Bank of Baroda Ltd (BOB) posted second-quarter results that surpassed analysts' expectations, fueled by a strong recovery from previously written-off accounts and a surge in other income. This comes despite an increase in deposit costs that led to a lower-than-expected net interest margin (NIM) of 3.07.
The bank's asset quality was impacted by two major corporate slippages and a ban imposed by the Reserve Bank of India (RBI) on new customer onboarding through its mobile app. However, BOB has managed to mitigate these challenges through alternative customer transaction channels.
Nirmal Bang Institutional Equities predicts BOB's loan book and profit after tax (PAT) to grow at compound annual growth rates (CAGRs) of 15.2% and 20.2% respectively over FY23-FY25. This forecasted growth is expected to result in a return on assets (RoA) of 1.1% and a return on equity (RoE) of 16.7% in FY25, driven by sustained growth in the retail asset management (RAM) segment and an improved business mix leaning towards retail.
Despite the RBI restrictions, frequent NII misses, and intense competition, Motilal Oswal Securities described BOB's Q2 results as mixed. The bank's pre-provision operating profit surged 33% year-on-year, exceeding Motilal Oswal's estimates by 13%. BOB has taken compliance actions following the RBI ban and expects it to be lifted soon.
However, despite an overall healthy business performance, Nuvama Institutional Equities downgraded BOB from 'BUY' to 'HOLD'. This decision was influenced by negative surprises on BOB's overseas book which exceeded those of its peers. Nuvama maintained its target price for BOB at Rs 220.
InvestingPro Insights
Drawing from InvestingPro data and tips, we can provide further insight into Bank of Baroda Ltd. BOB's market cap stands at 910.36M USD, with a P/E ratio of 245.9 as of Q3 2023. Despite a -15.73% return on price over the last year, the company is trading at 84.27% of its 52-week high. The InvestingPro fair value for BOB is estimated at 18.01 USD.
Turning to InvestingPro Tips, BOB has seen accelerating revenue growth, and despite poor earnings and cash flow that could potentially force dividend cuts, 2 analysts have revised their earnings upwards for the upcoming period. This aligns with the prediction that the company will be profitable this year, a claim supported by the fact that the company has been profitable over the last twelve months.
These are just a few of the tips available from InvestingPro, which provides a comprehensive analysis of the company's performance and future prospects. For a more detailed analysis and additional tips, consider exploring InvestingPro's offerings.
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