Tuesday, July 28, 2009

[Investors Please Listen] Bank of Baroda Q1FY10 Result_Update ; Downgrade to ACCUMULATE with TP Rs430

Downgrade to ACCUMULATE with TP Rs430


ACCUMULATE

 

CMP: Rs418                              Target Price: Rs430


Bank of Baroda (BOB) Q1FY10 results were marginally below our expectations as the NII growth remained subdued at 14% yoy and down 18% qoq. However, driven by higher other income and lower provisioning, the net profit of Rs6.9bn was ahead of our expectations. NII growth moderated during the quarter led by 22bps yoy contraction in NIMs to 2.1%

Highlights of the quarter were: (1) CASA maintained at 35.1% (2) controlling slippages for the quarter at 0.3% and (3) amount assets restructured at <3%. Even as slippages were higher than last year, BOB has upgraded large amount of incremental slippages in Q2FY10. Moreover the provision coverage also improved to 81.7% in Q1FY10 from 72.5% in Q1FY09.

We continue to like the improvement in operating performance of BOB on counts of fee income, CASA mix and asset quality. With largely retail liability franchise, pressure on NIMs was expected. We believe NIMs will claw back to 2.7-2.8% by Q3FY10. However, the current valuations of 1.2x its FY10E ABV and 1.1x FY11E ABV are rich. We downgrade the stock to ACCUMULATE with price target of Rs430.


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Safe Harbor:

The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
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