Bank of Baroda share price target

BOBs domestic business has witnessed considerable weakness over the last couple of years. Its FY15 annual report suggests that risks have only increased. We cut earnings by 9/4% for FY16/17E respectively as we raise our slippages (and hence) provisioning assumptions.

BOBs core & net earnings were below estimates by 7/33% with slower loan growth & higher provisions. However, stable asset quality (with controlled slippages) and improved PCR (65%) was a positive surprise, especially given that a sharp deterioration was reported by one of its peers.

Though BoB's Q4FY15 results were below estimates as the earnings declined by 48% YoY (79% QoQ growth on lower base) to Rs 6 bn, asset quality improved as GNPA and NNPA declined sequentially to 3.72% and 1.89% respectively.

against expectation ofRs33.7bn/Rs7.5bn.The underperformance in NII was due to16bps qoqdeclineindomesticNIMsto2.76%andmoderategrowthof7.2%indomesticadvances. MoreoverwithsignificantlyhigherprovisionsatRs18.2,netprofitcameinloweratRs6.0bn....

Advances growth likely to remain sluggish: Pipeline for corporate advances growth has been absolutely exhausted. Bank is not witnessing any fresh inquiries for Greenfield projects as well as expansion of current facilities. Retail (12.4%) and SME (15.1%) advances continue to be the key driver for the advances growth.

BOB reported a weak set of numbers led by a sharp deterioration in asset quality. G/NNPA spiked 18/24% QoQ driven by the highest ever quarterly slippages of Rs 30bn (3.1% ann.) & restructuring of Rs 16bn.

Conservative & Cautious approach to loan disbursement Bank of Baroda's (BOB) five year CAGR in advances stands at 25% from FY08 to FY13. However, in FY13, the advances...