Bank of Baroda (BOB) Q2 results beat analyst estimates on bottom line front, thanks to robust recovery from written off accounts and other income. Net interest margin (NIM) at 3.07, however, disappointed a bit on rise in cost of deposits. Analysts noted that asset quality was a bit under pressure due to two major corporate slippages. Impact of a ban on new customer onboarding on mobile app a monitorable, analysts said. That said, many analysts finds valuation attractive for BOB, as they maintained 'Buy' rating on the stock.
Nirmal Bang Institutional Equities expects BOB's loan book and PAT to grow at compounded annual growth rates of 15.2 per cent and 20.2 per cent, respectively, over FY23-FY25. This, it said, should result in a return on asset (RoA) of 1.1 per cent and return on equity (RoE) of 16.7 per cent in FY25.
"This will be on the back of continued growth in the RAM segment, improving business mix towards retail leading to marginal NIM improvement and control on operating and credit costs," the brokerage said while suggesting a target of Rs 238 on the stock.
For Motilal Oswal Securities, BOB's Q2 results were a mixed bag as pre-provision operating profit grew 33 per cent YoY, which was 13 per cent higher than its estimates, aided by higher other income (49 per cent beat) though margins declined 20 basis points sequentially.
"Due to the restrictions imposed by RBI on BOB World, the bank was not able to provide certain services to new customers but multiple channels were available to them to do their transactions and therefore the impact was minimised. Deposits in all the segments and overall business remained healthy. The bank has taken significant actions in terms of compliance and expects the ban to be lifted in the near term," the brokerage said while suggesting a target of Rs 240 on the stock.
Nuvama Institutional Equities has retained its target price of Rs 220 on the stock but downgraded the stock from ‘BUY’ to ‘HOLD’. "BOB’s strong growth is leading to frequent NII misses. Negative surprises on its overseas book have also been higher than peers. We believe achieving the guided NIM of 3.15 per cent (higher than the current 3.07 per cent) is a tall task given the intense competition," it said.
YES Securities said BOB's NIM guidance for FY24 got revised 15 bps lower, given the view on interest rates stands altered. It said asset quality outcomes were only optically weak and not a cause for any concern. It said the overall impact of the RBI ban on BoB World is quite minimal on the bank. This brokerage has maintained ‘Buy’ on BOB hares with a revised price target of Rs 290.
Valuations, despite a strong performance, still remain attractive, said Kotak Institutional Equities. A slower re-rating hereon awaits the bank, it said while suggesting a fair value of Rs 215 on the stock.
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