Buy Bank Of Baroda; target of Rs 178: KRChoksey

KRChoksey's research report on Bank Of Baroda

The bank reported profits of INR 5.3 bn, up 160% yoy. Advances at INR 4145 bn grew by 9.8% yoy/-3% qoq. Domestic credit book registered 19.8% growth yoy, largely led by retail book growth of 33.8%. Home loans segment posted a growth of 43.47%. NII at INR 43.8 bn grew by 29% yoy / 9% qoq translating into NIMs of 2.58% up 24 bps qoq. The improvement in NIMs is on the back of improved margins in both domestic and international business and due to less interest income reversals on NPA accounts compared to last several quarters.

Outlook

While stress resolutions and retail thrust should help NIMs, focus on productivity should help improve efficiency.  Improving corporate book profile should yield better risk-adjusted returns. We maintain BUY with a target price of INR 178 per share, valuing the bank at 1.5x FY20E ABVPS.