BoB targets 40% growth overseas

To deploy Rs 25,000 crore, open 10 offices this year

MUMBAI: Bank of Baroda has decided to focus on its international operations in a big way. While it currently gets 20% of its business from international operations, the bank has decided to deploy 40% of its total resources there.

"We are projecting a growth of 35-40% from international operations. In order to achieve this, we have decided to deploy Rs 25,000 crore this year as against Rs 17,000 crore in 2006-07," said V Santhanaraman, executive director, Bank of Baroda. In March 2006, total credit advances to overseas operations stood at Rs 10,000 crore.

Bank of Baroda plans to open 10 offices abroad during the year. "By March 2008, we'll we have 71 offices abroad, in 25 countries," said Anil K Khandelwal, chairman & managing director with Bank of Baroda.

The bank has a strong presence in east Africa, where it also plans to acquire a bank. "We will acquire a mid-sized bank having 10-20 branches in East Africa," Khandelwal had said last month.

By 2009, the bank will open branches in New Zealand, Canada and Australia. "We'll open the Canada branch by June 2008 if we get the license soon," Khandelwal said.

Incremental growth in branches overseas has been 69-70% this year. Right now, the total operations overseas has a smaller base.

"As we are expanding our operations globally, we will need fresh capital of at least Rs 3,000 crore over the next two years," said a senior official of the bank.

However, Rajeev Varma and Veekesh Gandhi, analysts of Merrill Lynch are concerned about the margin pressure the bank will face if it focuses on overseas loans.

"Although we are somewhat concerned about impending margin pressure (if the focus is on overseas loans), BoB is also aggressively looking to re-balance its loan portfolio towards high-yielding segments and rundown high cost bulk deposits (20% of total) over the next 3-6 months. Further, it is targeting raising CASA levels. Hence, we think margins could sustain at 3%," they said in a report.

Bank of Baroda is aiming a business volume of Rs 3, 00,000 crore by 2010 as against a business volume of Rs 2, 09,000 crore in March 2007.

Today the bank gets 16% of business from the SME division (16%) and 15% from its retail operations.

This year the bank has decided to re-balance its credit portfolio by offering small and medium enterprises (SMEs) 15% credit.

The bank's net NPAs have slid from 0.92% as on June 2006 to 0.67% as on June 2007, Khandelwal is confident that they'll bring down their NPAs below 0.50% during the year with their speedy recovery process.  "We propose to sell Rs 500-600 crore of our NPAs in the second quarter. We are in discussions with various companies for the same. Moreover, real estate exposure of BOB has been one of the minimum in the industry," Khandelwal said.

At the same time, the bank expects CASA deposits to stay at 38%.