Buy Bank of Baroda; target of Rs 275: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bank of Baroda

BOB saw a weak quarter with core PPoP miss of 7.3% as NII/NIM was 6.1% below PLe. Margins remain under pressure; while reported domestic NIM fell by 9bps QoQ, full year NIM for FY25 fell by 16bps YoY to 3.02% due to 24bps increase in deposit cost and 13bps fall in loan yields. In our view, the fall in yields was likely due to preference for growth over profitability while increase in funding cost was driven by reliance on higher cost bulk deposits in FY25. Bank expects NIM to remain under pressure in Q1FY26, post which it may improve. We trim NIM for FY26/27E by 7/3bps to owing to likely repo rate cuts which may result in earnings downgrade of avg. 7.0%. Loan/deposit growth guidance for FY26 was given at 11-13% and 9-11%. Stock is valued at 0.8/0.7x on FY26/27 ABV (20% discount to SBI).

Outlook

We tweak multiple to 0.9x from 1.0x and trim TP to Rs 275 from Rs285 but we roll to Mar’27 ABV. Retain ‘BUY’.

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