Bank of Baroda One-offs push asset quality down ACCUMULATE :Emkay

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Bank of Baroda

One-offs push asset quality down

ACCUMULATE

CMP: Rs790                                        Target Price: Rs950

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n     BOB’s Q3FY12 NII at Rs26.6bn / PAT at Rs12.9bn – inline with our estimates. Despite improved recoveries, steep rise in gross slippages (1.5% of loans) warranted higher provisioning

n     Problem loans (GNPA + restructured loan portfolio) now account for 7% of total book. Global NIM at 3.0% (-7bps qoq) was aided by 27bps qoq improvement in international NIM

n     Growth in balance sheet remains satisfactory at 6% qoq (26% yoy). Domestic book witnessed steady 18%+ yoy growth. Adjusted for INR dep., int. book grew by 22%+ yoy levels

n     Deterioration in asset quality was compensated by higher provisioning. Given healthy capital and superior return ratios, we drive comfort at current valuations. ACCUMULATE