17th November, 2023

Q2FY24 RESULT UPDATE

Retail Equity Research

Bank of Baroda BUY
Banking 12 Months Investment Period Rating as per Large Cap
BSE CODE: 532134 NSE CODE: BANKBARODA CMP Rs. 198 TARGET Rs. 222 RETURN 12%
(Closing: 16-11-23)
Bloomberg CODE: BOB:IN SENSEX: 65,982

KEY CHANGES: TARGET RATING EARNINGS

Strong loan book and resilient fee income Company Data

Bank of Baroda (BoB) is a public-sector banking and financial services Market Cap (cr) Rs.102,238
company in India. It has 8,205 branches in India and 93 offices in 17 foreign Outstanding Shares (cr) 517.1
countries. Free Float 36.0%
• In Q1FY24, net interest income (NII) increased 6.4% YoY to Rs 10,831cr, Dividend Yield 2.7%
led by strong growth in high-yield loans and advances. 52 week high Rs.220
• The bank’s asset quality improved, with gross non-performing assets 52 week low Rs.147
(NPAs) and net NPAs declining to 3.32% and 0.76%, respectively (vs. 6m average volume 993,575
5.31% and 1.16% in Q2FY23). Beta 1.4
• BoB recorded strong growth in profitability, supported by growth in NII Face value Rs.2
and advances, with strong loan growth across all business lines. Also, Shareholding % Q4FY23 Q1FY24 Q2FY24
fee income contributed significantly to profitability and compensated Promoters 64.0 64.0 64.0
for downward pressure on the margin. Furthermore, the quality of FII’s 10.9 12.3 12.4
assets has continued to improve, which will lead to sustainable growth MFs/Insti 17.0 16.0 16.0
in the future. We reiterate our BUY rating on the stock with a revised
Public 7.8 7.5 7.4
target price of Rs. 222, based on 0.88x FY25E BVPS.
Others 0.3 0.2 0.2
Non-interest income boosts earnings growth Total 100.0 100.0 100.0
In Q1FY24, BoB’s interest income grew 31.1% YoY to Rs. 27,862cr, driven by robust Promoters’ pledge 0.0 0.0 0.0
growth in retail loans (+22.2% YoY) and corporate loans (+16.5% YoY). At the same Price Performance 3 Month 6 Month 1 Year
time, interest expense rose 53.7% YoY to Rs. 17,031cr, as global deposits grew 14.6% Absolute Return 1.0% 4.3% 20.8%
YoY along with a rise in cost of deposits (4.92% in Q2FY24 vs 3.59% in Q2FY23). As a Absolute Sensex -1.5% 6.4% 6.1%
result, NII increased a decent 6.4% YoY to Rs. 10,831cr, while net interest margin
Relative Return* 2.5% -2.1% 14.6%
(NIM) dipped to 3.19% (vs. 3.41 in Q2FY23). Further, pre-provision operating profit
*over or under performance to benchmark index
grew 33.0% YoY to Rs. 8,020cr, as non-interest income grew substantially 128.5% YoY
to Rs. 4,171cr, supported by higher fee income. Consequently, adjusted profit after tax
(PAT) rose 28.4% YoY to Rs. 4,253cr. 230 BANKBARODA Sensex Rebased

