MOSL: BANK OF BARODA (Buy)-Elevated provisions lead to losses-balance sheet clean-up continues

Bank of Baroda: Elevated provisions lead to losses; balance sheet clean-up continues

(BoB IN, Mkt Cap USD5.8b, CMP INR141, TP INR163, 15% Upside, Buy)

• Bank of Baroda (BoB) reported a loss of INR31b v/s a profit of INR1.6b in 4QFY17, led by elevated opex (gratuity provisions and depreciation on revaluation of fixed assets) and provisions. Elevated NPL provisions (6.8% credit costs annualized) were on account of high slippages (12.3% annualized). PPoP came in at INR26.7b (-11.7% YoY), led by low other income (down 14.2% YoY due to weak treasury income) and high opex (up 25.5% QoQ) due to a rise in depreciation expense and gratuity provisions.
• NII growth came in at 12% YoY on the back of 12% YoY loan growth and 34bp YoY expansion in NIM to 2.51%. Interest income reversal for the quarter was INR1.7b (INR5.9b for FY18), and interest on income tax refund came in at INR1.3b.
• Slippages were elevated at INR125.7b (annualized slippage ratio of 12.3% v/s 5.5% in 3Q) v/s INR56.3b in 3Q, with INR82b of slippages from the corporate book and ~INR13.7b of slippages from the international book.
• While recoveries/upgrades were subdued at INR14.8b/INR10.8b, write-offs were elevated at INR20b. GNPA/NNPA increased 17%/18% QoQ to INR565b/INR235b. In percentage terms, GNPA/NNPA stood at 12.27%/5.49% (+95bp/+52bp QoQ).