Bank of Baroda stock soars 6% on solid Q2 earnings show, strong asset quality

The strong quarterly show also tipped off a spike in volumes in the counter as two crore shares changed hands on the exchanges so far.

Shares of Bank of Baroda soared as much as 6 percent on October 28 after the lender delivered a strong earnings performance for the July-September quarter, marked by its strongest asset quality in at least 10 years.

At 11.55 am, shares of Bank of Baroda were trading at Rs 251.56 on the NSE. The strong quarterly show also tipped off a spike in volumes in the counter as two crore shares changed hands on the exchanges so far, double the one-month daily traded average of one crore shares.

The lender's net profit stood at Rs 5,238 crore in Q2, marking a 23.2 percent year-on-year growth from Rs 4,253 crore in the same period last fiscal. The bank reported a net interest income of Rs 11,622 crore, a 7.3 percent increase from Rs 10,831 crore in Q2FY24.

The lender's asset quality also improved to the strongest in at least quarters as the gross non-performing assets (GNPA) ratio slipped to to 2.50 percent in Q2, sharply down from 3.32 percent in the base period. Similarly, the net non-performing assets (NNPA) ratio came down to 0.60 percent from 0.76 percent in the previous year.

Brokerage firm HSBC has maintained a "hold" call on Bank of Baroda with a target of Rs 270, noting that the bank's strong Q2 non-core income offset pressures from net interest margin (NIM) compression, weaker fee income, and ad hoc provisions.

Going ahead, though HSBC expects stable operating profitability from FY25-27 it also believes that credit cost normalisation may impact return on assets (RoA).

Nomura, on the other hand, kept its a "buy" rating on the stock with a target of Rs 290, citing healthy RoA (Reutrn on Assets) performance in Q2 and stable asset quality, which it believes supports a favorable risk-reward profile.

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Nomura also projects an RoA of 1.1 percent and return on equity (RoE) of 15-16 percent for Bank of Baroda through FY25-27.

Meanwhile, the lender's domestic deposits grew by 7.1 percent in Q2 to Rs 11,50,791 crore, while international deposits surged 21.2 percent to Rs 2,12,695 crore, bringing total global deposits to Rs 13.63 lakh crore—up 9.1 percent on year.

Retail advances also showcased 20 percent growth to Rs 2,32,311 crore. Domestic gross advances rose by 12.5 percent to Rs 9,38,883 crore, with international advances also up by 7.6 percent to Rs 2.04 lakh crore.

“This has been a strong quarter from a topline and bottomline point of view," Debdatta Chand, MD & CEO of Bank of Baroda said in an exchange filing.

Looking ahead, he anticipates deposit growth of 9-11 percent for FY25, a slight reduction from the earlier guidance of 10-11 percent. The bank also aims to keep its margin guidance steady at 3.15 percent, ± 5 basis points for FY25, with a slippage ratio target between 1-1.25 percent for the fiscal year. Additionally, Chand noted that the bank expects to contain credit costs below 0.75 percent for FY25, with retail advances projected to grow by around 20 percent.

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