Bank of Baroda Q3 earnings preview: Profit may grow marginally; NIM contraction likely

Bank of Baroda (BoB) is set to announce its earnings for the quarter and nine-months ended on December 31, 2023, today. Banking analysts tracking the counter expect a muted show from the country's second largest public sector lender. BoB may report a flattish growth in net interest income (NIIs) of Rs 11,000 crore on both year-on-year (YoY) and quarter-on-quarter (QoQ) basis, with net interest margin (NIM) contract slightly. Pre-provisioning operation profit (PPOP) may decline in single percentage points, while net profit is likely to be at around Rs 4,000 crore.

Analysts said slippages may stay under control and see an improvement in asset quality for the lender. They expect management's commentary on the loan book projection and NPAs to be keenly watched.

Axis Capital said advances growth remained healthy, driven by retail book but deposits growth was muted QoQ. Margins are expected to witness marginal compression and elevated opex to weigh on PPOP growth.

Fresh slippages to remain in control, said the brokerage. Axis Capital believes that asset quality outlook and loan book traction are key monitorables for the lender.

Axis pegs PPOP slipping about 8 per cent YoY to 7,605 crore, while it sees NIIs to come in at Rs 11,019 crore for the December 2023 quarter. However, the brokerage firm pegs bottom line at Rs 3,976 crore, up slightly on a yearly basis.

YES Securities pegs the PSU lender to report NIIs at Rs 11,070.5 crore, slightly higher on QoQ and YoY basis, but PPOP is likely to come in at Rs 7,635.7 crore dropping in single digits on both fronts. Net profit is seen at Rs 4,004.5 crore, up 4 per cent YoY but down sequentially.

NII growth will be slightly slower than average loan growth due to rise in cost of deposits outpacing yield on advances. Consequently, NIM will be marginally lower sequentially. Sequential fee income growth will broadly match loan growth due to linkage with disbursement activity, said the brokerage. "Slippages would be broadly stable on a sequential basis," it added.

Phillip Capital expects BoB to report a flattish-to-marginal growth in (NIIs) at Rs 11,014.4 crore in the December 2023 quarter, with NIMs contracting to 35 bps to 3.02 per cent. Ebitda may slip 7 per cent YoY to Rs 7,676.5 crore but net profit may jump 14 per cent YoY to Rs 4,407.4 crore, the brokerage said.

The lender may report a broad-based growth in loan book and asset quality is seen improving on both gross and net levels. Provision for wage revision will increase due to higher wage settlement, it said.

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