profit of ₹4541 crores
Bank of Baroda Reports Q1 FY26 Results: NIM Decreases, Other Income Surges
Bank of Baroda, one of India's leading public sector banks, has released its Q1 FY26 (2025) financial results, revealing a decrease in net interest margin (NIM) and net interest income (NII), but a significant increase in other income.
The NIM for Q1 FY26 stood at 2.91%, a decrease from 3.18% in Q1 FY25. This decline is primarily due to the ongoing realignment of asset and liability costs, with the cost of deposits taking more time to adjust, putting pressure on NII. NII for Q1 FY26 was ₹11,435 crore, a 1.4% year-on-year (y-o-y) decrease.
However, other income, including fees, commissions, treasury gains, and recovery in written-off accounts, jumped 88% y-o-y to ₹4,675 crore. This surge in other income has supported profit growth despite the compression in NIM and NII.
Debadatta Chand, the bank's Managing Director and CEO, has expressed that the transition in the bank's asset and liability composition is expected to complete over the next two quarters, implying continued pressure on NIM and NII in the near term. Chand also anticipates positive traction for NII and NIM from the third quarter onwards.
Regarding expectations for the upcoming quarters, the bank's management forecasts that NIM will remain under pressure and likely moderate further in subsequent quarters, with FY26 full-year NIM expected in the range of approximately 2.85% to 3.0%. The transition phase is expected to keep net interest income growth subdued or negative until asset-liability realignment concludes.
Despite the pressure on NIM and NII, the bank reported robust growth in both domestic and international advances. Retail, agriculture, and MSME sectors saw a robust growth in domestic advances at 17.5%, 16.2%, and 13.1% respectively. Global advances increased by 12.6% y-o-y to ₹12,07,056 crore. Domestic deposits rose 8.1% y-o-y, while international deposits increased by 14.8% y-o-y. Global deposits were up 9.1% y-o-y to ₹14,35,634 crore as at June-end 2025.
Corporate advances growth was relatively muted at 4.2% in the reported quarter. Treasury gains soared to ₹2,016 crore. Fresh slippages were higher at ₹3,476 crore in Q1FY26 compared to ₹2,873 crore in Q4FY25.
Bank of Baroda reported a muted growth in first quarter standalone net profit at ₹4,541 crore. The bank made a 40% provision towards an overseas account in the manufacturing sector (Bank's exposure: ₹500 crore), which became non-performing in Q1FY26. Provision for non-performing assets (NPA) & Bad Debts Written-off rose 33% y-o-y to ₹1,686 crore. However, the bank's Net Non-Performing Assets (NPA) position improved to 0.60% of net advances as at June-end 2025, compared to 0.69% as at June-end 2024. Similarly, the Gross Non-Performing Assets (GNPAs) position improved to 2.28% of gross advances as at June-end 2025, compared to 2.88% as at June-end 2024.
In summary, while NIM compressed, other income, including fee-based income, treasury income, and recovery in written-off accounts, rose significantly, supporting profit growth. The bank also reported robust deposit and loan growth both domestically and internationally despite the NIM pressure. The bank's management is cautiously optimistic about the bank's core interest income operations for FY26, with improvement expected as cost of funds and asset yields get realigned.
- The bank's strategic focus on fee-based income, treasury gains, and recoveries from written-off accounts is a part of its wider business strategy in the banking-and-insurance industry.
- The surge in other income sources, such as fees, commissions, and treasury gains, has demonstrated the bank's ability to adapt to the changes in the economy and agriculture markets.
- Despite the decline in NIM and NII, the bank's subscription-based services like loans to retail, agriculture, and MSME sectors have shown promising growth, contributing to the overall business.
- The bank's financial performance indicates a renewed focus on diverse revenue streams, moving beyond traditional interest income, leading to growth in the stocks and markets associated with the finance sector.
- The anticipated improvement in NIM and NII from the third quarter onwards, as per the bank's management, is expected to positively impact the overall business growth and strengthen the bank's position in the banking, business, and agriculture sectors.
