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

Prabhudas Lilladher's research report on Bank of Baroda

We remain positive on Bank of Baroda (BOB) given, 1) domestic corporate credit is reviving as growth touched an 8-yr high of +13% YoY and BoB would be a key beneficiary as corporate loan share is ~40% and market share in overall advances is sizeable at 6.6% post-merger 2) BOB could see NIM expansion for 1-2 more quarters while private bank margins might peak in Q3FY22, due to higher share of MCLR linked loans (53% vs 30% for private banks) 3) balance sheet is stronger as GNPA in Q2FY23 reduced to 5.3% from 8.1% while PCR enhanced from 67% to 79%; expect RoA/RoE to improve over FY22-25E from 0.6%/9.6% to 0.9%/14.7%. We had recently raised FY23E earnings by 8% for BoB, however, with asset quality risks abating and steady credit growth outlook, there is likelihood of further earnings upgrade.

Outlook

Rolling forward to Mar’25 ABV, we raise multiple from 1.0x to 1.1x and maintain TP at Rs220. Reiterate ‘BUY’.