Our Bureau

Mumbai , Sept. 22

BANK of Baroda is expected to report a 10-15 per cent drop in its operating profits in the current fiscal, on account of lower treasury profits, Mr P.S. Shenoy, Chairman and Managing Director, said today.

This is despite an expected 18 per cent growth in credit this year after a flat growth in the past couple of years.

In fact, most banks in the country are likely to take a 15-20 per cent hit on their overall operating profits in the current year due to a fall in treasury profits, he said speaking to newspersons on the sidelines of a BoB Cards press conference here on Wednesday.

In the year ended March 2003-04, BoB had recorded an operating profit of around Rs 2,500 crore, while treasury income was close to Rs 950 crore.

Although the Reserve Bank of India had recently, as a one-time measure, allowed banks to shift a portion of their SLR securities to the held to maturity (HTM) category, Bank of Baroda may not exercise this option in the immediate future, he said.

According to analysts, with bond yields hardening, most bankers are unsure on whether the time is right to make the transfer.

As per the central bank's instructions, the transfer of securities must be done at the market price, which is much lower than the holding price of the securities in the portfolios of most banks.

"In the current scenario it does not make sense for banks to make the shift, as most of them will take a hit while doing so. This is something, which will benefit banks in the long run. In keeping with our view of interest rates for the future, BoB won't shift securities to the HTM category at the moment," he said.

Commenting on the interest rates outlook, he said, rates were expected to remain stable with a downward bias, in the next three months.

In order to enable the bank to meet the Basel-II requirements, BoB plans to hit the capital markets with a second public offer by January 2005.

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