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Buy Bank of Baroda; target of Rs 208: Geojit

December 02
01:41 2017

Geojit’s research report on Bank of Baroda

BOB’s loan book grew at a modest pace of 9% YoY mainly led by domestic advances. Domestic loan book witnessed healthy trends (?14% YoY) aided by strong growth in retail advances (?26% YoY) and stable growth in wholesale credit (?15% YoY). Within retail, home loans outperformed (?34% YoY) aided by portfolio buyouts. However, the bank continues to curtail its low yielding international loan book (?1% YoY). On liabilities front, while low cost CASA deposits grew at a robust pace of 24% YoY, term deposits declined by 5% YoY. As a result, total deposits increased at a muted pace of 3% YoY. CASA ratio improved by 580 bps YoY to 33.4%. Going forward, we expect advances to grow at a healthy pace of 11% CAGR over FY17-19E mainly led by retail and agri loan books.

Outlook

We expect RoA and RoE to improve to 0.5% and 9%, respectively by FY19E. Hence, we continue to maintain BUY rating on the stock with a revised upwards TP of Rs208 and value the bank at P/ABV of 1.6x for FY19E.

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