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Buy Bank Of Baroda Shares, This Broking Firm Says

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Broking firm Emkay Global is bullish on the stock of Bank of Baroda and has a target price that is 35 to 40% higher from current levels. The broking firm has set a price target of Rs 110 on the stock from the current market price of Rs 79.50.

 

Lower slippages

Lower slippages

"Despite a higher recovery in written-off accounts and contained provisions, Bank of Baroda posted a loss of Rs 10.5 billion (est: net profits of Rs 4.5 billion) mainly due to DTA reversal as it moved to a new lower tax structure. Impressive asset quality performance with gross non performing assets (GNPA) ratio down at 8.9% (vs. 9.6% pro forma in Q3) due to lower slippages and lower RSA pool at 1.6%," Emkay Global has said in a report

Retail growth trend healthy
 

Retail growth trend healthy

The broking firm has also noted that the retail growth trend remains healthy at 14%, but corporate remains a drag.

"Bank of Baroda expects reasonable pick-up in corporate growth during H2FY22, thereby supporting overall growth and margins. Cost saving with merger synergies kicking-in should support core return on assets," Emkay Global has said.

Management expects overall slippages/LLP in FY22 to be lower vs. FY21 (2.7%/2%) due to lower stress in corporate pool, including overseas exposure. 60% of international fresh NPAs in FY21 will be restructured, leading to an upgrade. BOB may consider selling stake in its life insurance venture and also onboard a partner to ramp up the card subsidiary.

Outlook Valuations

Outlook Valuations

According to Emkay Global Bank of Baroda has recently raised capital via QIP, leading to reasonable CET 1 at 10.9% now vs. 9% in Q3.

"With merger and asset quality pain largely behind, we expect BOB's RoE to gradually improve to 10-12% over FY23-24E from a low of 1% in FY21. Retain Buy with a revised target price of Rs 110 based on 0.8x FY23E ABV (vs. 0.6x). Key risks: Higher NPA formation, mainly in corporate/SME book; and slower-than-expected growth trajectory," the broking firm has said.

Disclaimer:

Disclaimer:

The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advise to buy or sell stocks, gold, currency or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in GoodReturns.in

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