Buy Bank of Baroda; target of Rs 910: KRChoksey

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Buy Bank of Baroda; target of Rs 910: KRChoksey

KRChoksey is bullish on Bank of Baroda and has recommended buy rating on the stock with a target of Rs 910 in its November 1, 2011 research report.

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RELATED NEWS Buy Unichem Labs; target of Rs 177: Sushil Finance Hold KEC International; target Rs 63: Way2Wealth Hold Indraprastha Gas; target Rs 428: KRChoksey ALSO READ See previous views by KRChoksey See what other Experts & Brokerages are saying about Bank of Baroda See messages about Bank of Baroda Bank of Baroda BSE | NSE 31/05/12 Are Mutual Funds betting on Bank of Baroda?

KRChoksey is bullish on Bank of Baroda and has recommended buy rating on the stock with a target of Rs 910 in its November 1, 2011 research report.

"Bank of Baroda reported Rs1166 crore up by 14.4% y-o-y & 12.9% q-o-q, in line with our expectation. Net interest income grew strongly 25.9% yo- y driven by steady loan growth 23.9% y-o-y & 2.9% q-o-q and 20bps sequential NIM expansion. Core fee income growth was healthy at 13.2% y-o-y & 14.3% q-o-q driven by credit related fee and off balance business. Trading gains were subdued at Rs 10.1crore as compared to Rs74.0 crore in Q1FY12 due to increase in bond yields. Cost to income ratio continued to improve to 35.2%. Asset quality has been fairly stable during the quarter. Slippage ratio remained at comfortable levels of ~ 0.94%, while loan restructured amounting to Rs663 crore in Q2FY12 vs. 455 crore in Q1FY12. Gross NPAs and Net NPAs stood at 1.41% & 0.47% respectively with PCR (reported) ratio of 82.0%. Advances and Deposit growth were 23.9% y-o-y & 22.1% y-o-y respectively higher than the system growth rates Domestic CASA growth slowed to 12.6% y-o-y reflecting migration of funds from saving accounts to term deposits given the higher interest rates in the system."

"Net interest income showed strong growth 25.9% y-o-y and 11.7% q-o-q aided by 20bps sequential NIM expansion & healthy loan book growth (23.9% y-o-y). Strong growth in SME segment, hike in base rate and higher yields on investment book are key drivers for NIM expansion. We believe deregulation of saving bank deposit rate and higher interest rate environment continue to put pressure on cost of funds in next two quarters. We are building in 10bps NIM contraction in FY12 factoring higher cost of funds and some deterioration in pricing power. Core fee income grew strongly 13.2% y-o-y & 14.3% q-o-q , contributing 62% to non interest income. Forex income saw strong traction, up 47.3% y-o-y and 5.2% q-o-q during the quarter. Trading gains were subdued to Rs10.2 crore against Rs74 crore in Q1FY12 due to higher bond yield during the quarter. We expect fee income to grow at 18% CAGR over FY11-13 driven by credit related fee income and off balance businesses."

"BOB has delivered steady core operating performance in tough quarter. Sharper-than-expected margin expansion, healthy fee income, improvement in cost to income ratio and strong asset quality were key highlights from the numbers. We have revised downward our FY12 & FY13 estimates by 2.9% and 7% respectively reflecting lower loan growth and higher credit costs. At Rs771, the stock is trading at 1.1x FY13ABV and 5.5x FY13 earnings, attractive valuation. We upgrade to BUY from HOLD on the stock with target price of Rs 910 (potential upside 18.0%)," says KRChoksey research report.

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