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Result and Price Analysis

In 4QFY23, Bank of Baroda (BOB) has delivered an expected result on operating and assets quality front. The fresh slippages were slightly higher at ?22.4bn v/s ?21.7bn in 3QFY23. Furthermore, the reduction (up-gradation & recovery) stood ?78.4bn v/s ?74bn in the previous quarter. It reported GNPA (3.79% v/s 4.53% in 3QFY23) and NNPA (0.89% v/s 0.99% in 30QFY23) declined substantially along with higher PCR (incl. TWO) of 92%. The bank has witnessed robust growth in net advances (21.1% YoY, 5.6% QoQ) and deposit growth (15.1% YoY, 4.7% QoQ) with better liquidity position (LCR of 135% +). Moreover the bank has reported net profit of ?47.7bn on the back of lower loan loss provision (?3.2bn v/s ?8.2bn in the previous quarter). SMA1/2 pool reduced sequentially to ~32bps. We believe the inexpensive valuation (P/ABVPS: 1.0x) makes BOB lucrative. Thus reiterate BUY with target price of ?239.

Made provision for Go-Air exposure; ECL provision to be at ~1.1% of book: The GNPA and NNPA ratio inched down meaningfully to 3.79%/0.89% (v/s 4.53%/0.99% in 3QFY23) because of moderate slippages and higher upgrades and write-offs. The PCR including technical write-off stood ~92% of GNPLs. The absolute GNPA reduced by 12.2% sequentially and 32% YoY. Go-Air account is standard and has an exposure of ?13bn. The bank has made provision of ?5bn in this quarter. It has tangible collateral of more than ?10bn against the exposure. In 4QFY23, the fresh slippages were at slightly higher level of ?22.4bn v/s ?21.7bn in the previous quarter. Corporate book contributed a mere 2% of the slippages amount while retail contribution was at 19%. SME book has slippages contribution of 54%. The reduction (up-gradation, recovery & write-offs) stood ?78.4bn v/s ?73.9bn in the previous quarter. The Bank’s SMA 1&2 book down sequentially at around to 32bps. Restructured book reduced to ?160bn v/s ?185bn in 3QFY23. The Bank has made provisioning of ?14bn; mainly standard asset related provisions of ?4.2bn. The provision for NPAs were ?3.2bn (Credit cost: 0.14% v/s 0.37% in 3QFY23). ECL provision are expected to be at 1% - 1.15% of loan book.

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