Bank of Baroda shares in focus after Q1 business update; what should investors do?

Shares of the public-run lender Bank of Baroda traded weak following the release of its quarterly numbers on Friday after market hours. Bank of Baroda shares traded with a cut of over 3 per cent at Rs 264.45 per share, while at day's low it hit a price of Rs 261.8, a decline of over 4 per cent from the previous close.

In the previous trading session, its shares closed higher by 1.35 per cent at Rs 273.70 per share on the BSE.

Loans at the domestic level grew at a robust rate, rising 8.51 per cent on-year to Rs 8.82 lakh crore. Domestic retail loans grew even more strongly, registering 20.86 per cent growth in comparison to the corresponding period of the previous fiscal year to Rs 2.22 lakh crore.

On a global level, the bank’s business grew by 8.52 per cent on-year, scaling to Rs 23.77 lakh crore, led by strong growth in global deposits. In terms of advances, the bank’s global portfolio logged a growth of 8.14 per cent on-year to Rs 10.72 lakh crore, While, in the domestic market, deposits recorded a 5.25 per cent growth over the corresponding period last year. 

The lender in the current year will raise Rs 10,000 crore via long-term bonds for boosting infra and affordable housing. 

What should investors do after Bank of Baroda Q1FY25 update?

Global brokerage Citi has given a ‘buy’ rating on the stock with a target of Rs 300, implying potential gains of nearly 10 per cent from the last close. On the Q1 business update of the lender, the brokerage maintained that growth has moderated sharply with balance sheet consolidation and NIM management seeming to be the priority for the state-run bank. Also, the brokerage noted that normalization of credit cost could be offset by higher Q1 seasonality. Further, absence of wage revision impact will lend support to broadly stable ROA.

Morgan Stanley maintains an equalweight call on the lender for a target of Rs 284. The brokerage reiterated that domestic loans at the lender declined 2 per cent sequentially in Q1FY25 on the back of decline in non-retail loans. Overseas book was also down 1 percent in comparison to 2.7 per cent in the April-ended quarter. Furthermore, loan-to-deposit ratio (LDR), however, remained steady quarter-on-quarter.