Buy Bank of Baroda; target of Rs 260: Sharekhan

Sharekhan's research report on Bank of Baroda

Despite a strong pick-up in loan growth (up 5% q-o-q), NII plunged due to lower NIMs, which weakened core operating performance (down 11% y-o-y). NIM fell by 8 bps q-o-q to 2.86% (mainly led by lower yields) and outlook on NIMs is negative. Asset quality improved led by higher write-offs. Higher write-offs drove up provisions, owing to which earnings missed the mark. Nevertheless, core credit cost (44 bps annualised vs 31 bps q-o-q) still remined lower below the long- term average. On the positive side, only treasury gains aided the profitability resulting in RoA at ~1.2% in Q4.

Outlook

The bank is confident that strong recoveries and treasury gains would continue to aid earnings/return ratios in FY26E, despite pressure on core operating profitability. We maintain a Buy with a revised PT of Rs. 260. Stock trades at 0.8x/0.7x its FY2026E/FY2027E ABV estimates.