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Bank of Baroda Research Report - 21st Jan 2016

Banking | Published on Nov 10th 2015


For 2QFY2016, Bank of Baroda reported a PAT decline of 88.7% yoy to Rs124cr, largely due to higher-than-expected provisions. Slippages spike, NIM dips qoq During the quarter, the loan book and deposits grew by 7.6% and 8.0% yoy, respectively. Advances growth was slower than the last 4 years’ average growth. Total CASA deposits growth was muted at 4.11% yoy with overseas CASA deposits showing a decline of 30.8% yoy while domestic CASA deposits grew by 11.9% yoy; as a result, the domestic CASA ratio improved marginally to 32.0% as against 31.9% in 2QFY2015. The Global NIM dipped by 18bp qoq with a decline in domestic as well as international NIM by 20bp and 7bp qoq, respectively. The NIM dip was led by a 57bp yoy fall in yield on earning assets and more than the 26bp yoy fall in cost of funds as well as elevated slippages. On the asset quality front, the Gross NPA ratio rose substantially to 5.56% in 2QFY2016 from 4.13% in 1QFY2016 marking a rise of 143bp sequentially, whereas the Net NPA ratio was at 3.08% in the quarter as compared to 2.07% in 1QFY2016. There was a sharp spurt in fresh slippages for the quarter which came at Rs6,816cr as compared to Rs1,685cr in 1QFY2016 with slippages from restructured book at Rs1,391cr, resulting in a sudden spike in annualized slippage ratio to 6.5% as against 1.8% in 1QFY2016. The bank restructured loans worth Rs115cr in 1QFY2016, while it has not refinanced any accounts under the 5/25 schemer nor has it sold any assets to ARCs during the quarter. Outlook and valuation: Bank of Baroda is currently trading at a higher valuation multiple as compared to peers on account of market optimism about the bank’s performance, given the new Management at the helm of affairs. However, the key lies in the execution of the new strategy, going forward. At the current market price, the stock trades at a valuation of 0.9x its FY2017E ABV. In our view, the bank is factoring all the positives. Hence, we maintain our Neutral view on the stock.

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CMP 171
Target Price
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)36,325.08
MCAP NSE (Rs in Cr)36,278.99
P/E (x)NM
EPS (Rs.)-26.14
BV (Rs.)158.07
Div Yield (%)0.00
FV (Rs.)2.00
P/BV (x)1.00
EV/Sales (x)11.35
EV/EBITDA (x)25.47

Shareholding Pattern (%)

Public & Others6.0
Grand Total100.0

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