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MOSL: BANK OF BARODA (Buy)-Strong operating performance-asset quality improves sharply

Bank of Baroda: Strong operating performance; asset quality improves sharply

(BOB IN, Mkt Cap USD6.2b, CMP INR126, TP INR150, 19% Upside, Buy)

 

• BOB reported a loss of INR9.9b, dragged by higher provisions of INR54b, as the bank accelerated provisions toward a few large stressed accounts like Videocon, RCom etc. For FY19, PPoP grew 12% to INR135b, while PAT declined to INR4.3b owing to higher provisions (credit cost of ~2.7%).
• NII increased 27% YoY to INR50.7b in the quarter, led by healthy domestic loan growth and one-offs on account of income tax refund of INR2.0b. Thus, the global NIM improved by 21bp QoQ to 2.9%, while the domestic NIM expanded by 32bp QoQ to 3.1%.
• Domestic loan growth came in at 14.2% YoY to INR3.7t, led by retail loans (+24.2% YoY). Within retail, home/auto loan growth was at 22.1%/49.4% YoY, whereas SME loan growth was muted at 7.2% YoY. Total deposits grew by 8.0% YoY to INR6.4t, taking the domestic CD ratio to 71.5%. Domestic CASA ratio improved by 26bp QoQ to 40.2%.
• Fresh slippages inched up to INR31.9b, of which INR5.3b was due to the IL&FS Group, leading to an annualized slippage ratio of 3.3%. Write-offs for the quarter came in at INR67.5b, leading to a decline of 140bp/ 93bp QoQ in the GNPA/NNPA ratio to 9.6%/3.3%. PCR including TWO stood at 78.7%.