Published on 7/06/2021 11:54:28 AM | Source: Emkay Global Financial Services Ltd

Buy Bank of Baroda Ltd For Target Rs.85 - Emkay Global

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Q4FY21 Result – Slips into loss due to migration to new tax regime; asset quality under control

Despite a higher recovery in written-off accounts and contained provisions, BOB reported a loss of Rs10.5bn (vs. estimate of Rs4.5bn profit), mainly due to DTA reversal as it moved to the new lower tax structure. Reported GNPA ratio improved 76bps qoq to 8.9% vs. pro forma GNPA of 9.6% in Q3.


We have a Buy rating on the stock, given higher retail orientation, reasonable capital position and favorable risk-reward at current valuations (0.6x FY23E ABV) among PSBs. We will review our earnings estimates/rating post management call.


Key highlights:

* Overall loan growth remained subdued at 2% yoy, but domestic organic retail and agriculture loans grew 14% and 13% yoy, respectively.

* Deposit growth too remained muted at 2.2%, while domestic CASA ratio improved to 43%, up 380bps YoY, leading to lower CoF.

* Global NIM was down 15bps qoq mainly due to interest reversal on NPAs and interest waiver, partly offset by lower CoF and overseas margin expansion.

* Reported gross slippages were lower than expected for Q4 at Rs122bn, which adjusted for proforma unrecognized slippages in Q3 due to SC stay stood at Rs37bn. BOB has received restructuring requests to the tune of Rs94bn (1.3% of loans), of which Rs23bn (0.3% of advances) has been implemented.

* The bank holds a specific PCR of 67%, while it has reversed the Covid-19 provisioning buffer of ~Rs17bn during the quarter.

* Overall SMA 1& 2 pool (>Rs50mn) for the bank stood at 3.9%, down from 4.4% in Q3.

* The bank had opted to provide the liability for frauds over a period of four quarters. Accordingly, the carry forward provision as on 31 March 2021 was ~ Rs1.6bn.

* BOB raised Rs45bn during FY21 through a QIP and another Rs37bn through AT-1 bonds, resulting in a CRAR of 15% and CET-1 of 10.9%.


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