BOB posts record 168% surge in quarterly profit, shares rise; brokerages bullish on the stock

Shares of Bank of Baroda extended gains to the second session in early trade on May 17, building on the positive sentiment after the public sector lender’s stellar quarterly earnings reported during market hours on Tuesday.

The bank recorded its highest-ever quarterly net profit of Rs 4,775 crore for January-March, reflecting a 168 percent year-on-year rise. Annual net profit of Rs 14,110 crore was also at a record high, up 94 percent from FY22’s Rs 7,272 crore.

Net interest income (NII), the difference between interest earned and spent, surged 34 percent to Rs 11,525 crore in January-March from Rs 8,612 crore a year ago. Net interest margin came in at 3.31 percent, compared to 3.03 percent in the same quarter last year.

Asset quality improved and deposit growth remained robust during the quarter under review.

Also Read: Bank of Baroda posts record Q4 net at Rs 4,775 crore: Four highlights from earnings

Shares of the lender also reacted positively to the strong earnings beat and extended their minor early gains to settle 1.44 percent higher at Rs 186.50 on the National Stock Exchange on May 16.

On May 17, shares of Bank of Baroda extended its uptrend and at 09.27 am was up another 1.55 percent at Rs 189.40 on the NSE. The stock also touched an intraday high of Rs 190, inching closer to its 52-week high of Rs 197.20.

Brokerages share a similar optimism, here’s what they believe:

Kotak Institutional Equities is bullish on the lender’s stellar earnings growth in FY23 and believes it is well-placed among large public banks, with all its business metrics moving closer to top-tier banks. The brokerage has an ‘add’ rating for the stock, with a target price of Rs 200.

Global broking and research firm JP Morgan has retained its ‘overweight’ call on the stock, with a price target of Rs 230. “The lender’s profits have more than doubled in the last four quarters, thanks to moderating credit costs,” it said in a report. The broking firm also sees that the management’s guidance of 1 percent return on assets (RoAs) for FY24 as conservative, given that RoAs have hit 1.34 percent in Q4 FY23.

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Macquarie sees normalised credit costs as key to maintaining profitability for Bank of Baroda. Going ahead, the firm also views margin protection and loan growth as key focus areas for the lender. The broking house has a ‘neutral’ rating for the stock, with a target price of Rs 180.

Nuvama Institutional Equities believes Bank of Baroda has made more progress than other state-run lenders in adopting practices of private
banks and making private hires. Finding the risk-reward attractive, the broking firm has retained its ‘buy’ call on the stock, with a price target of Rs 220. “The bank has delivered an RoA of over 1 percent in the last three quarters, if it can sustain this performance, the stock can likely re-rate,” Nuvama wrote in its report.

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