Buy Bank of Baroda; target of Rs 280: Sharekhan

Sharekhan's research report on Bank of Baroda

Q3FY25 numbers were a mixed bag. Core operating performance was weak while asset quality trends were stable. Earnings were higher than estimates mainly led by lower credit cost (~31 bps annualised). Loan/deposit growth grew 12% y-o-y each. NIM fell by 16 bps q-o-q to 2.94% (owing to lower spreads & higher interest income on bad loans recovery in the last quarter) resulting in weak NII growth (~3% y-o-y) which largely impacted the core PPoP growth (down 2% y-o-y). Management is guiding for NIMs at ~3.05% (±) 5 bps for FY25E. Guidance on loan/deposit growth, slippages, and credit cost for FY25E has been broadly maintained.

Outlook

We maintain a Buy with a revised PT of Rs. 280. At CMP, the stock trades at 0.9x/0.8x/0.7x its FY25E/26E/27E ABV. Valuations are reasonable given recent underperformance.