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Minor miss due to one-offs; outlook steady

In 4Q24, BOB reported in-line PPOP, however, PAT was below JMFe led by higher provisions and a 28.2% tax rate. Balance sheet performance was strong as advances grew +4.1% QoQ / 13.3% YoY to INR 10.7trln, while deposits grew +6.6% QoQ / +10.2% YoY to INR 13.3trln. NII came in at INR 117.9bn, +6.2% QoQ / +2.3% YoY, with calculated NIMs rising 12bps sequentially to 3.0%. Opex grew +14.2% QoQ / +13.9% YoY to INR 78.8bn, led by higher employee expenses of INR 45.5bn, +19.4% QoQ / +20.3% YoY. The management explained that, of this, INR 8bn was one-time, including INR 4bn on account of actuarial revaluation of gratuity liabilities. PPOP was in-line at INR 81.1bn, +15.6% QoQ / +0.4% YoY. Asset quality continues to be strong. On the provisions front, BOB provided INR 5.5bn for GoFirst, in addition to INR 12bn, already provided, thereby making 100% provision for the account, up from c.70%. If we exclude this account, NPA provisions would have declined by 7.1% QoQ to INR 9.4bn. Effective tax rate for the quarter came in at 28.2%, leading to PAT miss on JMFe. Overall, in current quarter, the company gained one-time income of INR 3.1bn as interest on I-T refund but provided an additional INR 8bn for employee costs and INR 5.5bn additional provisions for a specific account. Management commentary was upbeat – RoA guidance was revised upwards from 1.0% to 1.1% for FY25, while advances growth was guided at 12%-14%, with retail book growth substantially outpacing wholesale book. With strong deposit accretion in the quarter, management guided for deposit growth to trail advances growth in FY25. We expect BOB to continue deliver on its ROA of 1%+ story driven by continued loan growth momentum, stable margins and low credit costs. We build a loan growth of 15% over FY24-26e and average RoA/RoE of 1.1%/16.3% over FY25-26e. Valuations for BOB are attractive at current levels of 0.9x BVPS. We value the company at 1.0x FY26e BV to get our target price of INR 270. Maintain BUY.

* Strong core business performance: Balance sheet performance was strong advances grew +4.1% QoQ / 13.3% YoY to INR 10.7trln, while deposits grew +6.6% QoQ / +10.2% YoY to INR 13.3trln. NII came in at INR 117.9bn, +6.2% QoQ / +2.3% YoY, with calculated NIMs rising 12bps sequentially to 3.0%. Retail loan growth was robust at +5.6% QoQ / 20.7% YoY to INR 2,149bn. Management is optimistic of a similar strong growth in retail loans in FY25 as well. Each segment within retail grew at more than 4% QoQ, even as growth in personal loans came down QoQ. Corporate book growth was also strong at +4.7% QoQ. The bank guided for strong growth in advances at 12%-14%. With strong deposit accretion in the quarter, management guided for deposit growth to trail advances growth in FY25. Management commentary was upbeat on NIMs at 3.1% - 3.15% levels, and targeted fee income growth of c.20%. With this, RoA guidance was revised upwards from 1.0% to 1.1% for FY25. Hence, the strong performance is likely to continue going into FY25/FY26.

* Opex elevated with one-offs; asset quality remains robust: Opex grew +14.2% QoQ / +13.9% YoY to INR 78.8bn, led by higher employee expenses of INR 45.5bn, +19.4% QOQ / +20.3% YoY. Of this, management explained that INR 8bn was a one-time expense, including INR 4bn on account of actuarial re-valuation of gratuity liabilities and INR 4bn run-rate of providing for wage revisions. The management does not see any oneoffs in employee expenses in FY25. PPOP was in-line at INR 81.1bn, +15.6% QoQ / +0.4% YoY. Asset quality continues to be strong. On the provisions front, BOB provided INR 5.5bn for GoFirst, in addition to INR 12bn, already provided, thereby making 100% provision for the account, up from c.70%. If we exclude this account, NPA provisions would have declined by 7.1% QoQ to INR 9.4bn. Gross slippages increased to INR 32bn, +22.2% QoQ / +16.6% YoY. We see this as normalisation from benign levels and expect the trend to continue into FY25/FY26e as well.

* Valuation and view: We expect BOB to continue deliver on its ROA of 1%+ story driven by continued loan growth momentum, stable margins and low credit costs. We build loan growth of 15% over FY24-26e and average RoA/RoE of 1.1%/16.3% over FY25-26e. Valuations for BOB are attractive at current levels of 0.9x BVPS. We maintain BUY with a TP of INR 270, valuing BOB at 1.0x FY26 BVPS.

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SEBI Registration Number is INM000010361