Emkay Global Financial recommended hold rating on Bank of Baroda with a target price of Rs 58 in its research report dated June 24, 2020.
Emkay Global Financial's report on Bank of Baroda
BOB reported strong numbers in Q4 with a net profit of Rs5.1bn, mainly aided by higher other income, lower staff cost and contained NPA provisions, despite NIM compression due to lower yield on loans/investments. GNPA ratio improved 103 bps qoq to 9.4%, due to higher upgrades and standstill benefit on overdue loans (Rs40bn). BOB has a high moratorium rate of 65% among PSBs due to the opt-out option, but it is likely to fall as it has revised modalities in the second round. Management expects long due integration to be completed in FY21. However, we believe that managing Covid-19-induced asset quality pain will be challenging and thus, factoring in higher NPAs/LLP, we cut FY21/FY22 estimates by 141/48%.
We retain Hold/UW in EAP, with a revised TP of Rs58, based on 0.5x FY22E ABV (vs. Rs62, based on 0.6x FY22E ABV earlier), given its reasonable valuations, healthy capital position and higher retail orientation, which should be structurally positive in the long run.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.