Buy Bank of Baroda; target of Rs 235: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bank of Baroda

BOB saw a mixed quarter; while core PAT at Rs40.7bn missed PLe by 3% led by lower NII and higher tax rate, asset quality was stable with more buffers created. Loan growth guidance is maintained at 14-15%, while over medium term, share of retail might enhance to 53% (now 47%). Balance sheet further fortified, as PCR was shored up by Rs2bn while coverage on stressed airline was increased from 38% to 50%. OTR reduced QoQ from 1.7% to 1.3%. NIM decline of 20bps QoQ was highest compared to PSU peers, attributable to decline in reported yields as credit flow for the quarter was led by lower yielding segments. While bank would like to maintain NIM for FY24 at FY23 levels, we are factoring an 8bps decline in NIM to 3.08%. MCLR repricing would be a key to upgrade in NIM. Basis Q1’24 results, SBI delivered better NII/NIM and in near term SBI could outperform BOB on NIM given higher CASA and unsecured share.

Outlook

We slightly tweak our multiple from 1.15x to 1.11x but keep TP unchanged at Rs235. Retain ‘BUY’.