MOSL: BANK OF BARODA (Buy)-Stress additions remain elevated-provisions mar earnings
​Bank of Baroda: Stress additions remain elevated; provisions mar earnings
(BOB IN, Mkt Cap USD6.5b, CMP INR188, TP INR217, 15% Upside, Buy)
- Bank of Baroda (BoB) reported PAT of INR1.5b (70% miss) v/s INR2.5b in 3QFY17. The strong operating performance (+17% YoY; 36% beat) was driven by robust fee income growth (+50% YoY/QoQ) and controlled opex (flat YoY). Elevated NPL provisions (2.7% credit costs annualized) on account of continued stress additions led to the PAT miss.
- NIM expanded 11bp QoQ to 2.2% on a low base (3Q had interest income reversal of ~INR2.6b). Margins were also aided by IT refund of INR1.5b.
- Slippages remained elevated at INR40.7b (annualized slippage ratio of 4.3%) v/s INR41.4b in 3Q, led by relapse of INR22.8b from the restructured book. While recoveries and upgrades were lower than previous quarters in FY17, high write-offs of INR15.8b led to flat absolute GNPLs on a sequential basis. Overall NSL stood at ~9.6%.
- FY17 highlights: BoB reported PAT of INR24.7b v/s loss of ~INR67b in FY16. This was a year of balance sheet consolidation: loan growth was flat YoY, led by ~12% decline in overseas loans.
Bank of Baroda is engaged in providing various services, such as personal banking, corporate banking, international banking, small and medium enterprise (SME) banking, rural banking, non-resident Indian (NRI) services and treasury services. The Bank's segments include Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Operations. The Bank offers personal banking services, such as deposits, loans, mobile banking and wealth management services; business banking services, such as Baroda Money Express, debit cards and collection services; corporate banking services, such as appraisal and merchant banking, and cash management and remittances; international banking services, such as export, import and trade finance, and correspondent banking; rural banking services, such as deposits, priority sector advances, financial inclusion and lockers, and treasury services, such as domestic and forex operations. The Bank operates a network of approximately 5,330 branches.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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