18 May 2017
4QFY17 Results Update | Sector: Financials
Bank of Baroda
Buy
BSE SENSEX
30,435
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
9,429
BOB IN
Stress additions remain elevated; provisions mar earnings
2,304
Bank of Baroda (BoB) reported PAT of INR1.5b (70% miss) v/s INR2.5b in
433.3 / 6.5
3QFY17. The strong operating performance (+17% YoY; 36% beat) was
202 / 128
driven by robust fee income growth (+50% YoY/QoQ) and controlled opex
3/-10/13
1656
(flat YoY). Elevated NPL provisions (2.7% credit costs annualized) on account
40.8
of continued stress additions led to the PAT miss.
CMP: INR188
TP: INR217(+15%)
Financials & Valuations (INR b)
Y/E March
2017 2018E
NII
135.1
156.3
OP
109.8
119.5
NP
13.8
44.0
NIM (%)
2.2
2.4
EPS (INR)
6.0
19.0
EPS Gr. (%)
NA
218.0
BV/Sh. (INR)
147.8
162.4
RoE (%)
4.1
12.3
RoA (%)
0.2
0.6
P/E(X)
31.4
9.9
P/BV (X)
1.3
1.2
2019E
180.5
131.5
57.5
2.5
24.9
30.7
181.4
14.5
0.7
7.6
1.0
NIM expanded 11bp QoQ to 2.2% on a low base (3Q had interest income
reversal of ~INR2.6b). Margins were also aided by IT refund of INR1.5b.
Slippages remained elevated at INR40.7b (annualized slippage ratio of 4.3%)
v/s INR41.4b in 3Q, led by relapse of INR22.8b from the restructured book.
While recoveries and upgrades were lower than previous quarters in FY17,
high write-offs of INR15.8b led to flat absolute GNPLs on a sequential basis.
Overall NSL stood at ~9.6%.
FY17 highlights:
BoB reported PAT of INR24.7b v/s loss of ~INR67b in FY16.
This was a year of balance sheet consolidation: loan growth was flat YoY, led
by ~12% decline in overseas loans.
Other highlights:
a) Retail advances grew 13% QoQ and 14% YoY. b) Average
daily CASA ratio improved to 38.8% v/s 37.1% in 3Q. c) CET 1 ratio declined
30bp QoQ to ~9%.
Valuation and view:
We like management’s focus to clean up the balance
sheet and lay the foundation for sustainable growth. We expect stress
addition and credit costs to reduce in FY18/19. Additional buffers like non-
core financial investments among other options will lead to dilution-free
growth in the near term. We largely maintain estimates. Maintain
Buy
with
a TP of INR217 (1.2x FY19BV) – based on RI model.
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
Subham Banka
(Subham.Banka@MotilalOswal.com);
Anirvan Sarkar
(Anirvan.Sarkar@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.