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Motilal Oswal Report
Bank of Baroda reported a healthy Q1 FY23 as core pre-provision operating profit grew 11% YoY, while lower provisions drove net earnings (a significant beat).
Business growth was healthy, with loans growing 3% QoQ. However, margin moderated by 6 basis points QoQ.
Bank of Baroda's asset quality improved as fresh slippages moderated to Rs 32.7 billion, resulting in a significant decline in credit cost, with provision coverage ratio increasing further to ~76%.
Total special mention account I/II (over Rs 50 million) stands controlled at 48 bps of loans. Collection efficiency (excluding agri) improved to 98% in June 2022.
We raise our FY23/24 earnings estimate by 22%/11% to factor in higher net interest income and lower credit cost. We estimate a FY24 return on asset/return on equity of 1%/13.7% as we build in a credit cost of 1.1%.
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