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Bank Of Baroda
BLOOMBERG: BOB IN EQUITY | BSE: 532134 | NSE: BANKBARODA
Qualitatively weak performance
Although Bank of Baroda’s (BOB) Q4FY11 profit came in higher than our
expectations, numbers were qualitatively weak in our view. NII included Rs 2.53bn
as interest on tax refund, adjusted for which domestic NIMs fell 12bps QoQ to 3.7%.
A lower effective tax rate of 5% for the quarter, aided by a tax write-back, led to
higher-than-expected net profit growth. Pension provisions for retired employees
stood at Rs 5.5bn in Q4FY11, which, to an extent hurt PPP growth. Slippages during
the quarter stood at Rs 6.06bn (1.52% on an annualised basis), much higher than
those reported in the past few quarters, thus leading to a spike in provisions. Our
earnings estimates for FY12/FY13 stand revised by 8%/7% to reflect the lower
employee expenses as pension liabilities for retired employees have already been
provided for. Maintain BUY with a revised target price of Rs 1100 (1.6x FY12 BV).
Credit growth broad-based; NIMs remained under pressure: Domestic advances
grew 29% and international advances 37% YoY during the quarter (fig 5). Deposits
too grew by 27% YoY while CASA declined marginally to 34% (fig 7). While NII
growth was higher at 14% QoQ, it included Rs 2.53bn of interest on income tax
refund, adjusted for which, NIMs declined 12bps QoQ to 3.7% (fig 10).
Asset quality deteriorates: Fresh slippages increased during the quarter to Rs 6.7bn
(1.52% on an annualised basis; fig 4), leading to higher NPA provisions. Further, the
bank provided for a floating provision of Rs 3bn during the quarter, resulting in
higher provisioning coverage. Gross NPA increased by 14% QoQ to Rs 31.5bn. In
percentage term, gross NPA increased from 1.32% in Q3FY11 to 1.36%.
Other income remained muted; cost rises led by provisions for second pension
liabilities: Other income remained muted with 8% YoY growth during the quarter
led by low core fee based income and lower recoveries from PWO (fig 8). C/I ratio
increased to 43.6% led by a 43% QoQ rise in the employee expenses as the bank
provided for second pension liability provisions of Rs 9.2bn during FY11 (Rs 5.5bn
for retired employees and Rs 3.66bn for current employees). Consequently, AS-15
provisions now stand lower at Rs 3.66bn each for the next four years.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bank Of Baroda
BLOOMBERG: BOB IN EQUITY | BSE: 532134 | NSE: BANKBARODA
Qualitatively weak performance
Although Bank of Baroda’s (BOB) Q4FY11 profit came in higher than our
expectations, numbers were qualitatively weak in our view. NII included Rs 2.53bn
as interest on tax refund, adjusted for which domestic NIMs fell 12bps QoQ to 3.7%.
A lower effective tax rate of 5% for the quarter, aided by a tax write-back, led to
higher-than-expected net profit growth. Pension provisions for retired employees
stood at Rs 5.5bn in Q4FY11, which, to an extent hurt PPP growth. Slippages during
the quarter stood at Rs 6.06bn (1.52% on an annualised basis), much higher than
those reported in the past few quarters, thus leading to a spike in provisions. Our
earnings estimates for FY12/FY13 stand revised by 8%/7% to reflect the lower
employee expenses as pension liabilities for retired employees have already been
provided for. Maintain BUY with a revised target price of Rs 1100 (1.6x FY12 BV).
Credit growth broad-based; NIMs remained under pressure: Domestic advances
grew 29% and international advances 37% YoY during the quarter (fig 5). Deposits
too grew by 27% YoY while CASA declined marginally to 34% (fig 7). While NII
growth was higher at 14% QoQ, it included Rs 2.53bn of interest on income tax
refund, adjusted for which, NIMs declined 12bps QoQ to 3.7% (fig 10).
Asset quality deteriorates: Fresh slippages increased during the quarter to Rs 6.7bn
(1.52% on an annualised basis; fig 4), leading to higher NPA provisions. Further, the
bank provided for a floating provision of Rs 3bn during the quarter, resulting in
higher provisioning coverage. Gross NPA increased by 14% QoQ to Rs 31.5bn. In
percentage term, gross NPA increased from 1.32% in Q3FY11 to 1.36%.
Other income remained muted; cost rises led by provisions for second pension
liabilities: Other income remained muted with 8% YoY growth during the quarter
led by low core fee based income and lower recoveries from PWO (fig 8). C/I ratio
increased to 43.6% led by a 43% QoQ rise in the employee expenses as the bank
provided for second pension liability provisions of Rs 9.2bn during FY11 (Rs 5.5bn
for retired employees and Rs 3.66bn for current employees). Consequently, AS-15
provisions now stand lower at Rs 3.66bn each for the next four years.
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