Bank of Baroda Q2 Results Review - Strong Performance; Lower Provisions Drive Earnings: Motilal Oswal

Motilal Oswal Report

Bank of Baroda reported a strong quarter as core pre-provision operating profit grew 39% YoY, while lower provisions and healthy net interest income drove earnings.

Business growth was healthy with loans growing ~5% QoQ and margins expanding 31 bps QoQ (18-20 bps impact was due to an account upgrade and unwound of international swap).

Asset quality improved as fresh slippages stood at Rs 34.8 billion, resulting in constant moderation in credit cost and provision coverage ratio increasing to ~79%.

Total special mention account-I/II (more than Rs 50 million) stands controlled at 42 bps of loans.

Bank of Baroda's collection efficiency (excluding agri) improved to 98% in September 2022.

We increase our FY23 earnings by 10%, factoring in higher NII and lower credit cost and largely maintain our estimates for FY24.

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