Buy Bank of Baroda; target of Rs 270: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bank of Baroda

BOB saw a weak quarter yet again as core PPoP adjusted for IT refund was 12.4% lower to PLe due to (1) miss on NIM by 8bps led by softer reported yields on loans and investments (2) weaker fee income and (3) higher opex led by other opex. Fall in reported NIM at 6-7bps QoQ was lower to peers (11-18bps decline). NIM may remain under pressure in Q2FY26 due to lead-lag impact of repo rate cut on loans/deposits. However, bank expects 70% of deposits to reprice within 1-2 quarters suggesting that NIM would start improving since Q3FY26. Loans de-grew by 2.0% QoQ due to 10% fall in corporate; however, BOB expects corporate growth of 8-10% YoY for FY26; we are factoring overall loan growth of 11% YoY in FY26.

Outlook

We trim NIM for FY26/27E by 5/3bps which may result in core earnings cut of 6.5%. We keep multiple at 0.9x on Mar’27 ABV but tweak TP to Rs270 from Rs275. Retain ‘BUY’.