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Last Updated : Nov 15, 2017 07:24 PM IST | Source: Moneycontrol.com

Analysts expect further improvement in Bank of Baroda's asset quality

Bank of Baroda has strong operating trends and has been staying ahead of peers, UBS said while maintaining a buy call on the stock with increased target price at Rs 230 from Rs 220 per share.

 
 
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Bank of Baroda share price closed flat on Wednesday despite weakness in other PSU banks. Analysts expect further improvement in asset quality after Q2 earnings.

The public sector lender's second quarter profit fell 35.6 percent year-on-year to Rs 355.4 crore on higher provisions, but asset quality improved on sequential basis.

Profit, however, registered a 74.88 percent increase compared with previous quarter.

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Net interest income during the quarter grew by 8.6 percent year-on-year to Rs 3,720.5 crore, which was ahead of estimates.

Asset quality improved in quarter ended September 2017. Gross non-performing assets as a percentage of gross advances were lower at 11.16 percent (against 11.40 percent in Q1FY18) and net NPAs also declined to 5.05 percent (5.17 percent).

Slippages at the end of September quarter were at Rs 3,451 crore, were sharply lower compared with Rs 5,200 crore reported at the end of June quarter. Fresh slippages were also lower at Rs 2,586 crore against Rs 4,384 crore on sequential basis.

Brokerage houses analyse earnings performance of the bank:-

Brokerage - Axis Capital | Rating - Hold | Target Rs 180

Axis Capital has maintained its hold rating on Bank of Baroda with a target price of Rs 180 per share post earnings, as the research house does not see huge upside post recent run-up.

"We have little room for further rerating given modest return ratios," it said.

Decrease in slippages, consolidation in international book and government recapitalisation are key positives.

Asset quality improved and slippages decline 41 percent in Q2 on sequential basis.

Brokerage - Morgan Stanley | Rating - Equal-weight | Target Rs 170

Morgan Stanley has maintained its equal-weight rating on the stock with a target price of Rs 170 as it feels earnings recovery may be a bit delayed.

Pre-provisioning operating profit margin is still quite weak & will improve gradually, according to the research house.

It is better placed than many state-owned enterprise bank peers, it feels.

Brokerage - UBS | Rating - Buy | Target Rs 230

Bank of Baroda has strong operating trends and has been staying ahead of peers, UBS said while maintaining a buy call on the stock with increased target price at Rs 230 from Rs 220 per share.

The research house expects return ratios to improve from FY19 and feels BoB is better placed than peers to clean up its corporate loan book.

It expects gross NPA to decline to 9 percent in FY19 from 11.2 percent in Q2FY18. Return on equity is expected to improve to 7.3/11.7 percent in FY18/19 from 3.5 percent.

Brokerage - Credit Suisse | Rating - Outperform | Target Rs 200

Credit Suisse has maintained its outperform rating with a target price at Rs 200 per share.

It has cut its FY18/FY20 EPS estimates by 42/22 percent. With CET1 at 8.4 percent, capital raise is imminent, it feels.
First Published on Nov 15, 2017 07:24 pm
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