Bank of Baroda (532134.IN) shares have fallen 17% during the last 8 weeks as investors fretted within the Indian lender’s soured loans. Nomura sees the dip as a good buying opportunity and possesses upgraded the second biggest government-controlled bank from neutral to get.
A good reason analyst Adarsh Parasrampuria likes this stock would be that the outlook for its pre-provision operating profit (PPOP) is preferable to its rivals, as a result of expected improvements rolling around in its net interest margins. Nomura forecasts PPOP to cultivate in an average rate of roughly 13% between 2017-19.
Parasrampuria also likes the bob login provisioning as India’s central bank cracks down non-performing assets (NPA).
RBI’s recent directive to raise the provisioning for 12 large NPA cases led to uncertainty over near-term P&L provisioning, but BOB’s NPA coverage at 58% could be the highest of the corporate banks and offers comfort, as we see it. Rating agency CRISIL recently indicated a 60% haircut for these 12 large accounts, which is analogous to our 60% haircut assumption used to go to our adjusted book.
However, the analyst is worried about M&A risks given government moves to consolidate smaller public sector banks (PSU):
M&A risks have raised, with all the finance ministry indicating a prospective merger of small PSU banks with larger ones. The world thinks BOB’s valuation at 1.0x FY17F book vs. 0.5-0.6x FY17F book for smaller PSUs factors in M&A-related provisioning risks.
Parasrampuria includes a INR200 a share target price on Bank of Baroda, which implies 26% upside. The state-owned lender trades at 10 x forward earnings and pays a modest 0.8% dividend yield.
Bank of Baroda (BoB) includes a strong provision coverage ratio in comparison with other public sector undertaking (PSU) banks. Their tier-I capital ratio is additionally significantly higher. Many other people are consolidating their balance sheet, BoB is talking about loan growth
For more details about bob login go to see our new web site: click for more