Hold Bank of Baroda, target of Rs 465: KRChoksey

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KRChoksey has recommended a hold rating on Bank of Baroda , with price target of Rs 465, in its report dated June 4, 2009.

"At current price of Rs 410, the stock is trading at 1.1x FY10E P/BV. We maintain a hold on Bank of Baroda with a target of Rs 465, giving an upside potential of 13% from the current levels, due to: 1) relatively cheap valuation compared to RoE (deserves a higher BV/s); 2) business growth of 20 - 22% as economy improves 3) stabilization of margins at current levels of 3% (channel expansion in semi urban areas will improve CASA ratio; repricing of some bulk deposits and lower term deposit rates will reduce funding costs); 4) growth in international book will boost global spreads; 5) Strong traction in fee income growth will continue to add to non interest income; 6) rerating of financial stocks post election results will allow monetizing UTI AMC stake in FY10. Downside risks: 1) NPLs increase as restructured loans default (BoB has restructured 2.5% of its loans, higher than PSB peers)," says KRChoksey's report.

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