Bank of Baroda Standing Tall in Tough Times

Bank of Baroda Standing Tall in Tough Times Performance Analysis: Q 1, 2011 -12 (FY 12) Dr Rupa Rege Nitsure Chief Economist July 27, 2011

Bank of Baroda: Key Strengths § Bank of Baroda is a 103 years old State-owned Bank with modern & contemporary personality, offering banking products and services to Large industrial, SME, retail & agricultural customers across the country. Uninterrupted Record in Profit-making and Dividend Payment Overseas Business Operations extend across 25 countries through 86 Offices Strong Domestic Presence through 3, 409 Branches Pioneer in many Customer-Centric Initiatives Provides Financial Services to over 40. 5 mln Customers Globally First PSB to receive Corporate Governance Rating (CGR-2) A well-accepted & recognised Brand in Indian banking industry Modern & Contemporary Personality Relatively Strong Presence in Progressive States like Gujarat & Maharashtra Robust Technology Platform with 100% CBS in Indian Branches

Domestic Branch Network • Bank’s network of domestic branches as on 30 th June, 2011 was 3, 409 & no. of ATMs were 1, 657. • During Q 1, FY 12, the Bank opened 45 new branches. • In FY 12, the Bank plans to open 269 branches in Tier-1 & Tier-2 centres and 253 branches in Tier-3 to Tier-6 centres. • Also, 126 branches under the Branch Expansion Plan of FY 11 are yet to be opened. Regional Break-up of Domestic Branches as on 30 th June, 2011 Metro Urban Semi. Urban Rural 756 639 842 1, 172 • Newly opened branches in Q 1, FY 12 are mainly in Maharashtra followed by Gujarat, M. P. & A. P. • Around 34. 4% of the Bank’s network at the end-June, FY 12 was situated in rural areas.

Robust Technology Platform • As on 30 th June 2011, the Bank’s entire domestic, overseas and RRBs [i. e. , five sponsored RRBs] related operations were on the CBS platform. • Even the branches of Memon Co-op. Bk. Ltd. taken over by the Bank in April’ 11 are successfully migrated to the CBS platform. • Bank has developed IT facilities for online/offline account opening through Business Correspondents under Financial Inclusion. • Bank’s retail & corporate customers enjoy several facilities under its Internet Banking delivery channel such as fund transfers to self & third party (within Bo. B); online payment of bills & taxes, rail-ticket booking, temple donations, online subscription to IPOs/FPOs thru’ ASBA & institutional fee payment. • Bank has implemented Internet Banking in several of its overseas territories & a Special Fund Mgmt Solution in UAE & New Zealand. • Bank has built a State-of-the-Art Data Centre conforming to Uptime Institute Tier-3 standard & a Disaster Recovery Site in different seismic zones to ensure uninterrupted banking services delivery to customers. • Bank’s Mobile Banking (Baroda M-Connect) provides various facilities to its customers like balance-enquiry, mini-statements, linking of multiple accounts, funds’ transfer, bill payments, ticket booking, shopping, feedback facilities, etc. • Anti Money Laundering (AML) has been implemented in India and 20 overseas territories.

Robust Technology Platform • Bank has successfully implemented an Integrated Global Treasury Solution in its major territories like U. K. , UAE, Bahamas, Bahrain, Hong Kong, Singapore, Belgium, USA and India to achieve reduced cost of operations & better fund mgmt. • Enterprise-wide General Ledger (EWGL) has been successfully implemented for the Bank’s domestic and overseas business. • Bank has introduced the facility of Multiple Accounts being linked to a single Debit Card (verified by Visa, CVV 2) and also Mobile Number registration thru’ ATMs in CBS for SMS Alerts. • E-tax payments thru’ ATMs are also facilitated and Mobile ATMs are introduced in Ahmedabad, Pune, Lucknow & New Delhi. • Back Office functions have been centralised in the Bank at City Back Offices & five Regional Back Offices ( at Baroda, Jaipur, Lucknow, Bhopal & Coimbtore) to improve the delivery of services. • On a pilot basis, Automated Cheque Processing Centre (Inward & Outward) has been set up in Mumbai. • Bo. B IIT – an exclusive IT Training Centre has been set up in Ghandhinagar to educate the Bank’s staff in all IT related products & services.

