February 15, 2017 / 12:32 IST
Bank of Baroda (BoB) reported PAT was 69% below our estimate at INR 2.5b owing to elevated NPL provisions (annualized credit costs of 1.86%. PPoP was in-line (52% YoY) as higher than expected trading gains (INR 8.4b vs. est. of INR 7.5b) compensated for 4% miss on NII (INR 31.3b vs. INR 33b est.).
Outlook
We expect stress addition and credit costs to reduce sharply in FY18/19. Additional buffers like non-core financial investments amongst other options will lead to dilution free growth until FY18. We cut FY17 estimates by 39%, however, we have not built in one off stake sale gains in our estimates. Maintain Buy with TP of INR 221 (1.2x December 18BV) – based on RI model.
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