Bank Of Baroda Shares Jump To Highest Since 2018 On Q2 Beat

Shares of Bank of Baroda Ltd. rose to hit the highest level since February 2018 after second-quarter profit beat estimates.

The Gujarat-based lender's net profit rose 58.7% year-on-year to Rs 3,313 crore, according to its exchange filing. That compares with the analysts consensus estimate of Rs 2,403 crore compiled by Bloomberg.

Key Highlights (Consolidated, YoY)

• Interest income up 27.3% at Rs 21,254.2 crore. (Bloomberg estimate: Rs 19,056 crore)

• Net interest margin at 3.33% vs 2.85%

• Gross NPA at 5.31% vs 6.26% (QoQ)

Bank of Baroda shares gained as much as 11.9% to Rs 161.75 apiece. The stock witnessed high trading volume, over 18.5 times the 30-day average for the time of the day.

The stock has gained 102.1% year-to-date, beating S&P BSE Sensex's 6.1% advance in the same period. The stock's relative strength index stood at 72, indicating that it may be 'overbought'.

It closed 9.5% higher, at Rs 158.35 apiece.

Of the 36 analysts tracking the company, 31 maintain a 'buy', four suggest a 'hold' and one recommends a 'sell'. The 12-month consensus price target implies an upside of 22.8%.

Here's what brokerages made of BoB's Q2:

• Maintains 'overweight' stance with a target price of Rs 195, implying a potential upside of 35%.

• Margins improved 30 basis points QoQ to 3.33%. Management clarified that 15 basis points of the improvement was due to interest income recovery on lumpy written-off accounts and, 4 basis points was due to other factors (unwinding of swaps, etc.).

• We note that interest income recoveries tend to be volatile and should remain so. Even if we adjust for that, NII growth was 9% QoQ, and 4% above our estimates.

• Risk reward, valuation are attractive. Steady improvement.

• Maintains 'outperform', ups target price to Rs 180 from Rs 150, implying a potential upside of 24.5%.

• Strong quarter; improving profitability trends.

• Results were ahead of estimates, with return on assets improving to > 1% on the back of healthy growth (+4% QoQ), strong NIMs (+30 bp QoQ, partly aided by one-offs) and contained credit costs (90 bp).

• Loan growth was healthy (+4% QoQ) and continues to be led by noncorporate segment. Retail loans growth remains strong (+28% YoY/ 7% QoQ), share improved to 22%. Management remains focused on profitable growth and sees opportunities for corporate growth to pick up.

• Capital levels remain healthy, with CET-1 at ~12% including profits and management believes it can sustain growth through internal accruals.

• Maintains 'buy' at a target price to Rs 175, implying a potential upside of 21%.

• Strong quarter as Core PPoP grew 39% YoY, while lower provisions and healthy NII drove earnings.

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

• CASA mix saw moderation as growth in term deposits was higher, given the rising interest rates.

• Asset quality continues to improve with CE strong at 98%. A lower SMA book and controlled restructuring book provide further comfort.

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

• Maintains 'buy' at a target price to Rs 173, implying a potential upside of 19%.

• Strong 2QFY23 performance, which was a beat on all counts, led by balance sheet growth, margin expansion and improvement in asset quality.

• Asset quality improvement was impressive, driven by higher recoveries and upgrades. The management expects overall credit growth to be ~14-16% for FY23.

• The bank continues to focus on margin enhancement and the management indicated that overall NIM is likely to be up by 10bps for FY23 vs FY22. In 2QFY23, NIM was partially elevated due to higher recoveries.

• The management has revised the credit cost guidance for FY23 and it is expected to be ~1-1.25% as asset quality continues to improve, with no major slippage risk on the horizon.

• The bank has ruled out any equity capital raise in FY23 as internal accruals are expected to be sufficient for driving growth. We have upgraded our earnings estimates on the back of margin improvement and lower credit cost, driven by improving asset quality.