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Bank of Baroda (BOB)
Banks/Financial Institutions
No signs of stress. BoB continued its strong performance in 3QFY12 with earnings
growth of 21% yoy driven by healthy balance sheet growth (26% yoy), stable margins
(3%) and strong growth in non-interest income (70% yoy). Slippages and loan
restructuring were higher primarily due to lumpy corporate loans. Healthy coverage,
stable NIM, relatively lower slippages and strong tier-1 are giving us comfort. Valuations
are attractive at 7X FY2013E EPS and 1.2X book for 20% RoE. Maintain BUY.
Going strong; maintain BUY
BoB delivered another consistent quarter with healthy earnings growth of 21% driven by 28%
revenue growth. NII grew 16% yoy (4% qoq) while non-interest income grew 70% yoy primarily
due to one-off benefits from treasury income (gains from mutual funds). Slippages were at 1.6%
as compared to 1% levels in 1HFY12—higher primarily due to slippage from a lumpy corporate
portfolio. Most of the other portfolios have shown improvement over the previous quarter which is
giving us confidence despite the weakening of the underlying macro environment.
We continue to maintain our positive outlook on BoB in the near term as the bank’s loan portfolio
is not seeing any serious signs of stress. Valuations are attractive at 1.2X FY2013E book and 7X
EPS delivering RoEs in the range of 20% levels in the near term. Earnings growth in the near term
is likely to remain subdued as we expect NIMs to decline and LLP to increase from current levels.
We maintain our BUY recommendation but revise our TP to `1,050 (`1,100 earlier) to factor lower
growth, slower fee income growth and higher provisions. We expect the bank to deliver flat 5%
CAGR for FY2012-14E. Sharper-than-expected deterioration in the underlying macro environment
remains a key risk as loan-loss provisions are at 80 bps levels for FY2012-13E.
Loan growth strong at 26%—benefits of currency depreciation, CASA ratio stable
BoB reported loan growth of 26% yoy in 3QFY12 (compared with 24% yoy in 2QFY12 and 25%
in 1QFY12). YTD growth at 14% is probably one of the best among public banks that have
reported till date but the bank has witnessed a positive impact from the currency depreciation.
Domestic loans grew by 19% yoy while loan growth in the international book was 46% yoy. Retail
loans grew 5% yoy, SME loans 27% yoy while the others (corporate) grew by 23% yoy.
Overall deposits grew 24% yoy (domestic deposits at 19% yoy while foreign deposits grew 42%
yoy). CASA in the domestic business was flat qoq at 34%. CD ratio for the quarter improved
marginally to 75% from 73% in September 2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bank of Baroda (BOB)
Banks/Financial Institutions
No signs of stress. BoB continued its strong performance in 3QFY12 with earnings
growth of 21% yoy driven by healthy balance sheet growth (26% yoy), stable margins
(3%) and strong growth in non-interest income (70% yoy). Slippages and loan
restructuring were higher primarily due to lumpy corporate loans. Healthy coverage,
stable NIM, relatively lower slippages and strong tier-1 are giving us comfort. Valuations
are attractive at 7X FY2013E EPS and 1.2X book for 20% RoE. Maintain BUY.
Going strong; maintain BUY
BoB delivered another consistent quarter with healthy earnings growth of 21% driven by 28%
revenue growth. NII grew 16% yoy (4% qoq) while non-interest income grew 70% yoy primarily
due to one-off benefits from treasury income (gains from mutual funds). Slippages were at 1.6%
as compared to 1% levels in 1HFY12—higher primarily due to slippage from a lumpy corporate
portfolio. Most of the other portfolios have shown improvement over the previous quarter which is
giving us confidence despite the weakening of the underlying macro environment.
We continue to maintain our positive outlook on BoB in the near term as the bank’s loan portfolio
is not seeing any serious signs of stress. Valuations are attractive at 1.2X FY2013E book and 7X
EPS delivering RoEs in the range of 20% levels in the near term. Earnings growth in the near term
is likely to remain subdued as we expect NIMs to decline and LLP to increase from current levels.
We maintain our BUY recommendation but revise our TP to `1,050 (`1,100 earlier) to factor lower
growth, slower fee income growth and higher provisions. We expect the bank to deliver flat 5%
CAGR for FY2012-14E. Sharper-than-expected deterioration in the underlying macro environment
remains a key risk as loan-loss provisions are at 80 bps levels for FY2012-13E.
Loan growth strong at 26%—benefits of currency depreciation, CASA ratio stable
BoB reported loan growth of 26% yoy in 3QFY12 (compared with 24% yoy in 2QFY12 and 25%
in 1QFY12). YTD growth at 14% is probably one of the best among public banks that have
reported till date but the bank has witnessed a positive impact from the currency depreciation.
Domestic loans grew by 19% yoy while loan growth in the international book was 46% yoy. Retail
loans grew 5% yoy, SME loans 27% yoy while the others (corporate) grew by 23% yoy.
Overall deposits grew 24% yoy (domestic deposits at 19% yoy while foreign deposits grew 42%
yoy). CASA in the domestic business was flat qoq at 34%. CD ratio for the quarter improved
marginally to 75% from 73% in September 2011.
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