What we are seeing ‘Face off’ situation in the banking sector today, was ‘work in progress’ from last at least 3 -5 years. We haven’t seen many PSU banks qualifying our investment grade business from last four years.

Bank of Baroda reported its full year results last week and suddenly investors see ugly face of banking sector in India. In our opinion, it will get worse every quarter from here on until March 2017 quarter, which RBI has kept strict deadline for banks to clean up their Balance sheet.

The bank report its total income grew by 3% compare to last year. Operating profits before provisions and contingencies plunged down by 13.30%. Same time provision and contingency rose sharply by 205% to Rs 15,953.97 crore. The bank reported full year losses for the 2016 of Rs 5,053.08 crore.

The gross NPA’s of the bank stand at Rs 40,521.04 crore representing 10% of its loan book and net NPA’s stand at Rs 19,406.46 crore. The deposits in the bank also fell down by 7% compare to last year putting pressure on its cost of funds. Same time Advances had also plunged down by 10% compare to last year.

Many analyst and investors are expecting this bank will come back in positive and report marginal profits for the 2017 financial year, but we are of the different opinion and still sceptical of this business earnings to come back in positive. We still see bank will face further more NPA’s pain and will also need fresh capital to turnaround their business into profits.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.