Buy shares of Bank of Baroda; target Rs 250: Emkay Global Financial.

Broker research report

06 Nov 2023 / 21:01 IST

Emkay Global Financial's research report on Bank of Baroda

Despite lower margins and higher provisions, Bank of Baroda (BoB) reported a slight 2% surplus in profit after tax (PAT) at Rs42.5 billion, driven by strong fees and recovery of amounts debited from accounts. Credit development remains stable at 19% y/y and 4% q/q and there was strong deposit growth at 15% y/y and 4% q/q. However, the home flow share of funds on account (CASA) fell to 40% this quarter. This, together with rising funding costs, continues to put pressure on the core NIM ratio (down 20' 'BP q/q and 26 BP y/y to 3.1%). There were larger non-compliance including GoAir (stipulated 100%) and one real estate account in UAE.

Perspectives

We have lowered our FY24-26E earnings forecasts given the decline in NIM, but expect the bank to maintain a healthy ROA of 1-1.1% / ROE of 15-16%, with a CET-1 of 12% providing additional comfort. We reiterate a buy on the stock with a target price of Rs 250 per share (previous price of Rs 260), valuing the bank at 1x on its September 2025 ABV and calculating the significance of earnings from