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Remarks: Bank of Baroda stands out among the PSU banks as it continues to deliver strong earnings growth with
improvement in key operational metrics. The bank’s business growth is expected to remain better than
industry’s (contributed by stronger overseas growth) with relatively stable margins which will lead to a healthy
growth in the top line.
While the asset quality of most PSU banks has deteriorated significantly over the past two to three quarters,
BoB’s asset quality has remained healthy due to lower slippages. Although, the asset quality risks have risen
due to weak macro environment and policy issues, yet BoB is expected to fare better than the other PSU
banks in terms of asset quality, resulting in lower credit cost and higher growth in earnings.
The operating metrics of BoB has improved significantly led by strong focus on CASA, margins, fee income etc.
The bank is expected to post RoE and RoA of around 20% and 1.1% respectively over the next two years.
We believe BoB commands a premium over the other PSU banks due to a steady growth in its core income and
a healthy asset quality. Currently, the stock is trading at 1.2x FY2013 book value which is reasonable. We
recommend a Buy on the stock with a price target of Rs1,065.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Remarks: Bank of Baroda stands out among the PSU banks as it continues to deliver strong earnings growth with
improvement in key operational metrics. The bank’s business growth is expected to remain better than
industry’s (contributed by stronger overseas growth) with relatively stable margins which will lead to a healthy
growth in the top line.
While the asset quality of most PSU banks has deteriorated significantly over the past two to three quarters,
BoB’s asset quality has remained healthy due to lower slippages. Although, the asset quality risks have risen
due to weak macro environment and policy issues, yet BoB is expected to fare better than the other PSU
banks in terms of asset quality, resulting in lower credit cost and higher growth in earnings.
The operating metrics of BoB has improved significantly led by strong focus on CASA, margins, fee income etc.
The bank is expected to post RoE and RoA of around 20% and 1.1% respectively over the next two years.
We believe BoB commands a premium over the other PSU banks due to a steady growth in its core income and
a healthy asset quality. Currently, the stock is trading at 1.2x FY2013 book value which is reasonable. We
recommend a Buy on the stock with a price target of Rs1,065.
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