Buy Bank of Baroda; target of Rs 285: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bank of Baroda

BOB saw a mixed quarter as core PPoP was 8.7% below PLe due to lower NIM which was offset by better asset quality. NIM dropped by 16bps QoQ to 2.94% driven by (1) normalization of interest on TWO recovery that was recognized in Q2FY25 (2) tightening of credit filters (3) increase in cost of funds. Guidance on loan/deposit growth in FY25 has been maintained at 11-13% and 9-11%. Asset quality has been consistently improving; net slippages were lesser owing to controlled slippages and write-offs that resulted in lower credit costs at 40bps.

Outlook

Due to focus on better quality underwriting and lower NIM guidance, we trim NIM over FY26/27E by 9/7bps that would be neutralized by fall in provisions by 7/8bps; impact on core PAT is not material. Stock is valued at 0.9/0.8x on FY26/27 ABV (14% discount to SBI). We tweak multiple to 1.0x from 1.1x due to tough macros and cut TP to Rs285 from Rs315. Retain ‘BUY’.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Bank of Baroda - 31012025 - prabhu