Shares of India’s third largest PSU bank received a buy call from Axis Securities for an upside of 38 percent.
Bank of Baroda is engaged in providing various services, such as personal banking, corporate banking, international banking, small and medium enterprise (SME) banking, rural banking, non-resident Indian (NRI) services, and treasury services.
With a market capitalization of Rs 1.20 lakh crores, the shares of Bank of Baroda Limited were trading at Rs 232 piece on Monday.
Bank of Baroda’s stocks have generated an overall return of 25 percent over the past year and a negative return of 5 percent over the past 6 months.
Reviewing the financials of Bank of Baroda Limited, the net interest income (NII) fell by 1.5 percent from Rs 12,763 crores in Q4FY24 to Rs 12,560 crores in Q1FY25. Also for the same period, the net profits generated by the firm tumbled by 8.6 percent Rs 5,015 crores to Rs 4,580 crores.
Brokerage Axis Securities has Initiated a ‘buy’ recommendation on Bank of Baroda Limited with a target price of Rs 320.00 per share, implying an upside potential of up to 38 percent from current market price.
Axis Securities Limited mentions that In the first quarter of FY25, the bank’s results were mixed. Net Interest Income (NII) has met the expectations, but the Pre-Provision Operating Profit (PPOP) and Profit After Tax (PAT) were lower than expected.
After reviewing Q1FY25, the bank has slightly reduced its earnings forecasts for the next two years. NII estimates are down a little by 0.5 percent for FY25 and 0.6 percent for FY26, while PPOP estimates have been lowered more by 6.6 percent for FY25 and 4.1 percent for FY26 , but PAT estimates have been slightly increased by 0.7 percent for FY25 and 0.6 percent for FY26.
Also, the brokerage firm mentions that the bank expects a 12-14 percent increase in advances, driven by growth in retail, SME, and agricultural segments for FY25. The bank also aims for a steady 13.5 percent annual growth rate over the next five years, with retail loans growing faster than other areas.
Also, Corporate credit growth which is nothing but the the increase in the amount of loans and credit extended to businesses, is expected to pick up by 10-12 percent by the end of FY25.
The analysts at the brokerage firm also believe that the bank is not overly concerned about recent small increases in loan defaults within the SME sector. They also believe that borrower cash flows which is nothing but the money that a borrower generates from their business or personal income have improved since COVID.
Also, the bank aims to keep loan defaults low, targeting a rate of 1-1.25 percent for FY25. They anticipate a decrease in non-performing assets (GNPA) and expect credit costs to remain around 0.75 percent for FY25.
Written By Zahal
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
