Buy Bank of Baroda; target of Rs 85: Emkay Global Financial

Emkay Global Financial is bullish on Bank of Baroda has recommended buy rating on the stock with a target price of Rs 85 in its research report dated January 27, 2021.

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Emkay Global Financial’s report on Bank of Baroda

BOB has reported a strong earnings beat with PAT at Rs10.6bn mainly due to healthy NIMs, higher treasury gains and contained provisions (including Rs3.7bn on potential interest reversals on proforma NPAs). Overall loan growth remains moderate at 7% yoy, but retail growth is accelerating, led by mortgages/auto. With integration related issues and big scare on asset quality easing, the bank plans to accelerate growth, mainly driven by retail and some back-end support from quality corporates. BOB has reported proforma GNPA ratio at 9.6% and restructured pool at ~2%, which is slightly better than expectations. The bank has also built in a reasonable provisioning buffer – 0.48% of loans, which is reasonably higher among PSBs and thus comforting.

Outlook

We retain Buy on BOB with a TP of Rs85 (based on 0.6x FY23 ABV) given its high retail orientation should drive better growth/core NIMs, reasonable capital position and favourable risk-reward at current valuations.

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