scorecardresearchBank of Baroda shares surge 10% after Q2; here's what top brokerages say

Bank of Baroda shares surge 10% after Q2; here's what top brokerages say

Updated: 07 Nov 2022, 04:32 PM IST
TL;DR.
Bank of Baroda garnered a standalone net profit of 3,312.42 crore in Q2FY23 rising by 58.70% from a profit of 2,087.85 crore posted in Q2 of the previous fiscal.
The bank's net interest income (NII) came in at  <span class='webrupee'>₹</span>10,174.46 crore in Q2FY23, up 34.47% from  <span class='webrupee'>₹</span>7,565.97 crore in Q2FY22.

The bank's net interest income (NII) came in at 10,174.46 crore in Q2FY23, up 34.47% from 7,565.97 crore in Q2FY22.

Shares of Bank of Baroda jumped 12% to their fresh 52-week high of 161.75 in intraday trade on BSE on November 7 buoyed by its September quarter earnings. The stock ended 9.55% higher at 158.35.

As Mint reported, Bank of Baroda beat street's estimates for Q2FY23 with profitability witnessing double-digit growth.

The bank garnered a standalone net profit of 3,312.42 crore in Q2FY23 rising by 58.70% from a profit of 2,087.85 crore posted in Q2 of the previous fiscal.

The bank's net interest income (NII) came in at 10,174.46 crore in Q2FY23, up 34.47% from 7,565.97 crore in Q2FY22.

Brokerages cheered the lender's quarterly numbers. Motilal Oswal Financial Services has a buy call on the stock with a target price of 175.

The brokerage firm said Bank of Baroda reported a strong performance with healthy NII growth (resulting in margin expansion) and lower provisions, driving net earnings.

It highlighted business growth was healthy at nearly 5% quarter-on-quarter (QoQ), led by the RAM segment and international book. CASA mix saw moderation as growth in term deposits was higher, given the rising interest rates.

Asset quality continues to improve with CE strong at 98%. A lower SMA book and controlled restructuring book provide further comfort.

"We increase our FY23 earnings by 10%, factoring in higher NII and lower credit cost and largely maintain our estimates for FY24. We estimate FY24 RoA (return on assets) and RoE (return on equity) of 1% and 13.9%, respectively, and value the stock at 175 (0.9 times FY24E ABV)," said Motilal Oswal.

Elara Securities has an 'accumulate' call on the stock with a target price of 160. Elara said Bank of Baroda remains its preferred pick in the PSU basket after SBI.

"We believe management actions are yielding results, and the bank has all the ingredients to sustain this performance; thus, continued delivery on core performance (excluding any one-offs) would drive rerating," said Elara.

Brokerage firm Nirmal Bang Institutional Equities also has a buy call on the stock with a target price of 173.

"Bank Of Baroda reported a strong Q2FY23 performance, which was a beat on all counts, led by balance sheet growth, margin expansion and improvement in asset quality. We have upgraded our earnings estimates on the back of margin improvement and lower credit cost, driven by improving asset quality," said Nirmal Bang.

Brokerage JM Financial maintained a buy call on the stock and raised the target price to 165 from 145.

"We upgrade our earnings estimate by 12% and 14% for FY23E and FY24E, respectively, driven by better than expected loan growth (aided by strong traction in the retail segment), strong operational performance (NIMs improvement and controlled opex) and steady asset quality (slippages to moderate resulting in credit costs of 1.25% and 1.20% in FY23E and FY24E, respectively). We build in RoA and RoE of 0.85% and 13.8% by FY24E respectively," said JM Financial.

According to a MintGenie poll, an average of 32 analysts have a ‘strong buy’ call on the stock.

Disclaimer: The views and recommendations given in this article are those of broking firms. These do not represent the views of MintGenie.

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First Published: 07 Nov 2022, 12:39 PM IST