Bank of Baroda (NSE:BANKBARODA) (BSE:532134)

Bank Of Baroda is an India-based public sector bank offering various deposit plans. The Bank operates its business in four segments: Treasury, Corporate / Wholesale Banking, Retail Banking and Other Banking Operations. The Bank’s deposit plans offer other features such as overdraft facility, outstation cheque collections, safe deposit lockers and ATM's. The Bank offers deposit products and services in various categories such as fixed, current, savings and Baroda first wealth pack. The Bank also offers wide range of products and services including wholesale banking, rural/agri banking, wealth management, CPPC pension, government business, pre-paid cards, interest rates, deposit products, loan products, internet banking, mobile banking, automated teller machine (ATM) / debit cards, demat and NRI Tax Solution.

Official website: www.bankofbaroda.com

Bank of Baroda (BOB)’s 4QFY2015 results have come in below our estimates. Its PAT de-grew by 48.3% yoy owing to a muted NII growth and higher provisions. Loan book growth slows; Asset quality improves During the quarter, the loan book and deposits grew slower than the system, ie by 7.8% and 8.6% yoy respectively. Retail and Farm Credit segments witnessed a strong yoy growth of 14.1% and 31.6%, respectively. The overseas business contributed 31.8% to the bank’s total business, with 53.1% of total overseas loan book coming from Buyers Credit/BP/BD. The bank plans to shift its focus to term credit in the overseas business, as the margin in Buyers Credit is low. CASA deposits grew by 11.3% yoy with domestic CASA deposits growing by 13.6% yoy during the quarter; as a result, the domestic CASA ratio improved to 33.01% as against 31.8% in 4QFY2014. Domestic NIM fell by 16bp qoq to 2.8%, as reduction in yield on advances was higher than cost of deposits. The Management aims to improve domestic NIM to 3% by FY2016 through rebalancing of loan book towards retail. On the asset quality front, Gross and Net NPA ratios fell to 3.7% (down by 13bp qoq) and 1.9% (down by 22bp qoq), respectively. Slippages were lower at Rs1,789.3cr, with slippage from restructured book at Rs884.8cr, resulting in annualized slippage ratio of 1.8% in 4QFY2015 as compared to 3.1% in 3QFY2015. The bank restructured loans worth Rs4,083cr in 4QFY2015 primarily driven by infra at Rs1,542cr and iron & steel at Rs442cr. As of 4QFY2015, the total outstanding restructured book stands at Rs28,303cr. Provision for NPAs increased by 134% yoy, resulting in credit cost at 0.9% as compared to 0.7% in 3QFY2015. The PCR stood at 64.9% as of 4QFY2015. Outlook and valuation: BOB has traditionally been an outperformer on the asset quality front and it has delivered stable asset quality. However with challenges on asset quality front, there could be volatility in NPAs from lumpy accounts, going ahead. At the current market price, the stock trades at a valuation of 0.8x FY2017E ABV. We recommend a Neutral rating on the stock.

Source http://www.angelbroking.com

For 1QFY2016, Bank of Baroda (BOB)’s PAT declined by 22.7% yoy (however better than our estimates) due to decline in other income and higher opex. Loan book growth slows; NIM improves qoq During the quarter, the loan book and deposits grew slower than the system, ie by 7.0% and 7.3% yoy, respectively. Retail and Farm Credit segments witnessed a strong yoy growth of 16.1% and 26.4%, respectively. The overseas business contributed 32.5% to the bank’s total business, with 52.5% of total overseas loan book coming from Buyers Credit/BP/BD. The bank plans to shift its focus to term credit in overseas business, as margin in Buyers Credit is low. CASA deposits grew by 10.8% yoy with domestic CASA deposits growing by 12.9% yoy during the quarter; as a result, the domestic CASA ratio improved to 31.9%. Global NIM went up by 9bp qoq with 13bp qoq improvement in Domestic NIM. Domestic NIM went up mainly on account of reduction in the cost of deposit due to repricing of domestic deposits. On the asset quality front, the Gross NPA ratio increased sequentially to 4.1% in 1QFY2016 from 3.7% in 4QFY2015, whereas the Net NPA ratio was at 2.07% in the quarter as compared to 1.89% in 4QFY2015. Fresh Slippages were higher at Rs1,685cr as compared to Rs1,358cr in 4QFY2015 with slippages from restructured book at Rs349cr, resulting in annualized slippage ratio of 1.8% in 1QFY2016. In the quarter, there weren’t any lumpy accounts that slipped into NPA. The bank restructured loans worth Rs147cr in 1QFY2016, while it has refinanced 5 accounts worth Rs4,500cr. Outlook and valuation: BOB has traditionally been an outperformer on the asset quality front and it has delivered stable asset quality. However with challenges on asset quality front, there could be volatility in NPA going ahead. At CMP, the stock trades at a valuation of 0.9x FY2017E ABV. We recommend Neutral rating on the stock.

Source: http://www.angelbroking.com/