Retain 'buy' on Bank of Baroda – Rs.854 - Geojit BNP Paribas Financial Services Limited

Buy rating is maintained on Bank of Baroda (BOB) with a target price of Rs.854 over one year. The bank has reported healthy performance for 3QFY12.

Net interest income (NII) at Rs.2650 crore increased 15.8% yoy and 3.5% qoq.

Net profit at Rs.1290 crore increased 20.7% yoy and 10.6% qoq.

Healthy NII growth was led by advance growth at 25.8% yoy even as reported net interest margin (NIM) was 8bps lower qoq to 2.99%.

Non – interest income also increased 70% yoy.

Provisions increased 73.1% qoq. GNPA increased to 1.48% from 1.41% in 2QFY12.

International business drives growth. International business increased 44% yoy whereas domestic business was up a modest 19% yoy.

Domestic yield on advances contracted 13 bps qoq to 12.01% whereas cost of domestic deposits went up 6bps qoq to 6.90%. Consequently, domestic NIM contracted 16 bps qoq to 3.51%. However, this was marginally offset by improved international NIM at 1.64% from 1.42% in 2QFY12.

Bank's advance growth is driven by SME credit. While retail credit increased marginally by 4.9% yoy to Rs.31050 crore, SME credit expanded by 27.2% to Rs.32100 crore.

As the provision increased 70% during the quarter, clarity is awaited on the asset quality. Also expect clarity on other income as it has increased substantially.

Source : Equity Bulls

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