Bank of Baroda share price target

26 May 2018 Bank of Baroda (BoB) reported a loss of INR31b v/s a profit of INR1.6b in 4QFY17, led by elevated opex (gratuity provisions and depreciation on revaluation of fixed assets) and provisions. Elevated NPL provisions (6.8% credit costs annualized) were on account of high slippages (12.3% annualized). PPoP came in at INR26.7b (-11.7% YoY), led by low other income (down 14.2% YoY due to weak treasury income) and high opex (up 25.5% QoQ) due to a rise in depreciation expense and gratuity provisions. NII growth came in at 12% YoY on the back of 12% YoY loan growth and 34bp YoY expansion in NIM to 2.51%. Interest income reversal for the quarter was INR1.7b (INR5.9b for FY18), and interest on income tax refund came in at INR1.

Bank of Baroda (BoB) is an Indian state-owned International banking and financial services company headquartered in Vadodara. It is the second largest bank in India, next to State Bank of India. BoB also has international presence, with 107 branches/offices in 24 countries including 61 branches/offices of the bank, 38 branches of its 8 subsidiaries and 1 representative office in Thailand. The deposits...

Strong improvement on all major operating metrics clearly suggests that Bank's organisational transformation effort is yielding the desired outcome. Further, 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. Recently-announced mega recapitalisation scheme is a long-term 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 front augur...

Maintain BUY with a TP of Rs 198 (1.3x Dec-19 ABV of Rs 152). BOBs robust comeback was blemished by yet another one-off telecom a/c slipping in 3QFY18. However, double digit growth in successive qtrs (+14% YoY), NIM uptick (after adjusting for IT refund) and restricted opex increase led to a large beat (~32%) in PPOP. High provisioning (3.21% of avg loans) on chunky slippages (~Rs 56.3bn, ~5.7% ann.) kept net earnings under pressure (down ~69% QoQ). Better treasury gains and lower MTM provisions (vs. peers) were pleasantly surprising.

ICICI Securities Ltd | Retail Equity Research BoB reported a strong operational performance. Asset growth & margins improved further. PAT was lower due to higher provisioning Operating earnings grew 40.6% YoY to | 3650 crore. This was led by NII traction of 40% YoY to | 4394 crore Higher-than-expected provisions of | 3427 crore led to profits being lower at | 112 crore. PCR improved 85 bps QoQ to 68.03% Credit traction improved further and was at 14.1% YoY to | 399380...

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