Bank of Baroda skids 8% as balance sheet clean-up continues

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26 Aug, 2025 12:21

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Moneycontrol Bureau

After posting a weak March quarter, Bank of Baroda is butchered at Dalal Street by heavy selling. Though few analyts are bullish on the stock, investors are pertubed dragging the stock 8 percent intraday on Monday. Bank of Baroda has reported a net loss of Rs 3230 crore in January-March quarter from Rs 598.3 crore in corresponding quarter last fiscal. During the quarter, its net interest income (NII) rose 5 percent at Rs 3330.4 crore against Rs 3171.7 crore year-on-year.

However, the lender had a marginal rise in its gross non-performing asset (NPA), but paid a higher provision in Q4. Its provision in Q4FY16 increased to Rs 6858 crore compared to Rs 6164.5 crore on sequential basis and Rs 1817.5 crore YoY.

After December quarter, analysts were bullish on the stock even though it had incurred huge losses and asset quality worsened in Q3. A day after Q3 results were announced, the stock had gained 24 percent intraday under the new management's 'clean-up act'.

So, is it best to buy even now?

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Nasrin Sultana

Special Correspondent|Moneycontrol.com

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Citi has maintained a buy rating on the stock with a target of Rs 185 per share. It feels that the stock will lose some value on the quarter performance. "But with the basic premise intact, the asset cycle likely bottoming - and about the only govt bank offering a changed & differentiated promise, would view any dips on the back of the q as enhanced buying opportunities," it says in a note.

On an optimistic note, it reiterates that asset quality cycle, business transition and thereafter the return to decent growth & profitability is a longer journey, and the start has been made.

Deutsche Bank has downgraded it to hold rating on the stock with a target price of Rs 150 per share factoring in higher non-performing loans (NPL) provisions and lower growth. The brokerage firm believes that the stock is fairly valued even though it feels earnings will rebound in FY17/18, for a likely 5-9 percent return on equity over next two years. "The focus on upgrades and recoveries is intense and the strong momentum seen in Q4 could continue in FY17, resulting in a net slippage of only Rs 5000 crore. It is also looking to book gains by selling non-core investments; this, combined with rationalisation of capital, should lead to an improvement in capital ratios," it adds.

Credit Suisse has maintained a neutral rating on the stock and cut earnings per share (EPS) by 23-48 percent for FY17/18 on lower pre-provisioning profits and higher NPL provisions. It explains that pre-provision profitability has come down to 100 basis points and the bank will struggle to make double digit ROEs even in FY17-18. RBI relaxation has helped reported Tier I but loan growth constraints are likely to continue give high equity leverage ratio.Meanwhile, Macquaire reiterates its underperfom rating on the stock. It has cut EPS estimates by 17-11 percent for FY17-18 factoring in higher credit costs. However, it has raised target price to Rs 120 from Rs 90 per share. "BoB has taken multiple initiatives with respect to fee income, retail banking. While these are medium-term positives from a franchise perspective, we believe the gains are likely to be backended," it says.

Kotak also has downgraded the stock to reduce as BoB reported a weaker-than-expected quarter with large loss from high provisions for bad loans and allocation to retirement funds due to changes in mortality table. "The worst is behind, but we are increasingly worried as the bank would probably take a few years longer than expected to reach steady state RoE of 15 percent. We see better alternatives and the recent price appreciation fully captures near term upsides," it says in a note.Goldman Sachs maintains sell rating on the stock.

At 10:36 hrs Bank Of Baroda was quoting at Rs 144.10, down Rs 10.85, or 7.00 percent on the BSE.Follow @NasrinzStory