Concentration (%): Domestic Branch Network

Pattern of Shareholding: 30 th June, 2011 As on 30 th June, 2011 • Share Capital: Rs 392. 81 crore • No. of Shares: 391. 55 million • Net worth: Rs 20, 785. 30 crore • B. V. per share: Rs 530. 85 • Return on Equity: 19. 88% • BOB is a Part of the following Indexes BSE 100, BSE 200, BSE 500 & Bankex Nifty Junior, Bank. Nifty, CNX 100, CNX 500 • BOB’s Share is listed on BSE and NSE in ‘Future and Options’ segment also.

Comparative Performance of Bo. B Stock: Jun’ 10 to Jun’ 11 Value (30 th June’ 10) Value (30 th June’ 11) % Change Sensex 17, 700. 90 18, 845. 87 6. 5% Nifty 5, 312. 50 5, 647. 40 6. 3% Bankex 10, 765. 03 12, 821. 05 19. 1% Bank. Nifty 9, 464. 60 11, 244. 65 18. 8% Bo. B-BSE 701. 95 871. 90 24. 2% Bo. B-NSE 701. 85 870. 80 24. 1% Index/Stock

India’s Macro Health: Q 1, FY 11 to Q 1, FY 12 Q 1, FY 11 Q 2, FY 11 Q 3, FY 11 Q 4, FY 11 Q 1, FY 12 Real GDP growth (%) 8. 8 8. 9 8. 2 7. 8 NA Agriculture (%) 2. 8 4. 4 8. 9 7. 5 NA Industry (%) 11. 4 9. 0 5. 7 5. 3 NA Services (%) 9. 4 9. 7 8. 6 NA Private Consumption Expenditure growth (%) (at current market prices) 26. 5 19. 5 18. 4 17. 0 NA Gross Fixed Capital Formation (% to GDP) (at current market prices) 29. 8 32. 4 27. 3 29. 6 NA SCB Credit growth (%, y-o-y) 21. 7 19. 0 24. 4 21. 4 19. 9 SCB Deposit growth (%, y-o-y) 14. 9 14. 3 16. 5 15. 8 18. 4 100. 85 93. 02 105. 13 97. 50 79. 61 WPI-Inflation (%) (end-period) 10. 6 9. 3 8. 9 9. 6 9. 4 Trade Balance ( US $ Billion) -32. 2 -35. 1 -21. 3 -21. 7 -31. 6 Rupee-USD (%, end-period) 46. 60 44. 92 44. 81 44. 65 44. 72 Foreign Exchange Reserves (endperiod, US $ Billion) 278. 27 294. 16 297. 33 305. 49 315. 72 Economic Indicator SCB Incremental Credit-Deposit Ratio (%)

Quick Economic Observations • Tempo of global economic recovery has slowed down on account of various factors like elevated prices of crude oil & other commodities, political tensions in Middle East, earthquake & tsunami in Japan, sovereign debt problems of Europe and fiscal fragility of the U. S. , etc. • Chronically high inflation pressures have started impacting adversely the investment sentiment and industrial production growth in India as well • Higher interest rates on term deposits have improved the pace of deposit mobilisation and reduced the gap between deposit and credit growth • While bank credit growth has decelerated to some extent, it is still above the indicative target of the RBI and has not shown a seasonal slack. • Rupee-USD Exchange Rate has shown a two-way movement • Equity markets remained sluggish, private placement market for bonds too was lacklustre during Q 1, FY 12 • Investments in physical assets improved & non-bank finance to commercial sector remained healthy • Notwithstanding the partial signs of growth slowdown, the RBI has warned of inflationary risks and hence continuation of the anti-inflationary stance with a close watch on new information

Bank’s Business Growth (Y-O-Y): Jun’ 06 to Jun’ 11

Bank’s Profitability: Jun’ 06 to Jun’ 11 • During the last five years, the Bank’s First Quarter Net Profit has grown at the robust CAGR of 44. 6%.

Bank’s Asset Quality: Jun’ 06 to Jun’ 11

Bank’s Business Performance: Jun’ 10 to Jun’ 11 Particular (Rs crore) Change Over Mar’ 11 (%) Jun’ 10 Mar’ 11 Jun’ 11 Y-O-Y (%) Global Business 4, 40, 262 5, 34, 116 5, 45, 283 23. 9 2. 1 Domestic Business 3, 31, 878 4, 02, 731 4, 05, 156 22. 1 0. 6 Overseas Business 1, 08, 384 1, 385 1, 40, 127 29. 3 6. 7 Global Deposits 2, 54, 668 3, 05, 439 3, 12, 943 22. 9 2. 5 Domestic Deposits 1, 96, 166 2, 33, 323 2, 36, 536 20. 6 1. 4 Overseas Deposits 58, 502 72, 116 76, 407 30. 6 6. 0 Global CASA Deposits 74, 784 87, 589 87, 221 16. 6 -0. 4 Domestic CASA 69, 114 80, 181 80, 225 16. 1 0. 05 Overseas CASA 5, 670 7, 407 6, 996 23. 4 -5. 5 • Share of Domestic CASA was at 33. 92% in terms of Aggregate Deposits and at 35. 90% in terms of Core Deposits as on 30 th June, 2011.

