This PSU Bank Stock Surges 44% in a Year Amidst A Weak Market; Do you Own?

Bank of Baroda Shares: BoB stock has returned 43.60 per cent in the last one year. On 5 August 2021, shares of Bank of Baroda were trading at Rs 82.45. Experts are still bullish on Bank of Baroda’s stock. They think it can go up to Rs 147 in a year’s time.  

The bank reported a 79.3 per cent year-on-year (YoY) growth in its net profit at Rs 2,168 crore in the quarter ended June (Q1FY23) on the back of a dip in provisions for bad loans.

The Mumbai-based public sector lender had posted a net profit of Rs 1,209 crore during the same period last year (Q1FY22). The bank’s stock had closed 0.81 per cent lower at Rs 116.25 per share on BSE on Friday.

Its net interest income (NII) was up 12 per cent in Q1FY23 to Rs 8,838 crore from Rs 7,982 crore in Q1FY22. Its net interest margin (NIM) moderated to 3.02 per cent in Q1FY23 from 3.04 per cent a year ago. It also fell from 3.08 per cent in March 2022.

Sanjiv Chadha, managing director and chief executive, said the bank expects to improve NIMs by 10 basis points in FY23.

BoB’s non-interest income fell sharply to Rs 1,182 crore in Q1FY23, from Rs 2,863 crore in Q1FY22. Its treasury revenues, which have a significant share in other income, were hit due to the hardening of bond yields. It booked mark-to-market (MTM) losses on the bond portfolio.

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The bank’s asset quality profile improved with gross non-performing assets (GNPAs) at 6.26 per cent till June 2022 from 8.86 per cent in the year-ago quarter. Net NPAs, too, dipped to 1.58 per cent in June 2022 from 3.03 per cent a year ago.

Analysts at ICICI Securities believe that the bottom of NPA issue will lower credit costs. “Gradual pick-up in corporate book coupled with healthy offtake in retail segment to lift overall growth trajectory. While the faster repricing of loans in a rising rate scenario aids margin trajectory. We expect return ratios to improve, thereby, aiding valuations,” the brokerage firm said.

Emkay Global has a buy call on Bank of Baroda with a target price of Rs 140. The current market price of the Bank of Baroda is Rs 121.7. The time period given by analyst is one year when the Bank of Baroda price can reach the defined target.

BoB remains well-capitalized among large PSBs, with CET-1 ratio >11 per cent post QIP and, thus, does not pose any risk of dilution. It has revised our earnings estimates for FY24/25E by 1 per cent/3 per cent and rollover TP to 0.7x June’24E ABV, leading to revision in TP to Rs 140 (up from Rs130).

Bank of Baroda, incorporated in the year 1911, is a banking company (having a market cap of Rs 62,961.33 Crore).

For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 21,576.76 Crore, down -3.98  per cent from last quarter’s Total Income of Rs 22,470.46 Crore and up 1.04 per cent from last year same quarter Total Income of Rs 21355.53 Crore. The bank reported a net profit after tax of Rs 1939.56 Crore in the latest quarter.

The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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