Q2 Earnings report: Can Bank of Baroda sustain the stellar Q1 performance?

In the last three-months stock has rallied from Rs 78 to Rs 103.60 today, registering a return of 36.17%.

Bank of Baroda is an Indian multinational, public sector banking and financial services company. It currently has 8,192 branches in India and 99 overseas offices across 20 countries. The bank merged with Vijaya Bank and Dena Bank, effective 1st April 2019.

In the last three months stock has rallied from Rs 78 to Rs 103.60 today, registering a three-month return of 36.17%. This has happened exactly after Q1-results are out.

For Q1FY22, Net Interest income grew 15.8% YoY as domestic NIM improved 53bps YoY to 3.12%. This growth was mainly attributable to the decline in interest expenses to Rs 9,161 crore (-21.6% YoY), even as interest income de-grew 7.8% to Rs 17,053 crore.

Operating profit before provisions reached Rs 5,707 crore (+32.1% YoY). GNPA/NNPA was stable QoQ at 8.86%/3.03%. Domestic Deposits and Domestic Advances were down 2.4% and 2.3% sequentially. Access to low-cost borrowings and sufficient liquidity will help improve income growth as the credit demand returns.

Transfer NPAs to a bad bank to lower broad NPA numbers and aid recovery. Recent outlook upgrade by Moody’s on the Indian banking system to impact positively on Bank of Baroda as well.

Domestic Loan Book

Presently, corporate advances account for 46% of the loan book, followed by retail (21%), Agriculture (15%), MSME (15%) and others (3%).

Retail Book - Home loans account for 66% of the retail book, followed by auto loans (17%), others (12%) and education loans (5%).

International Business

International banking accounts for nearly 15% of the total business of the bank. It has achieved success in markets like East Africa. It has 101 overseas branches/offices across 21 countries. It operates in the UK, New Zealand, Kenya, Uganda, Guyana, Tanzania, Ghana, Botswana, Zambia, Malaysia and other countries. The Bank has one joint venture viz. India International Bank (Malaysia) Bhd. in Malaysia and one associate bank viz. Indo Zambia Bank Ltd. in Zambia with 30 branches.

Today, there is movement in stock price, at 2.50 PM stock is down by 4.70% in the anticipation of Q2-results. The company is reporting Q2-results at 4 PM today evening, 10 November 2021.

We have to wait and watch whether the company can carry the momentum with Q2-performance.