scorecardresearchBank of Baroda: ICICI Direct retains a ‘buy’ after Q3 results; sees 22%

Bank of Baroda: ICICI Direct retains a ‘buy’ after Q3 results; sees 22% upside

Updated: 06 Feb 2023, 03:30 PM IST
TL;DR.

In Q3FY23, Bank of Baroda reported its highest-ever quarterly net profit of 3,853 crore compared to a net profit of 2,197 crore in the same quarter last year. On the asset quality side, the gross non-performing assets ratio declined to 4.53 percent in Q3 from 7.25 percent in Q3FY22.

The net profit of the bank has been growing steadily for the last four quarters. In the first quarter of the current fiscal year, it delivered a net profit of  <span class='webrupee'>₹</span>2,168 crore.

The net profit of the bank has been growing steadily for the last four quarters. In the first quarter of the current fiscal year, it delivered a net profit of 2,168 crore.

Extending their winning streak, shares of Bank of Baroda, a leading PSU bank, soared 3.05% to 168.60 apiece in Monday's trade after rallying 6.20% in the previous trading session. The stock has been on a bull run since June 2022, when it reached a 52-week low of 89.8 a share. It has increased by about 87% since then.

The banking stock has risen by more than 38 percent in the last six months and in the last one-year period, it has soared by 53 percent. The market price of the stock has zoomed by over 300% since the October 2020 lows.

The recent surge in the stock price was ascribed to the bank's strong third-quarter earnings. Last week, Bank of Baroda reported its highest-ever quarterly net profit of 3,853 crore for the December ending quarter, compared to a net profit of 2,197 crore in the same quarter last year. Sequentially, the net profit was up by 16.29%.

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The stock price chart of Bank of Baroda.

The net profit of the bank has been growing steadily for the last four quarters. In the first quarter of the current fiscal year, it delivered a net profit of 2,168 crore, and the bank extended the same momentum in the second quarter and posted a net profit of 3,313 crore.

Total income on a standalone basis rose to 23,540 crore in the October-December quarter of FY23, as against 17,963 crore in the same period of the previous financial year.

The bank's domestic deposits increased by 14.5% YoY to 10,03,737 crore, while the global deposits rose by 17.5% to 11,49,507 crore.

In Q3 FY23, the net interest income of the bank came in at 10,818 crore, an increase of 26.5% YoY, driven by a nearly 20 percent growth in advances and a 0.24 percent widening of the net interest margin to 3.37 percent. Non-interest income jumped 41% YoY in Q3 to 3,552 crore.

On the asset quality side, the gross non-performing assets ratio declined to 4.53 percent in Q3 from 7.25 percent in the year-ago period on the back of 2,830 crore in fresh slippages. While the net NPA came down to 0.99% in Q3 compared to 2.25% in Q3 FY22, a drop of 126 basis points.

Meanwhile, the bank said it has reduced its exposure to Adani Group entities over the last two years and has no concerns about asset quality issues with the conglomerate.

The bank's managing director and chief executive, Sanjiv Chadha, told reporters that the bank's overall exposure to the Ports-to-Media conglomerate's entities is one-fourth of the single group exposures allowed under the Large Exposures Framework (LEF), but refused to share a number.

Following the release of the third quarter earnings, brokerage firm ICICI Direct Research maintained its "buy" rating on the stock with a target price of Rs. 200 apiece, which hints toward an upside of 22.24% from the stock's latest closing price. 

"Continued robust performance in terms of growth and profitability." Healthy growth momentum, coupled with margin improvement & steady asset quality, is expected to aid RoA. "Thus, the stock is due for a re-rating," said the brokerage.

On the other hand, Phillip Capital maintained a "neutral" rating on the bank, citing a higher proportion of overseas business, which are low margin in nature. The brokerage has a target price of 160 apiece on the stock.

32 analysts polled by MintGenie on average 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.

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First Published: 06 Feb 2023, 03:29 PM IST