Shares of the public sector lender, Bank of Baroda, have rallied 18.50% in the last one month to hit a new 52-week high of ₹174.2 on December 02. YTD, the stock surged from ₹81.95 to the current level of ₹171.20, delivering an astounding return of 108.90%, which is 46.75% higher than the Nifty PSU Bank Index, which returned 62.15% during the same time. With this outstanding performance, the stock ranked as the index's second-highest gainer.
At current levels, the stock is trading 122.19% above its 52-week low of Rs. 77. The latest up move in the stock started on November 05 after the bank released its September quarter numbers, which exceeded analyst estimates. Since its Q2 announcement, the stock has almost experienced a one-way spike, returning 18.43% to its shareholders.
The bank's net profit has been steadily growing over the past five quarters. In the second quarter of the last fiscal year, the bank posted a standalone net profit of ₹2,088 crore, crossing the ₹2,000 crore mark for the first time. The bank maintained this pattern for the following four quarters.
The state-run lender reported an impressive 59% increase in its net profit for the September quarter, reaching ₹3,313 crore and surpassing the ₹3,000 mark for the first time. This increase was driven by a fall in bad loans and an increase in net interest income.
The bank's net interest income grew by 34.5 percent to ₹10,714 crore during the quarter while the net interest margin rose to 3.33 percent at the end of September 2022.
On the asset quality side, the gross non-performing assets of the bank came down to 5.31 percent of the gross advances in Q2 FY23, from 8.11 percent in the year-ago period, while the net NPAs fell to 1.16 percent from 2.83 percent.
Due to the fall in NPAs, the provisions for bad loans and contingencies declined to ₹1,627.46 crore for the quarter from ₹2,753.59 crore a year ago.
In its most research report, domestic brokerage firm, Ashika Stock Broking maintained a bullish view on the stock. The brokerage says that the bank has always outperformed its peers (ex-SBI) on the majority of parameters and is one of the best-managed PSU banks.
The GNPA ratios of BOB spiked to 12.3% in FY18 from a mere 1.5% in FY12, but have since then come down gradually to 6.6% in FY22 and further to 5.31% as of Q2 FY23, it says.
The brokerage noted that the bank has one of the lowest NNPAs at 1.16% as of Q2 FY23 and an overall stressed book (NNPAs +restructured book) at 3.11% as of Q2 FY23, lower than peers. Slippages have come down consistently and stand at 2% vs. 2.1% in Q1 FY23 and 3.2% in Q2 FY22, it added.
"The bank is well placed to deliver a higher loan CAGR, led by healthy growth in retail and overseas loans. "Besides, the management expects corporate and MSME loan growth to pick up from here on," said the brokerage.
BOB delivered loan growth of 10% vs. 6.6% average loan growth between FY17 and FY22. For Q2 FY23, global gross advances grew by a strong 19% YoY, while domestic loan growth was at 15% YoY. BOB witnessed the highest improvement in NIMs to the tune of 100 bps, led by a decline in the cost of funds, while yields remained rather steady.
With the improvement in the credit-deposit (CD) ratio and higher share of loans linked to external benchmarks and sticky CASA, NIMs are expected to improve for BOB, while the steady cost of income and muted credit costs will support profitability ahead. BOB has already reported ROA at 0.84% for H1FY23 vs. 0.6% in FY22, according to the brokerage.
The brokerage has a "BUY" call on the stock with a target price of ₹197 per share.
An average of 34 analysts polled by MintGenie have a strong'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.