Sharekhan's research report on Bank of Baroda
Bank of Baroda (BOB) has seen steady improvement in its asset quality (net NPAs) at multiyear low of 1.58%, led by lower slippages in corporate book. Lower slippages should clearly sustain over the medium term because of improvement in the corporate credit cycle. Credit cost (as a of percentage of avg. loans) was also at a multi-quarter low of 0.9% in Q1FY23, owing to accelerated provisions made in earlier quarters (PCR at ~76%) as well as lower slippages. Benign credit cost is likely to support earnings trajectory in the medium term. Credit cost guidance stands at 1.25-1.50% of advances versus 1.8% in FY22. Margins are expected to improve by 10-15 bps from FY22 as the bank is focusing on the higher-margin segment - mid-corporate loans, personal loans, and gold loans within the retail segment. Also, a higher share of floating rate loans ~90% would support the margins and would offset a modest increase in cost of deposits.
Margin improvement & lower credit cost are key catalysts for improvement in RoA (From 0.6% in FY22 to 0.8% inFY23E/34E) going forward. At the CMP, the stock trades at 0.8x/0.7x its FY23E/24E ABV. We maintain Buy with a revised PT of Rs. 165. Our preferred picks among PSU banks basket remains SBI and BOB.
At 15:13 hrs Bank Of Baroda was quoting at Rs 140.15, down Rs 0.25, or 0.18 percent.
It has touched an intraday high of Rs 141.70 and an intraday low of Rs 139.00.
It was trading with volumes of 771,177 shares, compared to its thirty day average of 1,597,008 shares, a decrease of -51.71 percent.
In the previous trading session, the share closed up 1.26 percent or Rs 1.75 at Rs 140.40.
The share touched its 52-week high Rs 141.85 and 52-week low Rs 76.90 on 14 September, 2022 and 21 September, 2021, respectively.
Currently, it is trading 1.2 percent below its 52-week high and 82.25 percent above its 52-week low.
Market capitalisation stands at Rs 72,476.64 crore.
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