Bank’s Business Performance: Jun’ 10 to Jun’ 11 Particular (Rs crore) Change Over Mar’ 11 (%) Jun’ 10 Mar’ 11 Jun’ 11 Y-O-Y (%) Global advances (Net) 1, 85, 595 2, 28, 676 2, 340 25. 2 1. 6 Domestic Advances 1, 35, 712 1, 69, 408 1, 68, 621 24. 3 -0. 5 Overseas Advances 49, 882 59, 269 63, 719 27. 7 7. 5 Retail Credit Of which: 24, 994 32, 435 30, 934 23. 8 -4. 6 10, 779 12, 539 12, 910 19. 8 3. 0 SME Credit 21, 593 27, 365 28, 367 31. 4 3. 7% Farm Credit* 20, 475 24, 529 23, 211 13. 4 -5. 4% 11, 012 13, 245 13, 248 20. 3 0. 02% Home Loans Credit to Weaker Sections* * As of Last Reporting Friday

Bank’s Business Performance: Jun’ 10 to Jun’ 11 Y-O-Y (%) Change Over Dec’ 10 (%) 64, 454 65, 654 17. 1 1. 8 54, 769 62, 959 64, 162 17. 2 1. 9 Overseas Savings Deposits 1, 292 1, 495 1, 491 15. 4 -0. 3 Global Current Deposits 18, 723 23, 135 21, 567 15. 2 -6. 8 Domestic Current Deposits 14, 345 17, 222 16, 063 12. 0 -6. 7 4, 378 5, 912 5, 505 25. 7 -6. 9 Particular (Rs crore) Jun’ 10 Mar’ 11 Global Saving Deposits 56, 061 Domestic Savings Deposits Overseas Current Deposits

Bank’s Profits & NII: Apr-Jun, FY 11 & FY 12 Particular (Rs crore) Gross Profit Net Interest Income Apr-Jun’ 10 Apr-Jun’ 11 Y-O-Y (%) 1, 527. 87 1, 831. 28 19. 9 859. 16 1, 032. 85 20. 2 1, 857. 99 2, 297. 19 23. 6

Other Highlights: Q 1, FY 11 to Q 1, FY 12 Particular (in %) Q 1, FY 11 Q 2, FY 11 Q 3, FY 11 Q 4, FY 11 Q 1, FY 12 Global Cost of Deposits 4. 39 4. 50 4. 53 4. 79 5. 36 Domestic Cost of Deposits 5. 09 5. 27 5. 63 6. 41 Overseas Cost of Deposits 1. 95 2. 02 1. 94 1. 83 1. 80 Global Yield on Advances 8. 17 8. 40 8. 58 8. 74 9. 11 Domestic Yield on Advances 9. 79 10. 17 10. 34 10. 65 11. 23 Overseas Yield on Advances 3. 67 3. 75 3. 70 3. 54 3. 38

Other Highlights: Q 1, FY 11 to Q 1, FY 12 Particular (in %) Q 1, FY 11 Q 2, FY 11 Q 3, FY 11 Q 4, FY 11 Q 1, FY 12 Global Yield on Investment 6. 66 7. 06 7. 39 7. 45 7. 47 Domestic Yield on Investment 6. 83 7. 24 7. 56 7. 60 7. 59 Overseas Yield on Investment 3. 71 3. 85 4. 34 4. 86 Global NIM 2. 90 3. 02 3. 20 3. 45 2. 87 Domestic NIM 3. 43 3. 62 3. 82 4. 16 3. 39 Overseas NIM 1. 31 1. 33 1. 40 1. 41 1. 37

