24 June 2020
4QFY20 Results Update | Sector: Financials
Bank of Baroda
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
238.4 / 3.1
133 / 36
TP: INR65 (+25%)
Higher moratorium book to keep asset quality under pressure
Growth outlook modest; Credit cost to stay elevated
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BOB reported mixed 4QFY20 operating performance as moderation in NII
was supported by lower opex and higher treasury income. While elevated
provisions led to PBT loss, higher tax reversal resulted in the bank reporting
profits. Lower slippages were aided by asset classification benefit resulting
in an improvement in asset quality ratios. However, higher moratorium
book of 55% (as at end-May’20) should keep asset quality under pressure.
We cut our EPS estimate for FY21/FY22E by 34%/5%, as we increase our
credit cost projection and fine-tune our margin/growth estimates.
BOB reported PBT loss of INR17.2b, impacted by higher provisions of
INR68.4b while tax reversal of INR22.3b resulted in net profit of INR5b.
NII increased 5% YoY to INR68b (in-line). Global NIMs declined by 13bp
QoQ to 2.67% while domestic NIMs dipped 10bp QoQ. Total net revenue
grew 3% YoY.
NII/PPoP/PAT stood at INR275b/INR197b/INR5.5b.
Opex declined 23% YoY (-8% QoQ), which resulted in C/I ratio decreasing
~90bp QoQ to 46.8%. PPoP, thus, grew 48% YoY to INR51.2b.
Loans grew 5.9% YoY (+5.4% QoQ) to INR6.9t, within which, retail loans
grew 15%. Within retail, home/auto loans grew 11%/40% YoY. Deposits
grew 3.4% YoY (5.6% QoQ) to INR9.5t. Domestic CASA grew 6.8% YoY
resulting in 23bp QoQ increase in CASA ratio to 39.1%.
Fresh slippages declined to INR30.5b (2.6% annualized) aided by asset
classification benefit availed on overdue accounts of INR40.5b. ~90% of
slippages came in from the watch-list. In ratio terms, the GNPL/NNPL ratios
declined by 103bp/92bp QoQ to 9.4%/~3.1%. PCR, thus, improved by
~510bp QoQ to 68.9% (PCR incl. TWO stood at 81.3%).
Outstanding watch list increased to INR125b (1.8% of loans), SMA-1 stood
at 1.2% (-34bp QoQ) while SMA-2 also declined to ~1.2% (-86bp QoQ).
~65% of the book availed moratorium as at end-Apr’20, which declined to
~55% as at end-May’20. The bank expects it to decline further to ~35%
levels over the next few months.
BOB expects retail loan growth to slow down in the near term. Loan mix
target – corporates would comprise 50% while the rest would be balanced
between Agri, retail and MSMEs.
The bank has guided for 100bp improvement on the C/I ratio
over FY21E while margins are likely to remain flattish or slightly lower.
Higher tax reversal results in profits; PCR improves further
Financials & Valuations (INR b)
EPS Gr. (%)
Shareholding pattern (%)
FII Includes depository receipts
Highlights from management commentary
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
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.