Bank of Baroda Q3 Results Review - Balance Sheet Management To Drive Net Interest Margin: Prabhudas Lilladher

Prabhudas Lilladher Report

Bank of Baroda saw a good quarter; core pre-provision operating profit at Rs 61.2 billion beat our estimate by 6.5% owing to better margins and lower opex. However, fees were a miss due to moderation in unsecured loans, which may drag net interest margin over FY24-26E.

Run-down of higher cost bulk deposits (Rs 143 billion) drove lower funding cost, resulting in better NIM. Full year FY24 NIM target of 3.15% is intact as management does not expect a meaningful rise in deposit cost.

We expect funding cost to rise in Q4 FY24 since incremental loan-deposit ratio would reduce to accommodate credit offtake. Bank of Baroda has maintained loan growth guidance of 14-16% YoY in FY24 while it aims to keep LDR at 82%.

However, we are factoring lower loan accretion of 12%, since a higher loan growth may impact yields and raise funding cost, affecting NIM materially.

We maintain our multiple at 1.1 times but increase target price from Rs 240 to Rs 270 as we roll forward to March 2026 adjusted book value. Retain ‘Buy’.

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