Bank of Baroda: Most up-to-date News Concerning Banking

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Bank of Baroda (532134.IN) shares have fallen 17% during the last 2 months as investors fretted over the Indian lender’s soured loans. Nomura sees the dip as a good buying opportunity and possesses upgraded the second largest government-controlled bank from neutral to get.


One good reason analyst Adarsh Parasrampuria likes this stock is that the outlook due to the pre-provision operating profit (PPOP) is preferable to its rivals, thanks to expected improvements in the net interest margins. Nomura forecasts PPOP to cultivate within an average rate of roughly 13% between 2017-19.
Parasrampuria also likes the bob net banking provisioning as India’s central bank cracks down non-performing assets (NPA).
RBI’s recent directive to raise the provisioning for 12 large NPA cases resulted in uncertainty over near-term P&L provisioning, but BOB’s NPA coverage at 58% could be the highest from the corporate banks and gives comfort, as we see it. Rating agency CRISIL recently indicated a 60% haircut because of these 12 large accounts, which is analogous to our 60% haircut assumption used to get to our adjusted book.
However, the analyst can be involved about M&A risks given government moves to consolidate smaller public sector banks (PSU):
M&A risks have increased, using the finance ministry indicating a potential merger of small PSU banks with larger ones. We feel BOB’s valuation at 1.0x FY17F book vs. 0.5-0.6x FY17F book for smaller PSUs factors in M&A-related provisioning risks.
Parasrampuria carries a INR200 a share target price on Bank of Baroda, which implies 26% upside. The state-owned lender trades at Much forward earnings and pays a modest 0.8% dividend yield.
Bank of Baroda (BoB) carries a strong provision coverage ratio in comparison with other public sector undertaking (PSU) banks. Their tier-I capital ratio is also significantly higher. Many other medication is consolidating their balance sheet, BoB is talking about loan growth
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