Shares of Bank of Baroda (BOB) surged 6 per cent in Monday's trade, as the state-run lender reported healthy earnings for the September quarter after a soft Q1. Analysts said while the contribution of recovery and trading income was high, core performance also recorded improvement. The stock can rise up to 30 per cent over the next 12 months, a few brokerage targets suggest.
For the quarter, BOB's loan and deposit growth accelerated, while its core NIM fell only 3 basis points QoQ. Slippage for BOB was flat sequentially, gross non-performing loans declined, while PCR remained largely stable.
"We are revising earnings and raising target price to Rs 277/1x BV from Rs 250/0.9 times. BoB, once among the strongest franchises in state banks, has underperformed peers due to volatile earnings and negative news flow. Given a recovery in core earnings in Q2FY25, we reckon the stock shall outperform," said Nuvama Institutional Equities.
Bank of Baroda shares rose 5.86 per cent to hit a high of Rs 253.55. The stock is up 8 per cent in 2024 so far.
The brokerage has upgraded the stock to ‘Buy’. Nomura India expects BOB to deliver return on asset (RoA) of 1.1 per cent and return on equity (ROE) of 15-16 per cent over FY25F-27.
"In that context, BOB trades at an inexpensive valuation of 0.9 time FY26F BVPS. We value BOB at 1 time Sep-26 BVPS (against 1 time Jun-26F BVPS previously) to arrive at our target price of Rs 290," it said.
MOFSL has reiterated 'Buy' on the stock with a target price of Rs 290.
"BOB reported a healthy quarter, characterised by higher other income amid accelerated recoveries. Provisions were higher than expected as the bank created prudent NPAs and standard assets provisions. BOB guides for a controlled credit cost of 0.75 per cent for FY25, which should support the return ratio of 1 per cent-plus," it said.
MOFSL said it has cut FY25/FY26 EPS estimates by 4.7 per cent/4.8 per cent due to higher provisions, while it expects loan growth to be healthy and NIMs to be maintained at 3 per cent for FY25 and FY26.
"We estimate FY26 RoA/RoE at 1.1 per cent/15.7 per cent. Reiterate BUY with a revised target price of Rs 290 (premised on 1.2x FY26E ABV)," it said.