Bank of Baroda share price target

BoB reported muted PAT of INR1.18b in 3QFY18 due to elevated provisioning expenses, even as revenue growth stood strong. NII stood atINR43.9b (+40% YoY), although other income declined 6% YoY, led by a 39%YoY decline in treasury gains. However, controlled opex (flat QoQ) enabled41% YoY growth in PPoP to INR36.5b (much ahead of our estimate), leading to a 443bp improvement in the cost-income ratio to ~40% NII growth was led by (i) continued traction in loan growth, (ii) 135bp QoQ improvement in domestic CASA mix to 40.6%, (iii) slower growth of 8% YoY in low-margin international business, and (iv) improvement in asset mix, led by 33% YoY growth in retail loans. BOB further benefitted from interest on income tax refund amounting to INR3.3b, adjusting for which,global/domestic NIM expanded 21/29bp QoQ

BOB reported improved operational performance with higher NII growth (9% y-o-y & q-o-q) and controlled opex (5% y-o-y & q-o-q) leading to PPOP growth of 13% y-o-y & 15% q-o-q. Loan book growth was 9% y-o-y & 3% q-o-q to INR 3.9tn on a lower base. Highlight for the quarter was lower slippages of INR 25.9bn vs. 37.6bn (average fresh slippages for last 5 quarters). Credit cost continued to be higher (30% y-o-y & -1.6% q-o-q) due to ageing provisions which resulted in a PAT of INR 3.6bn (-36% y-o-y & 75% q-o-q). We recommend a HOLD on the stock with a TP of INR 175 in 16 months, implying...

BOB's asset quality improved marginally as fresh slippages declined by 41% QoQ. Hence, Gross/Net non-performing assets (NPA) improved by 24/12 bps sequentially to 11.2%/5.1%. Provision coverage ratio also (PCR) improved by 90 bps QoQ to 67.2% as the bank continues to make provisions judiciously. The Bank has total exposure to the tune of Rs77bn towards first list of loan accounts referred to IBC/NCLT. Notably, all these loans have already been classified as NPAs and currently the Bank holds PCR of ~54% for these accounts. We believe that some green shoots are visible and expect asset quality to improve gradually from hereon. We project...

BOB's asset quality improved marginally as fresh slippages declined by 41% QoQ. Hence, Gross/Net non-performing assets (NPA) improved by 24/12 bps sequentially to 11.2%/5.1%. Provision coverage ratio also (PCR) improved by 90 bps QoQ to 67.2% as the bank continues to make provisions judiciously. The Bank has total exposure to the tune of Rs77bn towards first list of loan accounts referred to IBC/NCLT. Notably, all these loans have already been classified as NPAs and currently the Bank holds PCR of ~54% for these accounts. We believe that some green shoots are visible and expect asset quality to improve gradually from hereon. We project...

Q2FY18 PAT at Rs 3.6 bn (down 36% YoY) was way below the Street and our estimates on higher than expected provisions. Asset quality improved, as fresh slippages declined 41% QoQ to Rs 26 bn

Analysis of stressed assets clearly suggests that the Bank is approaching the end of recognition of stressed loan cycle, which along with higher PCR clearly indicates sharp moderation in credit cost from FY19 onwards. Further, recently-announced mega recapitalisation scheme is a longterm positive for the Public Sector Banks in general. The Bank's new management is gradually reinstating confidence through major changes in operating structure, which may start yielding desired outcome. As we believe that improved outlook on asset quality and operating performance augur well for the Bank, we maintain our BUY recommendation on the stock...

Maintain BUY with a TP of Rs 202 (1.3x Sept-19 ABV of Rs 156) BOBs 2Q results signify managements focused approach on B/S healing, curtailing asset quality slip-ups and operational improvements. The uptick in growth (domestic loans +14% YoY), coupled with a decline in slippages (~3.61% vs 5.47% ann.), was a pleasant surprise. NIM improvement (2.31%, +20bps QoQ) propelled core earnings to an all-time high Reduction in net stress and sustained CASA traction were additional positives.

Bank of Baroda's (BoB) performance was healthy on the operational front. Loan growth & NIMs improved while asset quality was steady Asset quality was steady QoQ with GNPA ratio falling 24 bps QoQ to 11.16%. Absolute GNPA was largely flattish at | 46307 crore. Fresh slippages were at | 3451 crore vs. | 5200 crore in Q1FY18 The bank's operational performance was above estimates with PPP at | 3042 crore (up 13.1% YoY). However, higher-than-expected provisions led to profits being lower than estimate at | 355 crore....

Maintain BUY with a TP of Rs 206 (1.3x Sept-19ABV of Rs 159). Despite a couple of underwhelming quarters, we persist with our faith in BOB as the future seems bright. Our recent interaction with the BOB mgt indicates (1) Double-digit growth in the domestic book, led by Retail and Corp. segments, (2) Multiple tailwinds for NIM improvement, (3) Confidence on GNPA guidance for FY18E (Rs 465-475bn vs. Rs 462bn in 1QFY18), despite the slip in 1Q, (4) Lower exposures in RBIs 2nd NCLT list (18 a/cs amounting to Rs 45bn), (5) Conservative provisioning despite higher PCR of 66%, (6) Diminishing possibility of consolidation in FY18 due to timeline constraints (possible in FY19) and (7) A book accretive fund raise in the next few qtrs with visibility on growth.

Q1FY18 PAT at Rs 2.0 bn (down 52% YoY) was way below the street and our estimates. Asset quality was a key disappointment, as slippages rose ~30% QoQ at Rs 52 bn and remain elevated. Consequently, headline GNPA rose 94 bps QoQ at 11.4%.