Key concall highlights 210

• The bank has lowered its NIM guidance to ~3.15%, as deposits would be repriced 190
at higher costs in H2FY24. 170
• BOB has also maintained its guidance for advances to grow 14-16% in FY24,
150
where retail loan book is expected to grow within 20-22% and corporate loan
book within 12-13%. 130
Nov-22 Feb-23 May-23 Aug-23 Nov-23
Asset quality continues to improve
Growth in global advances was mainly driven by retail loan book growth, of which Standalone (cr) FY23A FY24E FY25E
home loan, auto loan grew and personal grew 16.1%, 21.1% and 67.2% YoY, Net Interest Income 41,356 46,247 51,394
respectively. Despite high fresh slippages, asset quality has improved significantly, Growth (%) 26.8 11.8 11.1
with GNPA falling 26.7% YoY to Rs. 33,968cr, while the ratio dropped to 3.3% from NIM (%) 3.5 3.3 3.2
5.3% in Q2FY23. Net NPA also declined 21.5% YoY to Rs. 7,597cr, and its ratio declined Pre-Provision Profit 26,864 31,303 35,564
to 0.76% from 1.16% in Q2FY23. Provision coverage ratio was good at 93.2%. Capital
Net Profit 14,110 17,557 20,319
adequacy ratio was 15.30%, and the tier-I ratio was 13.19%, well above the regulatory
Growth (%) 94.0 24.4 15.7
requirements.
Adj.EPS 27.3 34.0 39.3
Valuation Growth (%) 94.0 24.4 15.7
BoB is well-positioned for strong growth in NII, driven by the expanding loan book. BVPS 189.9 218.4 250.9
While margins are expected to remain under pressure, due to the repricing of deposits P/E 6.0 5.6 4.9
at higher costs, the bank’s fee income traction is expected to continue, as evidenced in P/B 0.9 0.9 0.8
the current quarter. This robust fee income growth is poised to offset the margin RoE (%) 15.3 16.6 16.7
pressure, ultimately sustaining a healthy ROA. Additionally, BoB’s continued RoA (%) 1.0 1.1 1.1
improvement in asset quality augurs well for its sustainable growth and stability.
Hence, we reiterate our BUY rating on the stock with a revised target price of Rs. 222,
using a target multiple of 0.88x on FY25E BVPS.

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Quarterly Financials (Standalone)
Profit & Loss Account
YoY QoQ YoY
Q2FY24 Q2FY23 Q1FY24 H1FY24 H1FY23
Growth % Growth % Growth %
Interest Income 27,862 21,254 31.1 26,556 4.9 54,417 40,192 35.4
Interest Expense 17,031 11,080 53.7 15,559 9.5 32,590 21,179 53.9
Net Interest Income (NII) 10,831 10,174 6.4 10,997 (1.5) 21,827 19,013 14.8
Non-Interest Income 4,171 1,826 128.5 3,322 25.6 7,493 3,008 149.1
Total Net Income 15,002 12,000 25.0 14,319 4.8 29,321 22,021 33.2
Total Income 32,033 23,080 38.8 29,878 7.2 61,911 43,200 43.3
Operating Expenses 6,982 5,969 17.0 6,495 7.5 13,477 11,462 17.6
Total Expenditure 24,013 17,049 40.8 22,054 8.9 46,067 32,641 41.1
Pre-Provision Profit 8,020 6,031 33.0 7,824 2.5 15,844 10,558 50.1
Provisions 2,161 1,627 32.8 1,947 11.0 4,107 3,312 24.0
Profit Before Tax 5,859 4,403 33.1 5,878 (0.3) 11,737 7,246 62.0
Tax 1,606 1,090 47.4 1,807 (11.1) 3,414 1,765 93.4
Minority Interests - - - - - - - -
Net Profit 4,253 3,313 28.4 4,070 4.5 8,323 5,482 51.8
Adj. - - - - - - - -
Adj. PAT 4,253 3,313 28.4 4,070 4.5 8,323 5,482 51.8
Adj. EPS (Rs.) 8.2 6.4 28.2 7.9 4.4 16.1 10.6 51.8

Change in Estimates
Old estimates New estimates Change %
Year / Rs. cr FY24E FY25E FY24E FY25E FY24E FY25E
Net Interest Income (NII) 46,264 53,139 46,247 53,206 (0) 0.1
Net Interest Margin (%) 3.3 3.3 3.3 3.4 (0) 0.1
Pre-Provision Profit 30,503 35,327 31,303 36,852 2.6 4.3
Net Profit 16,964 20,143 17,557 21,272 3.5 5.6
EPS (Rs) 32.8 39.0 34.0 41.1 3.5 5.6

Business Performance

YoY Growth
Q2FY24 Q2FY23 Q1FY24 QoQ Growth %
%
Advances 997,995 836,591 19.3 963,491 3.6
Deposits 1,249,647 1,090,172 14.6 1,199,908 4.1
Business 2,247,642 1,926,763 16.7 2,163,399 3.9
Gross NPA 33,968 46,374 (26.8) 34,832 (2.5)
Net NPA 7,597 9,672 (21.5) 7,482 1.5

