Bank of Baroda trades at a premium to its competitors and at 0.8 times book value for the fiscal year 25E. Nuvama Institutional Equities thinks that Bank of Baroda’s high value will stay the same because its earnings are higher than those of other PSU banks.
Bank of Baroda made more money than expected in the March quarter because it had a lot of other income and had to pay out less in expenses. Analysts said that business growth was strong and that the standard of assets was getting better, even though there were some controlled slips. Net interest income (NII) and margins were in line with forecasts.
Bank of Baroda shares are worth 0.8 times their book value in FY25E, which is more than other companies’ shares. Nuvama Institutional Equities thinks that Bank of Baroda’s high value will stay the same because its earnings are higher than those of other PSU banks. Based on 0.95 times BV for FY25E, the firm has raised its target price for the counter from Rs 195 to Rs 220.
“BOB has made more success than other state banks in using private bank practises and hiring people from the private sector. At 0.8 times BV FY25E, we think the risk-reward is good. In the last three quarters, the bank’s return on assets has been more than 1%. “If it can keep up this success, the stock price could probably go up to more than 1x,” it said.
JM Financial said that it thinks Bank of Baroda will have a RoA of 1% and a RoE of 16.2% by FY25. This will be due to strong loan growth, managed credit costs and opex, and low opex. It has a credit cost of 1.01 percent on average over FY24-25e. The firm thinks that the stock in Bank of Baroda is worth Rs 235.
The bank’s net profit for the March quarter was Rs 4,775 crore, up 168% from the same quarter last year, when it was only Rs 1,779 crore. Analysts were expecting a 140% increase in profits for the quarter. The company’s net interest income (NII) for the quarter went up by 33.8 percent year over year, from Rs 8,612 crore to Rs 11,525 crore. The bank in Vadodara said that their non-interest income went up by 37.4% from Rs. 2,522 crore to Rs. 3,466 crore.
The bank’s management thinks that the growth of retail loans will be 1.5 times the growth of all loans. It has said that loans will grow by 13–14% in FY24 and thinks that the margin will stay around 3.3% in FY24. In a normal cycle, the bank expects its return on equity in FY24 to be between 16 and 18%, its return on assets to be 1%, and its loan cost to be 1%.
“BOB had a good quarter because it made money thanks to good other income and lower reserves. The margin went up to 3.5%. At 5.6% QoQ, business growth was good, and strong traction across all sectors and an increase in CASA mix both helped. The quality of assets keeps getting better, and the net NPA is now at 0.9%. Motilal Oswal Securities said that a smaller SMA book and a controlled restructuring make them feel better about the quality of the assets. The firm has set a price goal for the stock of Rs 240.
Kotak Institutional Equities has kept its “Add” rating on the stock market, but has changed the fair value to Rs 200 from Rs 185. This puts the bank’s value at 0.9 times (adjusted) book and 7 times FY2025E EPS, which gives a return on equity of 14–15%.
The brokerage said that it has begun to set aside more money for the ECL move until there is more information.
“There is room for us to raise our earnings expectations because we are putting more pressure on NIM, which may not happen right away. From a pricing point of view, we think that Bank of Baroda will trade at a discount to SBI in this cycle,” the report said.
Nuvama said that the amount of money that Bank of Baroda owed to Go Air was Rs 1,300 crore and that BOB had Rs 1,000 crore in real security or promises. Still, it has set aside Rs 500 crore for this. In Q3FY24, this wasn’t SMA.