Key Financial Ratios : Q 1, FY 12 versus Q 1, FY 11 § Return on Average Assets at 1. 13% [ 1. 19% in Q 1, FY 11] § Earning per Share at Rs 105. 52 [Rs 94. 36 in Q 1, FY 11] § Book Value per Share at Rs 530. 85 [Rs 402. 08 in Q 1, FY 11] § Return on Equity (ROE) at 19. 88% [ 23. 46% in Q 1, FY 11] § Capital Adequacy Ratio at 13. 10% with Tier I Capital at 9. 06% • Cost-Income Ratio at 38. 11% [ 38. 27% in Q 1, FY 11] § Gross NPA ratio at 1. 46% -- is one of the lowest for large-sized banks in India § Net NPA ratio too low at 0. 44% § NPA Coverage at the healthy level of 82. 52% (including the technical write-offs) § Incremental Delinquency Ratio contained at 0. 25% for Q 1, FY 12; This means 1. 0% in annualised terms – the best level by the international standards.

Key Productivity Indicators Q 1, FY 12 versus Q 1, FY 11 Q 1, FY 12 Business per Employee (Rs crore) 10. 57 12. 65 Business per Branch (Rs crore) 129. 07 146. 97 Profit per Employee (Rs lakh) 2. 23 2. 57 Profit per Branch (Rs lakh) 27. 22 29. 83

Non-Interest Income: Q 1, FY 11 and Q 1, FY 12 Q 1, FY 11 Q 1, FY 12 % Change (Y-O-Y) Commission, Exchange, Brokerage 201. 54 274. 77 36. 3 Incidental Charges 77. 14 79. 55 3. 1 Other Miscellaneous Income 32. 89 43. 76 33. 0 Total Fee-Based Income 311. 57 398. 08 27. 8 Trading Gains 127. 94 74. 02 -42. 4 Profit on Exchange Transactions 121. 61 140. 01 15. 1 Recovery from PWO 56. 12 28. 76 -48. 7 Total Non-Interest Income 617. 25 640. 87 3. 8 (Rs crore)

Provisions & Contingencies: Q 1, FY 11 and Q 1, FY 12 (Rs crore) Q 1, FY 11 Q 1, FY 12 Absolute Change Provision for NPA & Bad Debts Written-off 277. 54 131. 95 -146 Provision for Depreciation on Investment -58. 91 138. 54 +197 Provision for Standard Advances 28. 81 112. 94 +84 Other Provisions (including Provision for staff welfare) 3. 89 7. 62 +4 Tax Provisions 417. 38 394. 37 -23 Total Provisions 668. 71 785. 42 +117

Bank’s Treasury Highlights: Q 1, FY 12 • Treasury Income stood at the level of Rs 214. 02 crore in Q 1, FY 12 • Out of this, Trading Gains Stood at Rs 74. 01 crore in Q 1, FY 12 despite the hardening of 31 bps in the benchmark yields on Go. I paper & lack-lustre equity markets. • As of June 30, 2011, the share of SLR Securities in Total Investment was 87. 95% • The Bank had 84. 5% of SLR Securities in HTM and 14. 8% in AFS at end-June 2011. • The per cent of SLR to NDTL as on 30 th June, 2011 was 25. 96%. • While the modified duration of AFS investments is 2. 50 years; that of HTM securities is 4. 90 years. • Total size of Bank’s Domestic Investment Book as on 30 th June, 2011 stood at Rs 79, 818 crore. • Total size of Bank’s Overseas Investment Book as on 30 th June, 2011 stood at Rs 3, 084 crore.

Overseas Business: Q 1, FY 12 • As on 30 th June, 2011, the “Overseas Business” contributed 25. 7% to the Bank’s Total Business, 19. 4% to its Gross Profit and 35. 5% to its Core Fee income. • While the Cost-Income Ratio for Domestic Operations stood at 41. 53% in Q 1, FY 12, it was more favourable at 18. 31% for the Bank’s Overseas Operations. • While the Gross NPA (%) in Domestic Operations stood at 1. 77% at end-June, 2011, that for Overseas Operations was lower at 0. 62%. • The Gross Profit to Avg. Working Funds (%) for Overseas Operations stood at 1. 40% in Q 1, FY 11 and at 1. 49% in Q 1, FY 12. • NIM as % of Interest Earnings Assets in Overseas Operations improved from 1. 31% in Q 1, FY 11 to 1. 37% in Q 1, FY 12. • Return on Equity in Overseas Operations too improved from 17. 55% in Q 1, FY 11 to 21. 44% in Q 1, FY 12.

