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Despite margin contraction and higher provisions, Bank of Baroda (BoB) reported a slight 2% beat on PAT at Rs42.5bn due to higher fees and recovery from written-off accounts. Credit growth remains healthy at 19% YoY/4% QoQ, with deposit growth also robust, at 15% YoY/4% QoQ; but Domestic CASA ratio slipped this quarter to 40%. This, coupled with rising CoF, continued to pressure NIMs (down 20bps QoQ/26bps YoY to 3.1%). Slippages too were higher, at Rs47.5bn/2.3% of loans, including GoAir (100% provided) and one UAE-based real estate account. Going forward, the bank expects growth to remain resilient, but has revised FY24 NIM guidance to 3.1% (+/-5bps) from the earlier 3.3%. Customer onboarding on BOB World remains suspended—the bank expects this to resume in due course. We cut our earnings for FY24-26E, factoring-in the lower NIMs, but expect the bank to delivery a healthy 1-1.1% RoA/15-16% RoE, with CET-1 at 12% providing added comfort. We retain BUY on the stock, with revised TP of Rs250/share (earlier Rs260), valuing the bank at 1x its Sep-25E ABV and subs/inv. value at Rs6/share.

Bank of Baroda: Financial Snapshot (Standalone)

Healthy growth, but margins slips even more than peers

BoB continued to report robust net credit growth (better than SBI’s) at 19% YoY/4% QoQ, led by healthy growth in retail which, in turn, was led by broad-based growth in auto, housing and PL loans. Deposit growth too was healthy, at 15% YoY/4% QoQ, while Domestic CASA ratio slipped further to 40%, leading to a 24bps QoQ jump in CoD. This coupled with the ICRR impact resulted in a sharp 20bps QoQ/26bps YoY decline in NIM to 3.1%. Going forward, the bank expects growth to remain healthy, but has its revised FY24 NIM guidance to 3.1% (+/-5bps) from 3.3% earlier.

Slippages surge, but higher w-offs lead to lower NPA ratio

Fresh slippages were elevated at Rs43.5bn/2.3% of loans, mainly due to recognition of GoAir and one real estate account based in the UAE; but higher w-offs led to reduction in GNPA ratio by 20bps QoQ to 3.3%/NNPA at 0.8%. Bank had already made part provisions on GoAir and, with the probability of recovery dimming with buyers backing out, the bank has made additional provisions, taking the overall provisions to 100%. Bank indicates that it carries strong tangible security, apart from a corporate guarantee of Rs10bn on GoAir. On UAE-based NA, the bank remains hopeful of a recovery in the near future, as the group is facing a temporary liquidity issue, which should soon resolve.

We retain BUY, with revised TP of Rs250/share

We cut our earnings for FY24-26E, factoring-in the lower NIMs, but expect the bank to deliver a healthy 1-1.1% RoA/15-16% RoE, with CET-1 at 12% providing additional comfort. We retain BUY on BoB, with revised TP of Rs250/share (earlier Rs260), valuing the bank at 1x its Sep-25E ABV and subs/inv. value at Rs6/share. Customer onboarding on BOB World remains suspended, and the bank expects this to resume in due course. Additionally, value unlocking in the insurance subsidiary and strategic tie-up in BoB cards are likely to be near-term catalysts. Key risks: Macro slowdown leading to slower credit growth/margin contraction and asset-quality disruption.

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