Brokerage see 20% upside in Bank of Baroda stock; shares attain 2-year high on strong Q3FY22 numbers

Shares of Bank of Baroda (BOB) touched an over two-year high of Rs 117.50 per share after gaining by over 4 per cent on the BSE in the intraday trade on Tuesday. This is the second straight session where the stock gained on the back of strong set of third quarter numbers in the financial year 2021-22 (Q3FY22). 

The stock has been trading at its highest level since July 23, 2019. At 02:45pm, it surged over 3 per cent to Rs 116.65 per share on the BSE as against 0.25 per cent fall in the BSE Sensex.   

See Zee Business Live TV Streaming Below:

The stock has rallied 10 per cent in the last two sessions after the public sector bank posted robust earnings for October-December quarter of FY22. The bank’s standalone profit doubled to Rs 2,197 crore year-on-year aided by higher net interest income and lower provisions.  

While the net interest Income (NII) jumped 14.38 per cent to Rs 8,552 crore in Q3FY22, aided by margins. Similarly, the net interest margin (NIM) stood at 3.13 per cent, up 36 basis points YoY. 

In Q3 FY22, the asset quality of the bank also improved both sequentially and on a YoY basis, The gross non-performing assets (NPAs) came at 7.25 per cent and net NPAs improved to 2.25 per cent.  

The bank in its management commentary said that it expects credit growth to be around 7-10 per cent in FY22 and NIMs to remain healthy due to better growth/lower interest reversals on NPAs. The bank has been guiding that the slippages should be in the range of 2 per cent.  

According to domestic brokerage firm Yes Securities says Bank of Baorda has improved delivery and outlook on stress, growth and margin make valuation un-demanding. It maintains Buy stance with a target price of Rs 137 per share, upside of over 20 per cent. 

“BoB delivered material sequential decline on slippages, which underlines the dual advantage of a benign corporate NPL cycle and low risk retail book, the brokerage said,  

It further added that the management has stated that the core margin is 3 per cent plus and there is scope to improve this, also the bank would grow as fast or slightly faster than the system next year.