MOSL: BANK OF BARODA (Buy)-Asset quality outlook improving; earnings to gain traction
Bank of Baroda: Asset quality outlook improving; earnings to gain traction
(BOB IN, Mkt Cap USD5.3b, CMP INR138, TP INR175, 27% Upside, Buy)
- BOB reported net profit of INR5.3b (highest in past six quarters) led by lower than expected credit cost. NII grew by 29% YoY on the back of 12% YoY loan growth and 14bp QoQ margin expansion to 2.65%. Total income grew 12% YoY which coupled with controlled opex enabled PPoP growth of 13% YoY at INR30b.
- Domestic advances grew at robust 19.8% YoY whereas global advances grew by 10% YoY. Domestic loan growth was driven by retail growth of 34% YoY (43% YoY growth in home loans) while domestic corporate portfolio also reported 23% YoY growth. Deposits growth was muted at 2% YoY while CASA ratio stood at 40.8% (Average daily CASA ratio stood at 39.34%). CET-1 ratio stood at 9.27% v/s 9.23% in 4QFY18.
- Slippages moderated to INR47.3b (FY18 quarterly average of INR60.4b) while recoveries/upgrades (INR5.5b/INR25.8b) held strong. GNPA/NNPA thus decreased 1%/5% QoQ to INR558.7b/INR223.8b respectively while PCR improved to ~60% (~69% including write-offs). Watch-list stood at INR86b while non-fund based exposure (not included in the watch-list) stood at INR28.7b. SMA-2 advances declined to 0.94% (v/s 1.19% in 4Q) while resolution of NCLT assets (INR209.5b total, ~63.4% coverage) will aid asset quality recovery in the coming quarters.
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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