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Last Updated : Aug 12, 2020 04:05 PM IST | Source: Moneycontrol.com

Reduce Bank of Baroda; target of Rs 52: Dolat Capital

Dolat Capital recommended reduce rating on Bank of Baroda with a target price of Rs 52 in its research report dated August 10, 2020.

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Dolat Capital's research report on Bank of Baroda


BoB’s reported a loss of Rs86 bn in Q1FY21 led by higher provisions. Though domestic slippages were muted owing to ongoing loan moratorium, two-third of slippages in 1QFY21 pertained to the international portfolio. Slippages from overseas book have been elevated over the last few quarters. The quarter also saw high additions to watch-list from the NBFC and power sector. The NBFC addition pertained to a single well rated infra financing NBFC account, where the bank has so far made 35% provisions as per RBI’s June 7 circular against a total exposure of Rs76bn, 75% of which is govt guaranteed. Moratorium book stood at 21% of advances by value, based on TLs that have not paid July instalment. Standard asset provision buffers were at 0.6% of loans for the bank, higher than public sector peers, partly due to the NBFC watch-list provisioning highlighted earlier. While BoB stands out for its conservative recognition and provisioning practices (PCR at 72%), risks to profitability from sub-par core earnings (PPoP/assets at 1.8%) and elevated credit costs are high.


Outlook


Tweaking our estimates marginally, we maintain our REDUCE recommendation on the stock with a TP of Rs52, valuing it at 0.6x of FY22E P/ABV.


For all recommendations report, click here


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First Published on Aug 12, 2020 03:56 pm
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