This is a stock recommendation based on one of the stock brokers. The stock analysis behind this recommendation is as below.
This "Buy Stocks" rating is on Bank of Baroda (BOB) with a target price of Rs.854 and is for the time period of over one year.
•Bank has reported good performance for 3QFY12.
•Net interest income (NII) stands at Rs.2650 crore which has increased 15.8% yoy and 3.5% qoq.
•Net profit is at Rs.1290 crore; increased 20.7% yoy and 10.6% qoq.
•Healthy NII growth was led by advance growth at 25.8% yoy even as reported net interest margin (NIM) was 8bps lower qoq to 2.99%.
•Non – interest income has increased by 70% yoy.
•Provisions increased 73.1% qoq. GNPA increased to 1.48% from 1.41% in 2QFY12.
•International business drives growth. International business increased 44% yoy whereas domestic business was up a modest 19% yoy.
•Domestic yield on advances contracted 13 bps qoq to 12.01% whereas cost of domestic deposits went up 6bps qoq to 6.90%. Consequently, domestic NIM contracted 16 bps qoq to 3.51%. However, this was marginally offset by improved international NIM at 1.64% from 1.42% in 2QFY12.
•Bank’s advance growth is driven by SME credit. While retail credit increased marginally by 4.9% yoy to Rs.31050 crore, SME credit expanded by 27.2% to Rs.32100 crore.
•As the provision increased 70% during the quarter, clarity is awaited on the asset quality. Also expect clarity on other income as it has increased substantially
Reiterating recommendation: Buy Stocks of Bank of Baroda for the stock price target of Rs.854 over one year time period.
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