Bank of Baroda | Q3FY15 Result Update | Disappointing quarter with higher slippages. all negatives priced in, maintain BUY with target price of Rs 247 ::IndiaNivesh

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Bank of Baroda reported lower than expected results on all fronts with Net Interest income of Rs 32.9 bn (vs expectation of Rs 34.6 bn) led by higher slippages. Operating profit came in at Rs 23.4 bn led by lower than expected growth in NII partly offset by higher other income of Rs 10.9 bn (up 17% yoy). Higher provisioning expense (up 66% yoy) and one off expense of Rs 4.1 bn led to significant decline in Net profit to Rs 3.3 bn. Even adjusted net profit (adjusted for one off tax expense of Rs 4.1 bn) was lower by 43% from our expectation. Asset quality deteriorated with higher fresh slippages of Rs 30.4 bn vs Rs 17.6 bn in Q2FY15 and fresh restructuring of Rs 16 bn vs Rs 11.8 bn. Gross / Net NPA was up 18% / 24% qoq and 47 / 37 bps qoq to 3.9% / 2.1%. We are lowering our earnings estimates by 20-25% for FY15E and FY16E and introducing FY17E earnings. We believe current valuation of 1.2x for FY17E are reasonable and factor in all negatives. Hence continue to maintain buy with target price of Rs 247, valuing it at 1.5x for FY17E ABV. Result update Loan growth continues to moderate: BOB’s loan growth was lower at 12% yoy to Rs 3936 bn led by higher growth in Agriculture (up 34% yoy and 16% qoq) and retail loan book (14% yoy and 3% qoq). Corporate loan book de grew by 7% yoy mainly due conscious decision of not growing in risky segments. Proportion of Wholesale (corporate) advances has come down from 19% in Q2FY15 to 18% in Q3FY15.

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