Buy Stock Of Bank Of Baroda, According To This Brokerage Company
Reduction of slips
“Despite a higher recovery of written off accounts and contained provisions, Bank of Baroda recorded a loss of 10.5 billion rupees (estimate: net profit of 4.5 billion rupees) mainly due to the cancellation of DTA during the transition to a new, lower tax structure Impressive performance of asset quality with a ratio of gross non-performing assets (GNPA) down to 8.9% (versus 9.6% pro forma in Q3) due to lower slippage and RSA pool decline to 1.6%, ”Emkay Global said in a report
Healthy Retail Growth Trend
The brokerage firm also noted that the retail growth trend remains healthy at 14%, but businesses remain a drag.
“Bank of Baroda expects a reasonable resumption of business growth during S2FY22, thereby supporting overall growth and margins. Cost savings through the establishment of merger synergies are expected to support the performance of asset base, ”said Emkay Global.
Management expects the overall slippages / LLP in FY22 to be lower compared to FY21 (2.7% / 2%) due to the decrease in stress in the company pool, including exposure to abroad. 60% of international postcode charges in FY21 will be restructured, leading to an upgrade. BOB could consider selling its stake in its life insurance business and also integrating a partner to develop the card subsidiary.
According to Emkay, Global Bank of Baroda recently raised capital through QIP, leading to a reasonable CET 1 at 10.9% now compared to 9% in Q3.
“With the merger and asset quality issues largely behind, we expect BOB’s RoE to gradually improve to 10-12% during FY23-24E from a low of 1%. in FY21. ABV (vs 0.6x) Main risks: Higher NPA formation, mainly in the business / SME portfolio, and slower than expected growth trajectory, ”said the brokerage firm.
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