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PROFIT & LOSS BALANCE SHEET
Y.E March (Rs. Y.E March
FY21A FY22A FY23A FY24E FY25E FY21A FY22A FY23A FY24E FY25E
cr) (Rs. cr)
Interest Cash &
70,495 69,881 89,589 115,896 128,686 120,413 122,655 95,703 110,982 129,200
Income Balances
Interest Exp. 41,686 37,259 48,233 69,648 77,293
Net Int. Investments 261,220 315,795 362,485 405,984 450,642
28,809 32,621 41,356 46,247 51,394
Income
% Change 4.9 13.2 26.8 11.8 11.1 Advances 706,301 777,155 940,998 1,079,796 1,236,366
Non-Int.
12,934 11,484 10,026 13,034 14,989
Income Fixed Assets 8,016 9,922 8,707 8,358 8,024
Net Income 41,743 44,105 51,382 59,281 66,382
Total Income 83,429 81,365 99,614 128,929 143,675 Other Assets 59,415 52,472 50,668 52,188 54,276
Operating Exp. 20,544 21,716 24,518 27,978 30,818
Total Assets 1,155,365 1,278,000 1,458,562 1,657,307 1,878,507
Total Exp. 62,230 58,976 72,751 97,626 108,111
Pre-Prov.
21,199 22,389 26,864 31,303 35,564 Capital 1035.53 1035.53 1035.53 1035.53 1035.53
Profit
Provisions 15,643 13,002 7,137 7,578 8,107
Reserves &
PBT 5,556 9,386 19,727 23,725 27,457 76,010 84,874 97,187 111,900 128,707
Surplus
Tax 4,727 2,114 5,617 6,169 7,139
Deposits 966,997 1,045,939 1,203,688 1,366,186 1,547,205
Tax Rate (%) 85.1 22.5 28.5 26.0 26.0
Minority
0 0 0 0 0 Borrowings 66,848 103,899 101,910 114,140 127,266
Interests
Net Profit 829 7,272 14,110 17,557 20,319 Other
44,474 42,252 54,740 64,046 74,294
% Change 51.8 777.3 94.0 24.4 15.7 Liabilities
Adj. 0 0 0 0 0 Total
1,155,365 1,278,000 1,458,562 1,657,307 1,878,507
Liabilities
Adj. Net Profit 829 7,272 14,110 17,557 20,319
No. of Shares BVPS (Rs.) 165.4 166.1 189.9 218.4 250.9
517 517 517 517 517
(cr)
Adj. EPS (Rs.) 1.8 14.1 27.3 34.0 39.3 Adj. BVPS
118.6 140.3 173.7 205.9 238.9
(Rs.)
% Change 74.5 690.0 94.0 24.4 15.7
DPS (Rs.) 0.0 2.9 5.5 6.8 7.9 % Change 26.3 18.3 23.8 18.5 16.1

RATIOS

Y.E March FY21A FY22A FY23A FY24E FY25E

Valuation
P/E (x) 41.7 7.9 6.0 5.6 4.9
P/BV (x) 0.4 0.7 0.9 0.9 0.8
Div. Yield (%) 0.0 2.6 3.4 3.6 4.1
Profitability & Return (%)
Yield on Advances 7.2 6.6 7.5 8.5 8.3
Cost of Deposits 4.0 3.4 3.9 5.0 4.9
Spread 3.1 3.2 3.5 3.5 3.4
NIM 3.0 3.2 3.5 3.3 3.2
ROE 1.1 8.9 15.3 16.6 16.7
ROA 0.1 0.6 1.0 1.1 1.1
Capital Adequacy (%)
CAR 15.0 15.7 16.2 16.2 16.1
Tier I 12.7 13.2 14.0 14.2 14.4
Tier II 2.3 2.5 2.3 2.0 1.7
Asset Quality (%)
GNPA 8.9 6.6 3.8 2.9 2.6
NNPA 3.1 1.7 0.9 0.6 0.4
Operating Ratios (%)
Credit/Deposit 73.0 74.3 78.2 79.0 79.9
Cost/Income 49.2 49.2 47.7 47.2 46.4
CASA 40.2 44.2 42.3 39.5 39.5

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Recommendation Summary (Last 3 Years) Dates Rating Target
3-Nov-20 HOLD 48
250 3-Feb-21 HOLD 81
200 13-Aug-21 HOLD 87
14-Feb-22 BUY 136
150 2-Aug-22 BUY 144
8-Feb-23 HOLD 182
100
17-Aug-23 BUY 217
50 17-Nov-23 BUY 222

