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 USD5.2b, CMP INR143, TP INR198, 39% Upside, Buy)

• Bank of Baroda (BoB) reported PAT of INR2.0b v/s loss of INR989m in 4Q. Elevated NPL provisions (2.3% credit costs annualized) on account of continued stress additions weighed down on PPoP (-4%/-1% QoQ/YoY; in-line), leading to a sharp PAT miss.
• NII growth was muted at 2%/1% QoQ/YoY on the back of sluggish loan growth (-1%/4% QoQ/YoY) and a 5bp contraction in NIM to 2.12%. However, NIM was impacted by ~11bp from interest reversals of INR1.7b, while 4Q NIM had an INR1.5b IT refund component.
• Slippages were elevated at INR52.0b (annualized slippage ratio of 5.7% v/s 4.3% in 4Q) v/s INR40.8b in 4Q, with INR8.9b of slippages from the restructured book. While recoveries and upgrades were subdued at INR16.1b, write-offs at INR350m were very low, leading to an 8% QoQ increase in absolute GNPA. Overall NSL stood at ~10.0%.
• Other highlights: a) Retail advances grew 5% QoQ and 19% YoY. b) Average daily CASA ratio declined marginally to 37.7% v/s 38.8% in 4Q. c) CET 1 ratio stood at 8.83% v/s 8.98% in the previous quarter.