Public Sector Banks have rallied in the past week after Bank of Baroda, Oriental Bank of Commerce and Union Bank of India saw asset quality improving. Leading brokerages in the country are betting on Bank of Baroda improving its performance even better and here's why.

ICICI Direct On Bank of Baroda

ICICI Direct is bullish on Bank of Baroda and has put a buy rating on the stock. "BoB's operational performance moderated with NPA pressure, falling business traction and margins impacting performance. We value Bank of Baroda at a premium multiple of 1.3x FY17E ABV and assign a target price of Rs 220. The bank still has an advantage over its peers in terms of well diversified book, healthy capital adequacy, PCR and CASA profile. We maintain BUY", says ICICI direct.com research report.

The stock is currently traded at Rs 220 on the National Stock Exchange.

Prabhudas Lilladher On Bank of Baroda

Reputed brokerage firm Prabhudhas Lilladher has said that CASA mix has improved smartly and business growth has picked up. BOB guided for 3% domestic NIM and improvement in RoA towards 1% mark even as the management displayed a cautious stance.

"BOB reported 13bps/22bps quarter-on-quarter improvement in GNPL/NNPL ratios, while coverage ratio improved 403bps QoQ to over 50 per cent. This was aided by healthy provisioning and sharp 40 per cent QoQ decline in fresh slippages (1.8 per cent annualized including debits in NPL accounts). Fresh restructuring also stood at ~Rs40bn (v/s Rs78.8bn for PNB) driving standard restructured portfolio at 6.1 per cent (5.9 per cent in Q3FY15). We maintain ‘BUY' with PT of Rs 220", says Prabhudas Lilladher research report.

K R Choksey On Bank of Baroda

Brokerage firm K R Choksey has put a buy call on Bank of Baroda with a price target of Rs 200.

"During the quarter profitability was dragged down by high provisions, while NIMs remained under pressure with a slow credit environment however contained asset quality came as a positive surprise. A pickup in the investment cycle, higher growth in retail & SME segments, healthy fee income growth, and growth in CASA would lead to a rebound in RoAs and could re-rate the stock in medium term. At Rs 158, the stock is trading at 0.9x FY17 adjusted book and 5.7x FY17 earnings. We recommend "BUY" rating on the stock with target price of Rs 200", says K R Choksey research report.

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