MOSL: BANK OF BARODA (Buy)-PPoP in line adjusted for one-offs-Slippages remain elevated
Bank of Baroda: PPoP in line adjusted for one-offs; Slippages remain elevated
(BOB IN, Mkt Cap USD6.2b, CMP INR96, TP INR115, 20% Upside, Buy)
Business growth remains muted; Asset quality deteriorates further
- BOB reported a weak 3QFY20, led by higher provisions and elevated slippages as it addressed the RBI divergence and recognized select large corporate accounts as NPLs (including DHFL). Muted business growth and one-offs in opex further drove 3QFY20 loss to INR14.1b.
- We have cut FY21/FY22 EPS est. by 12%/16%, as we factored in assumption of lower loan growth and a slight increase in opex. Maintain Buy.
Slippages elevated due to RBI divergence/HFC account; Provisioning coverage stable
- BOB reported loss of INR14.1b (v/s est. INR5.6b loss), mainly led by higher provisions of INR71.5b (+70% QoQ increase) due to RBI divergence and one-off of INR2.7b on operating expenses.
- NII increased 9% YoY to INR71.3b (in-line) aided by improvement in cost of deposits (+16bp QoQ). However, global NIMs were largely flat at 2.80% while domestic NIMs declined 7bp QoQ, mainly due to MCLR rate cut (15bp QoQ). PPoP grew 8.5% YoY to INR49.6b (in line adj. for one-off in opex).
- Loan growth was muted at 2.7% YoY to INR6.5t; retail loan growth came in at 15.3%. Within retail, home/auto loans grew 10%/43% YoY. Deposits grew 1% YoY to INR9.0t, taking the domestic CD ratio to 69.7%. Domestic CASA grew 8.8% YoY, resulting in 96bp QoQ rise in CASA ratio to 38.8%.
- Fresh slippages spiked to ~INR103.9b (in-line) led by slippage from stressed HFC (INR20b) and RBI divergence of INR45.1b, leading to an annualized slippage ratio of 7.4%. ~85% of the slippages came in from the watch-list of 2QFY20. Overall, GNPA/NNPA ratio increased 18bp/14bp QoQ to ~10.4%/4.1%. PCR, including technical write-off stood at 77.8%.
- Outstanding watch-list declined to INR105b (1.6% of loans), SMA-1 stood at 1.5% (+9bp QoQ) while SMA-2 declined to ~2.1% (+14bp QoQ).
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.