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Bank of Baroda -3Q earnings strong, but upside capped; Maintain Neutral
„Cut PO on macro headwinds; Neutral, as upside capped
BOB reported earnings of Rs10.7bn, up 28% yoy and 15% ahead of our estimate,
driven by a higher-than-estimated top line. Hence, we have raised our earnings
estimates by 10/2/2% for FY11/12/13. While, BOB has shown a marked
improvement in its quality of earnings over the quarters, we believe that re-rating
beyond 1.7x FY12 book (trades at 1.6x FY12 book) might be limited, owing to
persistent macro headwinds and a higher CoE (14% vs. 13% earlier) that we are
assuming. Hence, we retain our Neutral rating and our PO of Rs915.
3Q: Earnings stronger than est. (15% ahead) on top line
BOB reported earnings of Rs10.7bn, +28% yoy growth. The earnings beat was
due to stronger-than-estimated top-line growth (6% ahead) of 43% yoy, driven by
33% loan growth and a sharp rise in margins (up 25bps yoy and 18bps qoq), on
lower funding costs. The margin increase was due to a +40bps yoy rise in
domestic margins (+3.8%). Core fee growth was 19% yoy. CASA share was down
by +180bps yoy and 77bps qoq, to 35.1%. BOB estimated its pension charge at
Rs20.5bn over 5 years and has already provisioned Rs3.1bn over 9MFY11. We,
however, believe there could be upside risks to pension estimates.
Asset quality manageable; slippages under check
Headline NPLs increased by only 2% each (gross and net) qoq. Provision
coverage was at +85%. More importantly, slippages were flat qoq, at Rs2.8bn.
The delinquency (annualized) ratio was at <1.0%. Total restructured loans were
Rs61bn (2.9% of loans). Of this total, Rs5.6bn (~10% of rest. book) has slipped in
to NPLs.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Bank of Baroda -3Q earnings strong, but upside capped; Maintain Neutral
„Cut PO on macro headwinds; Neutral, as upside capped
BOB reported earnings of Rs10.7bn, up 28% yoy and 15% ahead of our estimate,
driven by a higher-than-estimated top line. Hence, we have raised our earnings
estimates by 10/2/2% for FY11/12/13. While, BOB has shown a marked
improvement in its quality of earnings over the quarters, we believe that re-rating
beyond 1.7x FY12 book (trades at 1.6x FY12 book) might be limited, owing to
persistent macro headwinds and a higher CoE (14% vs. 13% earlier) that we are
assuming. Hence, we retain our Neutral rating and our PO of Rs915.
3Q: Earnings stronger than est. (15% ahead) on top line
BOB reported earnings of Rs10.7bn, +28% yoy growth. The earnings beat was
due to stronger-than-estimated top-line growth (6% ahead) of 43% yoy, driven by
33% loan growth and a sharp rise in margins (up 25bps yoy and 18bps qoq), on
lower funding costs. The margin increase was due to a +40bps yoy rise in
domestic margins (+3.8%). Core fee growth was 19% yoy. CASA share was down
by +180bps yoy and 77bps qoq, to 35.1%. BOB estimated its pension charge at
Rs20.5bn over 5 years and has already provisioned Rs3.1bn over 9MFY11. We,
however, believe there could be upside risks to pension estimates.
Asset quality manageable; slippages under check
Headline NPLs increased by only 2% each (gross and net) qoq. Provision
coverage was at +85%. More importantly, slippages were flat qoq, at Rs2.8bn.
The delinquency (annualized) ratio was at <1.0%. Total restructured loans were
Rs61bn (2.9% of loans). Of this total, Rs5.6bn (~10% of rest. book) has slipped in
to NPLs.
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