0
Nov-20 May-21 Nov-21 May-22 Nov-22 May-23 Nov-23
Source: Bloomberg, Geojit research
Investment Rating Criteria
Ratings Large caps Midcaps Small Caps
Buy Upside is above 10% Upside is above 15% Upside is above 20%
Accumulate - Upside is between 10%-15% Upside is between 10%-20%
Hold Upside is between 0% - 10% Upside is between 0%-10% Upside is between 0%-10%
Reduce/sell Downside is more than 0% Downside is more than 0% Downside is more than 0%
Not rated/Neutral
Definition:
Buy: Acquire at Current Market Price (CMP), with the target mentioned in the research note; Accumulate: Partial buying or to accumulate as CMP dips in the future; Hold: Hold the stock with the expected
target mentioned in the note.; Reduce: Reduce your exposure to the stock due to limited upside.; Sell: Exit from the stock; Not rated/Neutral: The analyst has no investment opinion on the stock.
To satisfy regulatory requirements, we attribute ‘Accumulate’ as Buy and ‘Reduce’ as Sell.
The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation
in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/ return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock
always carries the risk of being upgraded to BUY or downgraded to a HOLD, REDUCE or SELL.
Not rated/Neutral- The analyst has no investment opinion on the stock under review
DISCLAIMER & DISCLOSURES
Certification: I, Vinod T P, author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject issuer or securities.
This report has been prepared by the Research Team of Geojit Financial Services Limited, hereinafter referred to as Geojit.
For General disclosures and disclaimer: Please Visit : https://www.geojit.com/research-disclosures#fundamental-research
CRISIL has provided research support in preparation of this research report and the investment rational contained herein along with financial forecast. The target price and recommendation
provided in the report are strictly Geojit’s views and are NOT PROVIDED by CRISIL. Further, CRISIL expresses no opinion on valuation and the associated recommendations. CRISIL has no
financial liability whatsoever, to the subscribers / users of this report.
Regulatory Disclosures:
Group companies of Geojit Financial Services Limited are Geojit Technologies Private Limited (Software Solutions provider), Geojit Credits Private Limited (NBFC), Geojit Investment Limited
(financial Services Company ( yet to start operations)), Geojit Techloan Private Ltd( P2P lending (yet to start operations)), Geojit IFSC Ltd ( a company incorporated under IFSC Regulations(
yet to start operations)), Qurum Business Group Geojit Securities LLC ( a joint venture in Oman engaged in Financial Services ), Barjeel Geojit Financial Services LLC (a joint venture in UAE
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In compliance with the above mentioned SEBI Regulations, the following additional disclosures are also provided which may be considered by the reader before making an investment
decision:
1. Disclosures regarding Ownership:
Geojit confirms that:
It/its associates have no financial interest or any other material conflict in relation to the subject company (ies) covered herein.
It/its associates have no actual beneficial ownership of 1% or more in relation to the subject company (ies) covered herein.
Further, the Analyst confirms that:
(i) He, his associates and his relatives have no financial interest in the subject company (ies) covered herein, and they have no other material conflict in the subject company.
(ii) He, his associates and his relatives have no actual/beneficial ownership of 1% or more in the subject company covered.
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During the past 12 months, Geojit or its Associates:
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investment banking or merchant banking or brokerage services from the subject company (e) Have not received any compensation or other benefits from the subject company or third party
in connection with the research report (f) The subject company is / was not a client during twelve months preceding the date of distribution of the research report.
3. Disclosure by Geojit regarding the compensation paid to its Research Analyst:
Geojit hereby confirms that no part of the compensation paid to the persons employed by it as Research Analysts is based on any specific brokerage services or transactions pertaining to
trading in securities of companies contained in the Research Reports.
4. Disclosure regarding the Research Analyst’s connection with the subject company:
It is affirmed that I, Vinod T P, Research Analyst (s) of Geojit have not served as an officer, director or employee of the subject company
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Neither Geojit/its Analysts have engaged in market making activities for the subject company.
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customercare@geojit.com. Compliance officer: Ms. Indu K. Address: Geojit Financial Services Limited, 34/659 P, Civil Lane Road, Padivattom, Kochi – 682024; Phone: +91 484-2901367;
Email: compliance@geojit.com. For grievances: Grievance Officer: Mr Nitin K; Address: Geojit Financial Services Limited,34/659 P, Civil Lane Road, Padivattom, Kochi – 682024; Phone: +91
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(Composite) No.: CA0226.
VINOD T P
Digitally signed by VINOD T P
Date: 2023.11.17 11:02:20
+05'30'

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