Buy Bank of Baroda; target of Rs 220: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bank of Baroda

We raise FY23E earnings by ~4% due to higher NII, although PAT change is immaterial in FY24/25E. Bank of Baroda (BoB) saw another strong quarter with core PPoP at Rs73bn (beat PLe by ~14%) led by higher NII, better TWO recovery and lower opex while asset quality was better. Stronger NII was led by higher NIM at 3.65% (PLe 3.51%) and loan growth at +6.5% QoQ (PLe 3.5%), driven by domestic corporate and retail credit. BoB guided for a ~15% YoY loan growth in FY24E. Loan mix which is 57:43 retail/wholesale could shift to 60:40. Bank indicated that increasing retail share, expanding corporate yields and higher MCLR share (50%) could drive further NIM expansion. Adani Group exposure could be 0.6% of loans, although entire credit is secured and 30% of exposure is towards JVs having large PSUs as partners.

Outlook

Valuation at 0.9x is attractive; we maintain a 1.2x multiple on Sep’24 ABV and TP at Rs220. Retain ‘BUY’.