bank of baroda share price: Bank of Baroda surges 11% to new highs after stellar Q2 show; brokerages say more steam left
The state-owned lender reported a jump of 59% in its net profit to Rs 3,313 crore for the second quarter ended September 30, 2022. It had posted a net profit of Rs 2,088 crore in the corresponding quarter of the previous fiscal.
Its total income rose to Rs 23,080.03 crore for the second quarter of 2022-23, compared to Rs 20,270.74 crore a year ago, the lender reported. Net interest income grew by 34.5% to Rs 10,714 crore.
Following the announcement of earnings, shares of Bank of Baroda (BoB) rallied 12% to Rs 161.75, its new 52-week high, before trading at Rs 157.65 at 10.15 am. The counter settled at Rs 144.55 on Friday.
The lender improved its asset quality, with the gross non-performing assets coming down to 5.31% of the gross advances by the end of September 2022, from 8.11% in the year-ago period. Net NPAs fell to 1.16% from 2.83%.
Provisions for bad loans and contingencies declined to Rs 1,627.46 crore for the quarter from Rs 2,753.59 crore a year ago. Net interest margins rose to 3.33% at the end of September 2022. The capital adequacy ratio declined to 15.25%.
Shares of Bank of Baroda have delivered strong returns in the year 2022 so far. The stock has jumped about 110% from its 52-week low of Rs 77 on December 27, 2021. The scrip is up by 20% in the last one month.
The majority of brokerage firms remain positive on the state-owned lender following its strong performance and positive outlook in the near future.
Healthy growth momentum coupled with improvement in margins and asset quality is expected to aid RoA and, thus, valuations, said ICICIDirect Research, with maintaining a buy rating and a target price of Rs 170 on the stock.
Advantage of faster repricing of loans should continue in the next couple of quarters, it added. “Steady CI ratio, lower credit cost to aid healthy earnings growth momentum.”
The GNPA and NNPA ratio inched down meaningfully because of higher upgrades and write-offs, said
. “Corporate book contributed 16% of the slippages amount where the retail contribution was at 17% and SME book at 25%.”
“The bank expects better recovery from legacy power accounts as the traction has improved. Aggregate NCLT exposure is Rs 51.4 bn, with coverage of 98.3%. The actual credit cost has exceeded management guidance of 150bps for FY23,” it added.
LKP Securities has a buy rating on Bank of Baroda with a target price of Rs 202 on the counter, suggesting a 40% upside in the stock from the previous close.
We maintain a ‘buy’ rating on BOB with a revised price target of Rs 180, said Yes Securities. “BoB is placed fifth in our pecking order for banks. We value the bank at 0.8x FY24 P/BV. We assign a value of Rs 9.1 per share to the subsidiaries,” it added.
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