Bank of Baroda Navigates Q2 FY26 with Strong Asset Quality and Strategic Growth

Bank of Baroda, a prominent Indian public sector bank, has released its performance analysis for Q2 FY26, showcasing a period of robust asset quality improvement and strategic growth in key segments. While the quarter saw a dip in operating and net profits compared to the previous year, largely due to the absence of one-off recoveries, the underlying performance indicators reflect a healthy trajectory for the bank.

For Q2 FY26, the bank reported a Net Profit of ₹4,809 crore. Although this represents an 8.2% year-on-year decrease, management highlighted that excluding a significant one-off recovery in Q2 FY25, the net profit would have grown by 22%. The Operating Profit for the quarter stood at ₹7,576 crore, a 20.1% decline year-on-year, primarily impacted by lower non-interest income. Total Interest Income grew by 4.1% year-on-year to ₹31,511 crore, driven by a 1.9% increase in interest on advances to ₹23,505 crore. However, Non-Interest Income saw a substantial 32.0% year-on-year decrease to ₹3,515 crore, mainly due to lower recovery from written-off accounts and treasury income.

Strategic Focus on RAM Advances and Asset Quality

A cornerstone of Bank of Baroda's strategy has been its unwavering focus on RAM (Retail, Agriculture, and MSME) advances. This quarter, the strategy continued to yield positive results, with Global Advances growing by 11.9% year-on-year to ₹12,78,847 crore. Domestic Advances increased by 11.5%, and International Advances by 13.8%. Within the RAM segments, the organic Retail book expanded by 17.6%, Agriculture by 17.4%, and organic MSME by 13.9%. This diversified growth helps de-risk the portfolio and ensures a broad-based expansion.

The bank's asset quality showed remarkable improvement, a key highlight of the quarter. The Gross NPA Ratio improved significantly by 34 basis points year-on-year to 2.16% in Q2 FY26. Similarly, the Net NPA Ratio saw a 3 basis points year-on-year improvement, reaching 0.57%. The Slippage Ratio reduced by 16 basis points year-on-year to 0.91%, and the Credit Cost remained low at 0.29%. These figures underscore the bank's prudent underwriting processes and effective recovery mechanisms. The Provision Coverage Ratio (including TWO) remained comfortable at 93.21%.

Financial Summary Table (INR Crore)

Prudent Management and Digital Transformation

Bank of Baroda's management emphasized its prudent liability management, which contributed to a sequential improvement in the Net Interest Margin (NIM) by 5 basis points to 2.96% in Q2 FY26. The domestic NIM stood at 3.10%. The bank's cost of deposits at 4.91% is one of the lowest in the industry, reflecting effective management of interest rate risk. The Capital Adequacy Ratio remained strong at 16.54%, with CET-1 at 13.36%, providing ample buffer for future growth.

Digital transformation remains a core strategic pillar. The bank continues to innovate and invest in its digital platforms, including 'bob World' and 'bob World Internet', to enhance customer experience and operational efficiency. Initiatives like 'Phygital branches' and the launch of new digital lending products across Retail, MSME, and Agri segments highlight this commitment. The bank also reported 96% of transactions done digitally and strong digital acquisition rates for new SHG, SA, and CA accounts.

Digital Sanctions (Value in Crore)

Sustainability and Future Outlook

Bank of Baroda is deeply committed to its ESG mandate, with initiatives like the Green Finance Framework, mobilization of Green Deposits, and the establishment of 'BOB Forest'. The bank also launched new products like 'bob MSE Spice' and 'bob Green Wheels' to promote a circular economy and electric vehicle adoption, respectively. These efforts align with the bank's target for Net Zero emissions by 2057 and its broader commitment to responsible growth.

Looking ahead, management provided guidance for full-year global advances growth of 11-13%, with Retail advances expected to grow 18-20% and Corporate advances 10-11%. The NIM is projected to be between 2.85-3% for the full year. Despite potential geopolitical headwinds, the bank maintains its slippage guidance at 1-1.25% and credit cost below 0.75%, demonstrating confidence in its robust business model and asset quality. The proactive creation of a floating provision further strengthens its preparedness for future regulatory changes.

Bank of Baroda's Q2 FY26 performance reflects a strategic clarity and disciplined execution, focusing on sustainable growth, enhanced asset quality, and digital leadership. The bank's commitment to ESG principles and prudent financial management positions it well for continued success in the evolving banking landscape.