Bank of Baroda Share Price on Hike as Brokerages Remain Positive Post-Q4 Results

Bank of Baroda (BoB) shares witnessed a surge of over 2% in early trading today morning, as brokerages affirmed their optimistic outlook on the PSU lender following its Q4 results. BoB shares rebounded from a drop of over 2% on Friday following the release of its Q4 earnings. 

The state-run Bank of Baroda reported a steady performance in its latest quarter, with both net profit and net interest income (NII) showing a 2.3% year-over-year (YoY) increase. The bank's Global Net Interest Margin (NIM) improved sequentially by 17 basis points (bps) to reach 3.27% in Q4FY24. Bank of Baroda's provisions remained elevated due to its aviation exposure. Loan growth remained robust at 15% YoY, and the bank anticipates loan growth of 12-14% in FY25. Deposit growth was also strong, accompanied by an improved CASA mix. Slippages experienced a notable increase from 1.1% to 1.3% quarter-over-quarter (QoQ), primarily driven by higher MSME and agricultural slippages. 

Brokerages remained optimistic about the bank's prospects following its Q4FY24 results, which met expectations. Analysts believe the stock's current valuation offers an attractive entry point for potential growth. Since the beginning of the year, BoB shares have outperformed the benchmark Nifty 50 index, rising over 10% compared to the index's 1.5% gain.

JPMorgan analysts have upgraded their rating on BoB to 'overweight' and increased their target price to ₹340 per share, suggesting a potential 33% gain from its current market value. They noted that BoB's fourth-quarter profit surpassed expectations despite the impact of wage revisions, while net slippages remained low at 45 basis points in the March quarter. 

Motilal Oswal analysts maintained a 'buy' recommendation for BoB, retaining their target price at ₹300 per share. They highlighted BoB's stable quarterly performance, leading them to adjust their FY25/FY26 EPS estimates upward by 1.9%/2.8%. The analysts forecast an FY26 Return on Assets (RoA) of 1.22% and a Return on Equity (RoE) of 17.3%.

BoB's asset quality demonstrates resilience, evidenced by a decline in gross non-performing assets (NPAs) to 2.92% in Q4FY24 from 3.79% a year earlier. Net NPAs have also improved, dropping to 0.68% compared to 0.89% in the previous year.

Kotak Institutional Equities analysts observed that the bank's asset quality remains strong, with FY24 slippages at 1.4%, not causing worries about portfolio strain. They retain a 'buy' rating with a target price of ₹280 per share. However, Bank of Baroda's net interest margin shrank to 3.18% in Q4FY24 from 3.31% in the previous year due to increased funding costs. On the other hand, it expanded by 17 basis points on a quarterly basis.

In the fourth quarter of fiscal year 24, Bank of Baroda's total domestic deposits experienced a year-over-year increase of 7.7%. Domestic advances for the same period saw a 12% year-over-year growth, and looking ahead, the management anticipates a loan growth of 12-14% and a deposit growth of 10-12%.

Nuvama analysts maintain that BoB is trading at a lower valuation than SBI. They justify this discount by citing SBI's superior liquidity position (lower loan-to-deposit ratio), higher asset quality, and lower earnings variability compared to BoB. They assert that BoB's loan-to-deposit ratio remains elevated among state-owned banks, and thus recommend a 'hold' rating with a target price of ₹255 per share.