Bank of Baroda gains on improved assets quality in Q2

The stock was up 4% to Rs 181 on the BSE in intra-day trade, recovering 7% from its early morning low of Rs 169.

Bank of Baroda was up 4% to Rs 181 on the BSE in intra-day trade after the state-owned lender reported improved operational performance and assets quality in September quarter (Q2FY18). The stock rebounded 7% from its early morning low of Rs 169.

Bank of Baroda reported 13% year on year (YoY) growth in its operating profit at Rs 3,042 crore during Q2FY18, driven by growth both in interest and fee income.

Net interest income for the quarter rose by 8.58% to Rs 3,720 crore from Rs 3,426 crore in the corresponding period of the previous year. Other income which includes fees and commissions rose by 11.2% to Rs 1,737 crore.

Domestic net interest margin during Q2FY18 has improved by 20 bps sequentially at 2.68% driven by reduction in cost of deposits & improvement in yield on advances, Bank of Baroda said in a statement.

Asset quality improved as gross non-performing assets (NPA) ratio and net NPA ratio stood at 11.16% and 5.05% on September 2017, against 11.35% and 5.46% respectively as on September 2016. Gross NPA and Net NPA stood at 11.40% and 5.17% as on June 2017.

Net profit during the quarter under review however declined 35.7% to Rs 355 crore against Rs 552 crore in a year ago quarter due to sharp rise in provisions and contingencies.

According to analysts at Edelweiss Securities, Q2FY18 performance is encouraging with respect to asset quality and growth; but, sustainability is key.

The brokerage firm maintains ‘buy’ rating on the stock with target price of Rs 243. Analysts believe, the government’s mega recap plan will address asset quality swings & encourage lending.

At 10:55 AM; the stock was up 2.5% at Rs 179, as compared to 0.28% decline in the S&P BSE Sensex. A combined 27.31 million shares changed hands on the counter on the BSE and NSE so far.