Bank of Baroda Q2 preview: Shares of Bank of Baroda fell 1.5 per cent to Rs 104.75 apiece on the BSE in Wednesday’s intra-day trade ahead of the company’s July-September quarter (Q2FY22) results, due later in the day.
At 10:02 AM, the shares of the state-owned lender were trading 0.7 per cent lower at Rs 105.6 per share as compared to a 0.6 per cent fall in the BSE Sensex index. The BSE Bankex index, meanwhile, was down around 1 per cent.
Analysts largely expect the lender's Q2 performance to be remain muted amid meagre loan book expansion, elevated slippages, and margin contraction.
Movement in stressed asset pool, management commentary around collections, restructuring pool, behavior of ECLGS loans, and credit demand will be key monitorables, they say.
Here's what leading brokerages forecast:
The Japan-based brokerage expects the lender’s loan book to expand only 0.2 per cent on a year-on-year (YoY) basis at Rs 671,500 crore compared with Rs 669,900 crore reported in Q2FY21. Sequentially, too, the growth is pegged at 0.5 per cent at Rs 668,400 crore.
"We factor in 15 basis points QoQ margin contraction at 2.89 per cent, leading to net interest income (NII) growth of 0.4 per cent YoY (-4.5 per cent QoQ) at Rs 7,538.5 crore," the brokerage said in a results expectation report.
NII was Rs 7,507.5 crore in the year-ago quarter and Rs 7,819.7 crore in Q1FY22.
Further, the operating profit is projected to fall 10 per cent YoY and around 13 per cent QoQ at Rs 4,987.8 crore.
"We expect pre-provision operating profit (PPOP) to decline by 12.6 per cent QoQ on the back of additional provisioning towards increased family obligation, which may result in higher employee overheads. We are building in provisioning cost of 162bp," it said.
This global brokerage has one of the most bullish projections for the bank. Loan book, for instance, is pegged at Rs 688,400 crore, up 8 per cent YoY and 2 per cent QoQ.
This would also lead to NII growth of around 9 per cent YoY and 3.3 per cent sequentially at Rs 8,154 crore.
"At the bottomline, we expect net profit to rise 9 per cent on year and over 51 per cent QoQ at Rs 1,831.5 crore, supported by stable operating profit of Rs 5,599.2 crore," it said.
PAT was Rs 1,678.6 crore in the corresponding quarter of the previous fiscal, and Rs 1,208.6 crore in Q1FY21. Similarly, operating profit was Rs 5,551.8 crore and Rs 5,707.4 crore during the respective quarters.
Analysts at the brokerage expect the lender’s net profit to fall as much as 35 per cent YoY (9.3 per cent QoQ) at Rs 1,096.7 crore, dragged by higher provisions.
They forecast a 35.6 per cent YoY rise in loan-loss provisions at Rs 4,071 crore, up from Rs 3,001.6 crore in Q2FY21. Sequentially, however, it would be a decline of 1 per cent from Rs 4,112 crore.
"Slippages are expected to remain under control but Agri/SME slippages need to be tracked," they said in their earnings preview report.
Motilal Oswal Financial Services
According to the brokerage’s expectations, elevated credit costs could keep earnings under pressure while operating expenses’ trajectory, given the rise in pension costs, will be eyed.
That apart, slippages may also stay elevated, keeping asset quality under pressure. In absolute terms, the gross non-performing asset (GNPA) ratio is pegged at 8.6 per cent for the quarter, compared with 8.9 per cent QoQ and 9.1 per cent YoY.
NNPA, meanwhile, is seen at 2.9 per cent relative to 3 per cent QoQ and 2.5 per cent YoY.
Overall, the net profit is projected to fall 42 per cent YoY at Rs 980 crore while operating profit is seen declining around 4 per cent on year at Rs 5,350 crore.
The brokerage expects overall growth to remain subdued; however, cash recovery of Rs 320 crore from DHFL should provide support earnings.
Slippages, it says, in SME/Retail and Mid-corporate book could remain high.