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Bank of Baroda nears 52-wk high, up 3%; regains Rs 1 trillion m-cap

Analysts at ICICI Securities believe the bank will report credit growth in line with industry growth coupled with healthy margins and steady asset quality and, thus, aid RoA of around 1 per cent.

Bank of Baroda

SI Reporter Mumbai

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Shares of Bank of Baroda were up 3 per cent at Rs 194.25 on the BSE in Monday’s intra-day trade amid heavy volumes. In past two days, the stock of state-owned lender rallied 6 per cent, and now quotes closer to its 52-week high level of Rs 197.20, touched on December 9, 2022.

The average trading volumes at the counter more-than-doubled today, with a combined 18.7 million shares changing hands on the NSE and BSE till 11:49 AM. In comparison, the S&P BSE Sensex was down 0.31 per cent at 61,191. Following the recent gains, the stock has been ablve to regain the Rs 1 trillion market capitalisation (m-cap), the BSE data shows. Thus far in the calendar year 2023, the stock has gained 4 per cent, against 3.3 per cent rise in the benchmark index.

With net non-performing asset (net NPA) ratio below 1 per cent and provisions for written off assets around 92 per cent, Sanjiv Chadha, managing director (MD) & chief executive officer (CEO), Bank of Baroda, excepts the bank to be in a better position to make the transition to the expected credit loss (ECL) framework. CLICK HERE FOR FULL REPORT.

Meanwhile, key brokerages have raised their target prices on Bank of Baroda after the state-owned lender posted better-than-expected March quarter (Q4FY23) results.

Analysts see up to 29 per cent upside in the stock from a one-year perspective as they believe Bank of Baroda is well-placed among the large public banks with nearly all key business metrics moving closer to the top-tier banks. Valuations, too, remain attractive despite steady strong quarterly performances.

Bank of Baroda continues to demonstrate robust growth in business and earnings led by improvement in NIMs and lower credit cost. Analysts at ICICI Securities believe the bank will report credit growth in line with industry growth coupled with healthy margins and steady asset quality and, thus, aid RoA of around 1 per cent.

According to analysts at Prabhudas Lilladher, ECL impact could be 1-1.5 per cent of loans and bank would like to keep credit costs under 1 per cent including ECL effect. Bank expects loan growth of 13-14 per cent in FY24E and retail share could improve. Momentum in unsecured loans should continue given its low share (2 per cent).

“NIM for FY23 was 3.3 per cent and while we factor a 12bps decline in FY24 margins, there is scope for an upgrade as 1) retail share could increase 2) MCLR share is higher at 50 per cent and 3) fixed rate loans would reprice upwards in FY24E. Valuation at 0.9x is attractive; maintaining multiple at 1.2x we roll forward to March 2025,” the brokerage firm said in result update.

“We like Bank of Baroda among PSBs due to its strong growth/returns profile with low risk of dilution, given healthy capital ratios (CET 1 ratio at 12.2 per cent). The current MD’s (Mr. Sanjiv Chadha) term is set to expire by July 2023, after which Mr. Debadatta Chand (ED) is set to take over the leading role in the bank, ensuring a smooth transition,” analysts at Emkay Global Financial Services said. 


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First Published: Jun 19 2023 | 12:24 PM IST

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