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Motilal Oswal Report
Bank of Baroda reported a mixed quarter as pre provision operating profit grew 33% YoY (13% beat) aided by higher other income (49% beat) though margins declined 20bp QoQ to 3.07%.
Business growth was healthy, with loan growth of 19% YoY (4% QoQ) and deposits growth of 15% YoY (4% QoQ). Loan growth was led by healthy growth in retail segments. Current account and saving account ratio moderated 45 bp QoQ to 39.9%.
Asset quality improved despite high slippages at Rs 47.5 billion (led by aviation account). Gross/net non performing asset ratios yet improved to 3.32%/0.76%, while provision coverage ratio moderated 88 bp QoQ. Special mention account 1/2 was under control at 22 bp of loans.
Due to the restrictions imposed by Reserve Bank of India 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 minimized.
Deposits in all the segments and overall business remained healthy. Bank of Baroda has taken significant actions in terms of compliance and expects the ban to be lifted in the near term.
We maintain our earnings estimates and expect FY25E return on asset/return on equity of 1.2%/16.8%. We reiterate our 'Buy' rating on the stock.
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