Bank of Baroda Q2 Results Review - Strong Recoveries Drive Earnings Beat; Loan Growth Steady: Motilal Oswal

Motilal Oswal Report

Bank of Baroda reported Q2 FY25 profit after tax of Rs 52.4 billion (14% beat), up 23% YoY/17.5% QoQ, driven by strong recoveries from TWO pool. Net interest margin contracted 8 bp QoQ to 3.10% due to the 5bp impact of penal charges in Q2.

Provisions came in higher amid the creation of prudent NPA provisions. Business growth was healthy, led by faster growth in loans at 12.3% YoY/7% QoQ, while deposit growth was steady at 9% YoY/4% QoQ. Thus, the credit-deposit ratio rose to 82.2%, while liquidity coverage ratio declined sharply to 123.7% (versus 138% in Q1).

BoB's slippages inched down to 1.1%. Gross non-performing asset declined 38bp QoQ to 2.5%, while net non-performing asset stood largely flat at 0.6%. provision coverage ratio declined marginally to 76.3%.

We cut our FY25/FY26 EPS estimates by 4.7%/4.8% as provisions rise. We estimate FY26 return on asset/return on equity at 1.1%/15.7%. Retain Buy with an unchanged target price of Rs 290 (1.2 times FY26E adjusted book value).

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