Buy Bank of Baroda; target of Rs 185: ICICI Direct

ICICI Direct's research report on Bank of Baroda

PAT came in at | 528 crore vs. loss of ~| 3100 crore in Q4FY18. This was mainly led by strong NII growth of 28.7% YoY to | 4381 crore and lower credit cost of | 2166 crore. Such strong traction in NII was also due to interest reversals and, thus, may not sustain ahead Loans increased 9.77% YoY to | 414517 crore led by domestic loans, which increased 19.84% YoY to | 326400 crore. Contribution of overseas business came down to 20.89% from 22.33% last quarter

Outlook

We maintain our target price of | 185, valuing the stock at 1.3x FY20E ABV. We maintain BUY. The bank may sell non-core assets (NSE & UTI AMC stake) and divest subsidiaries (AMC) to garner capital. A change in top management and merger with smaller/weaker banks remains key risks.