Earnings

Brokerages remain cautiously optimistic on Bank of Baroda post Q3 earnings; JPMorgan raises target

Updated : January 27, 2020 03:07 PM IST

Public sector lender Bank of Baroda reported a weak 3QFY20, led by higher provisions and elevated slippages.

However, despite poor results in the December quarter, brokerages remained optimistic on the stock

Post reporting weak earnings, the stock has fallen as much as 3.7 percent to Rs 92 per share in intra-day deals on Monday.

Public sector lender Bank of Baroda reported a weak 3QFY20, led by higher provisions and elevated slippages. Muted business growth and one-offs in opex further drove its loss to Rs 1,410 crore in the third quarter. The bank had reported a profit of Rs 471.25 crore in Q3FY19 and Rs 736.68 crore in Q2FY20.

Net interest income during the quarter grew by 1.4 percent sequentially (up 50.3 percent year-on-year) to Rs 7,129.05 crore. Fresh slippages stood at Rs 10,387 crore during the December quarter.

However, despite poor results in the December quarter, brokerages have remained optimistic about the stock. While maintaining a 'neutral' call on the stock, global brokerage JPMorgan raised the target price of the stock to Rs 100 from Rs 95 per share. Meanwhile, Kotak Securities and Motilal Oswal also remained bullish on the lender.

JPMorgan changed its reduced EPS estimates for the stock by 11 percent, while operating profit assumptions remain largely unchanged. The stock is modeling a higher credit cost assumption for FY21 and slippages are driven by divergence and HFC, while loan growth is subdued, the brokerage added.

Motilal Oswal, also cut the stock's FY21 EPS estimate by 12 percent and FY22 EPS estimate by 16 percent factoring in the assumption of lower loan growth. It estimates the credit cost of the company to remain elevated in FY21 and earnings to normalize gradually from H2FY21.

Meanwhile, Kotak Securities also noted that high slippages from NBFC and corporate sectors resulted in the weak performance of the public sector lender. An unchanged NPL ratio and persistent high slippages have led to a weaker conviction to assign a higher multiple to the business even as concerns on the merger are abating, the brokerage further stated.

Post reporting weak earnings, the stock has fallen as much as 3.7 percent to Rs 92 per share in intra-day deals on Monday.

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

Brokerages remain cautiously optimistic on Bank of Baroda post Q3 earnings; JPMorgan raises target

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