NPA Movement (Gross): Q 1, FY 12 Particular A. Opening Balance ( Rs crore) 3, 152. 50 B. Additions during Q 1, FY 12 584. 82 Out of which, Fresh Slippages 566. 19 C. Reduction during Q 1, FY 12 311. 86 Recovery 125. 47 Upgradation 71. 48 PWO & WO 114. 91 Exchange Difference NPA as on 30 th June, 2011 Recovery in PWO in Q 1, FY 12 0. 00 3, 425. 46 28. 76

Sector-wise Gross NPAs: Q 1, FY 12 versus Q 1, FY 11 Sector Agriculture Large & Medium Industries Retail Housing SSI (Mfg) Total MSME Overseas Operations Gross NPA (%) Q 1, FY 11 Gross NPA (%) Q 1, FY 12 3. 43 4. 10 1. 69 1. 80 2. 41 2. 11 2. 41 1. 96 1. 73 1. 50 2. 91 2. 50 0. 54 0. 62

Cumulative Position of Restructured Assets (Domestic) • During the past 39 months (1 Apr’ 08 to 30 June’ 11), the Bank has restructured 74, 050 accounts amounting Rs 7, 166. 28 crore. • Within this, the loans worth Rs 454. 85 crore were restructured in Q 1, FY 12; Rs 1, 597. 81 crore were restructured in FY 11, Rs 2, 455. 05 crore in FY 10 & Rs 2, 658. 57 crore in FY 09. • For the period of 39 months, out of the total amount restructured, Rs 4, 089. 13 crore (57. 1%) belonged to wholesale banking, Rs 1, 710. 88 crore (23. 9%) to SMEs, Rs 583. 83 crore (8. 1%) to retail and Rs 782. 44 crore (10. 9%) to agriculture sector. • About 71 accounts (of Rs 1 crore & above) restructured on/after 1 st Apr, 2008 with aggregate outstanding of Rs 897. 88 crore slipped to NPA after restructuring and most of them belonged to the SME segment. • Industry-wise break-up shows that the Bank’s restructured accounts are well spread over different sectors, the major ones being iron & steel, cotton textiles, engineering, infrastructure, real estate, etc. • The Bank has primarily helped genuine borrowers who suffered from temporary cash flow problems due to the global crisis. These accounts are restructured looking into the internal strength and the financial viability of such borrowers.

Sectoral Deployment of Credit at end-June, 2011 Sector % share in Gross Domestic Credit Agriculture 13. 6 Retail 18. 1 SME 16. 6 Wholesale 37. 4 Misc. including Trade 14. 3 Total 100. 0%

Bank’s BPR Project - Navnirmaan • Project Navnirmaan has altogether 18 activities covering both BPR & Organisational Restructuring, aimed at transforming the Bank’s branches into a sales & service centres to make possible a sustained sales growth, superior customer experience and alternate channel migration. • The most important initiatives were • Conversion of all metro & urban branches into Baroda Next branches within a timeline [310 branches rolled out so far across five zones & 22 regions] • Creation of automated & leaner Back Offices like: • City Back Office (Automated cheque processing introduced in Mumbai on 17 Jan, 2011) • Regional Back Office [five more offices are being opened coupled with technology changes for faster account opening]. • Establishment of two Call Centres • Introduction of frontline automation at select branches for customer convenience • Creation of an Academy of excellence • Organisational Restructuring • The initial impact of Baroda Next migration has been found to be rewarding both in terms of increased customer satisfaction and CASA growth. • The said impact has been sustained at 110 Baroda Next branches recently evaluated on (a) sales and (b) customer satisfaction.

Bank’s HR Initiatives • Recruitment during FY 11 [Exercise Concluded] • Probationary Officers – 1, 200 • Specialist Officers (in various specialised disciplines) – 319 • Clerks – 2, 000 • Campus Recruitment – 608 • (Bank visited nearly 102 institutes including some of the premier Business schools of the country) • Recruitment proposed in FY 12 • Probationary Officers – 1, 200 • Campus Recruitment – around 600 [Currently in the process of joining] • Specialist officers (in various disciplines) – 200 • Clerks – 2, 000 • New Hires Planned for Recruitment in FY 12: 4, 000 • Bank introduced a massive Leadership Development Programme in Aug’ 10 under which 700 Senior Executives (AGMs/DGMs] have been rigorously trained so far. • Bank proposes to inaugurate Baroda-Manipal School of Banking in August’ 10 to create the future stream of professionally trained bankers for itself

Thank you.