Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Bank of Baroda (BOB.BO)
Buy Equity Research
Above expectations on higher NII; maintain Buy
What surprised us
Bank of Baroda (BOB) reported 3QFY11 PAT of Rs10.7bn (up 28% yoy) 9%
ahead of GSe on higher NII and other income. Highlights: (1) strong NII at
Rs22.9bn, up 43% yoy (+12% vs. GSe), buoyed by a 20bp qoq uptick in domestic
NIMs to 3.82%, by higher investment income, LDR, domestic CASA of 35% and
credit growth of 33% yoy (5% ahead of GSe). We believe margins have reached
their peak and should decline in FY12, given the significant increase in deposit
rates in recent months; (2) non-interest income was 17% ahead of Gse driven by
higher FX income and trading gains, while fee income grew by a muted 6% yoy,
an area of disappointment, in our view; (3) employee costs were in line;
management indicated BoB will need to provide Rs20.6bn for pension liability
over five years; this is in addition to the Rs4bn made in FY10 and Rs2.57bn in
FY11. However, this does not factor in the recently concluded 17% wage hike for
employees, which could cost the bank an additional Rs4bn or 10% of PBT. We
are waiting management’s clarification on this, and have not factored this into
our estimates; (4) total provisions were 23% higher than GSe on MTM hit of
about Rs500mn in 3Q. Loan loss provisions were in line at 0.5% of loans, while
gross/net NPLs remained stable. The annualized slippage ratio was low at 0.7%,
but restructured loans grew 11% qoq to Rs 60.5bn (2.9% of loans), with
cumulative slippage from restructured loans (in >Rs10 mn accounts) at Rs5.6 bn
(9.3% of total).
What to do with the stock
We raise our FY11E/12E/13E EPS by 3%-5% to Rs111.33/Rs118.74/Rs144.42
to factor in higher NII, partially offset by higher costs and lower fees. We
retain our 12-m CAMELOT-based TP of Rs 1,110, target multiple
unchanged. Maintain our Buy rating, given reasonable valuations (FY12
P/B: 1.5X) for relatively high ROE (22%). Risks: MTM hit, macro headwinds.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Bank of Baroda (BOB.BO)
Buy Equity Research
Above expectations on higher NII; maintain Buy
What surprised us
Bank of Baroda (BOB) reported 3QFY11 PAT of Rs10.7bn (up 28% yoy) 9%
ahead of GSe on higher NII and other income. Highlights: (1) strong NII at
Rs22.9bn, up 43% yoy (+12% vs. GSe), buoyed by a 20bp qoq uptick in domestic
NIMs to 3.82%, by higher investment income, LDR, domestic CASA of 35% and
credit growth of 33% yoy (5% ahead of GSe). We believe margins have reached
their peak and should decline in FY12, given the significant increase in deposit
rates in recent months; (2) non-interest income was 17% ahead of Gse driven by
higher FX income and trading gains, while fee income grew by a muted 6% yoy,
an area of disappointment, in our view; (3) employee costs were in line;
management indicated BoB will need to provide Rs20.6bn for pension liability
over five years; this is in addition to the Rs4bn made in FY10 and Rs2.57bn in
FY11. However, this does not factor in the recently concluded 17% wage hike for
employees, which could cost the bank an additional Rs4bn or 10% of PBT. We
are waiting management’s clarification on this, and have not factored this into
our estimates; (4) total provisions were 23% higher than GSe on MTM hit of
about Rs500mn in 3Q. Loan loss provisions were in line at 0.5% of loans, while
gross/net NPLs remained stable. The annualized slippage ratio was low at 0.7%,
but restructured loans grew 11% qoq to Rs 60.5bn (2.9% of loans), with
cumulative slippage from restructured loans (in >Rs10 mn accounts) at Rs5.6 bn
(9.3% of total).
What to do with the stock
We raise our FY11E/12E/13E EPS by 3%-5% to Rs111.33/Rs118.74/Rs144.42
to factor in higher NII, partially offset by higher costs and lower fees. We
retain our 12-m CAMELOT-based TP of Rs 1,110, target multiple
unchanged. Maintain our Buy rating, given reasonable valuations (FY12
P/B: 1.5X) for relatively high ROE (22%). Risks: MTM hit, macro headwinds.
No comments:
Post a Comment