Bank of Baroda share price target

NII growth came in at 10% YoY aided by 19 bps QoQ expansion in margins to 2.81%. Other income witnessed robust surge of 41% YoY largely due to multi-fold increase in trading income at | 905 crore & recovery while core fee income remained muted. Accordingly, operating profit was at | 5336 crore, up 23% YoY. Provisions remain elevated at | 4209 crore led by higher fresh slippages leading to PAT of | 737 crore vs. our estimate of | 933 crore. Asset quality continued to remain steady QoQ with GNPA & NNPA ratio at 10.25% & 3.91%, respectively. Absolute GNPA was at | 69969 crore, flat...

While asset quality deteriorated marginally with GNPA ratio increasing ~26 bps QoQ to 10.28%, GNPA, on absolute basis, remained stable at | 69714 crore on the back of a reduction largely equal to slippages. Slippages were at | 5583 crore, down 15% QoQ. Post higher provisioning for legacy stress, provisions on NPA declined 11% YoY & 70%QoQ. Accordingly, provision coverage continue to remain stable at 77.34%. Exposure in accounts under NCLT 1 and NCLT 2 were at | 5820 crore and | 6957 crore with healthy coverage at 97.42% and 84.86%, respectively....

On merged basis BoB has Rs1.06tn of exposure to NBFCs which is at 15% of loans and is extremely high and accounts for some stress as well BOB's earnings saw marginal miss with our estimates at Rs7.1bn (PLe: Rs8.7bn) mainly from lower other income & higher opex from the merger. Provisions though remains elevated on continued slippages was largely in line with expectations. Slippages came in higher with corporate slippages at Rs15.0bn from Rs55.8bn was from the watchlist. But the watch-list has...

Bank of Baroda (BoB) saw the first quarter where the merged entity reported results and the performance was modest in our view with Net interest income (NII) growth of 2.61% y-o-y and profit of Rs. 710 crore for Q1FY20 as against the loss of Rs. 49 crore in Q1FY19. The reported prior period numbers are not comparable with the present reported numbers. Hence, we have used the re-stated prior period numbers of P&L; for comparison. The merger has not only thrown up integration issues (as expected), but overhang on asset-quality...

1QFY20 PAT of INR7.1b (our est. INR6.9b), was helped by lower provisions and treasury gains of INR3.4b (+124% YoY). NII increased 3% YoY to INR64.9b (4.3% QoQ decline) affected by slower domestic loan growth. Global NIMs declined 13bp QoQ to 2.62% while...

2 July 2019 opening balance sheet of the merged entity, reserves of Dena Bank/Vijaya Bank have been marked down by ~86%/~24%, largely due to higher provisions created on NPLs and harmonization of accounting policies. Further, the CET- 1/Tier-1 ratio of the combined entity stood at 8.6%/9.7%, indicating the need for a capital raise in the near future. Post the merger with Vijaya Bank and Dena Bank, BOB has become the third largest bank in the country in terms of advances. The loan/deposit market share of the merged entity stands at 6.7%/7.3% v/s 4.8%/5.1% pre-merger. According to the latest available data, retail/Agri/MSME/wholesale book constitutes ~24%/13%/13%/47% of the combined loan book (Exhibit 4). Also, on the liability side, CASA ratio for the merged entity has declined by ~327bp to 37% as against ~40% for BoB in 4QFY19 (Exhibit 5). The combined entity will have branch/employee strength of ~9, 491/84,064, an increase of 71%/51% over FY19 levels.

Asset quality witnessed a significant improvement with 9.3% QoQ reduction in GNPA to | 48233 crore, led by higher write-off of | 6750 crore. Slippages were sequentially stable at | 3192 crore with majority of pain recognised during the quarter. Utilising recent capital infusion by the government, the bank parked higher provisions at | 5550 crore, including ~| 1000 crore related to accounting for NPA accounts, ~| 1800 crore in lieu of legacy corporate exposure in telecom sector. Excluding these, provision on a normalised level was at ~| 2600 crore. Provision coverage increased to...

Domestic loan growth came in at 14.2% YoY to INR3.7t, led by retail loans (+24.2% YoY). Within retail, home/auto loan growth was at 22.1%/49.4% YoY, whereas SME loan growth was muted at 7.2% YoY. Total deposits grew by 8.0% YoY to INR6.4t, taking the domestic CD ratio to 71.5%. Domestic CASA ratio improved by 26bp QoQ to 40.2%. Fresh slippages inched up to INR31.9b, of which INR5.3b was due to the IL&FS; Group, leading to an annualized slippage ratio of 3.3%. Write-offs for the quarter came in at INR67.5b, leading to a decline of 140bp/ 93bp QoQ in...

Asset quality improved sequentially as slippages declined to 3.2% of loans in Q3FY19 as compared to 3.9% in Q2FY19, of which 84% of the slippages were from the pre-disclosed watchlist. Consequently, Gross and Net non-performing asset (NPA) ratios improved by 77 and 60 bps QoQ to 11.0% and 4.3%, respectively. Notably, BOB has a total exposure of Rs4,680cr towards IL&FS;, of which Rs1,170cr slipped during the quarter and the residual continues to remain standard. Further, BOB has an exposure of Rs23,654cr to NCLT accounts with PCR of 73%. Going forward, we believe that asset quality will improve as the incremental loan addition is with...