Buy Bank of Baroda; target of Rs 250: Emkay Global Financial

Emkay Global Financial is bullish on Bank of Baroda has recommended buy rating on the stock with a target price of Rs 250 in its research report dated November 05, 2023.

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November 06, 2023 / 21:01 IST

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Emkay Global Financial's research report on Bank of Baroda

Despite margin contraction and higher provisions, Bank of Baroda (BoB) reported a slight 2% beat on PAT at Rs42.5bn due to higher fees and recovery from written-off accounts. Credit growth remains healthy at 19% YoY/4% QoQ, with deposit growth also robust, at 15% YoY/4% QoQ; but Domestic CASA ratio slipped this quarter to 40%. This, coupled with rising CoF, continued to pressure NIMs (down 20bps QoQ/26bps YoY to 3.1%). Slippages too were higher, at Rs47.5bn/2.3% of loans, including GoAir (100% provided) and one UAE-based real estate account. Going forward, the bank expects growth to remain resilient, but has revised FY24 NIM guidance to 3.1% (+/-5bps) from the earlier 3.3%. Customer onboarding on BOB World remains suspended—the bank expects this to resume in due course.

Outlook

We cut our earnings for FY24-26E, factoring-in the lower NIMs, but expect the bank to delivery a healthy 1-1.1% RoA/15-16% RoE, with CET-1 at 12% providing added comfort. We retain BUY on the stock, with revised TP of Rs250/share (earlier Rs260), valuing the bank at 1x its Sep-25E ABV and subs/inv. value at Rs6/share.

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