Buy Bank of Baroda; target of Rs 130: Emkay Global Financial

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26 Aug, 2025 12:21

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Emkay Global Financial's report on Bank of Baroda

Despite lower other income and higher provisions, BOB reported in-line PAT at Rs17.8bn (est.: Rs17.9bn), mainly due to healthy NII growth, lower staff costs and tax provisions. Despite higher slippages, the GNPA ratio rose by 64bps qoq to 6.6% on higher woffs/recoveries. The standard net restructured book reduced to 2.4% of loans in Q4. Credit growth improved to 10% yoy/6% qoq, driven by retail/agri, but corporate/SME growth was sluggish. BOB expects credit growth to be around 10-12% in FY23, which coupled with a higher share of floating rate book, healthy CASA ratio and lower interest reversal on NPAs, should lead to a strong margin trajectory. The bank has utilized one-off gains from Air India (Rs10bn in Q4; Rs13bn in Q4) to ramp up the provision cover to 75%, which should contain incremental LLP. Factoring in better growth/NIMs and lower LLP, we expect the bank’s RoE to gradually improve to 11-13% over FY23-25E.

Outlook

BOB remains well-capitalized among large PSBs, with a CET-1 ratio of 11.7% post QIP. It is also better-positioned to accelerate profitable growth. Retain Buy/OW in EAP with a revised TP of Rs130 (earlier TP of Rs145), based on 0.7x FY24E ABV (0.9x Dec’23E ABV earlier) due to higher CoE.

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