Recommendation: Buy
CMP = Rs 227 (at the time of this recommendation)
Price target: Currently reviewing…
Key points:
- Bank of Baroda (BoB) reported a net profit of Rs 370.9 crore for Q1FY2009, indicating a growth of 12.1% yoy. The Q1FY2009 profit after tax was above our estimates of Rs 327 crore. The net interest income for the quarter stood at Rs 1,057 crore, up 16.9% yoy because of a robust 42.1% growth in the advances and a significant improvement of 790 basis points in the credit deposit ratio to 71.8%.
- The non-interest income was up by almost 21% yoy to Rs 512.6 crore as compared to that last year. Notably, this growth was achieved on the back of higher growth in the foreign exchange income (up by 50%), followed by core fee income (up by 44%) and recoveries (up by 38%). The operating expenses during the quarter were marginally up by 3.7% yoy; other operating expenses increased by 5.3% yoy, and the employee expenses increased by 2.8% yoy.
- The provisions and contingencies were up by 98.2% yoy, mainly due to a significant spike in the marked to market provisions to Rs 218.6 crore during the quarter as compared to the same time period last year. The asset quality of the bank improved during the quarter at gross levels. The gross non-performing assets declined by 5.3% yoy to Rs 2,091.1 crore. However, the net non-performing assets increased by 10.8% yoy to Rs 575.5 crore. The capital adequacy ratio remains comfortable at 13.19% as compared to 14.33% last year.
- The advances witnessed a robust growth of 42.1% yoy and stood at Rs 111,214 crore at the end of Q1FY2009. This growth was achieved on the back of a strong 67.8% growth in the foreign advances, a healthy 31.0% growth in the farm loan segment, a 19.5% growth in the small and medium enterprise segment and a 18.8% growth in the retail segment.
- At the current market price of Rs 227, BoB trades at EPS of 5.0, 2.5x 2009E.
- I am currently reviewing the stock’s valuation and would report it shortly on this portal.
