Bank of Baroda (BoB) is multi-national banking and financial services company which has its headquarters in Vadodara, Gujarat, while its corporate office is situated in Mumbai. The bank is engaged in offering several services such as personal banking, corporate banking, international banking, rural banking, small and medium enterprise (SME) banking, NRI services and treasury services.
The bank has over 5,000 branches spread across the globe. As of 4 October 2018, the market capitalization of Bank of Baroda was over Rs.26,000 crore.
Here is an analysis of Bank of Baroda’s financial outlook and value on the basis of its recent financial performance to see if there are any indication for the Bank of Baroda share price has any scope for a revision.
Table of Contents
Bank of Baroda Financial Performance
- For the quarter ending 30 March 2018, the bank posted a net loss of Rs.3,102.34 crore attributed to the increase in provisions towards bad loans. During the same period last fiscal, the bank had posted a net profit of Rs.155 crore.
- However, its net interest income rose by 12% to stand at Rs.4,002.26 crore as against Rs.3,582 crore.
- For the said quarter, provisions for non-performing assets (NPAs) inclined by 190% year-on-year to stand at Rs.7,052.53 crore.
- Net NPAs rose to 5.49% from 4.97% reported during the previous quarter and 4.72% posted during the same period last financial year.
- The loss posted by the bank was due to higher provisions on account of the RBI guidelines on the changed framework for stressed assets and large corporate slippages.
- For the quarter ending 30 June 2018, Bank of Baroda’s net profit more than doubled as it reported higher interest income and witnessed a decline in provisions for bad loans.
- For Q1 FY19, the bank’s net profit increased by 160% to stand at Rs.528 crore as against Rs.203 crore during the same period last fiscal.
- The bank has taken several measures to decrease its bad loans and provided Rs.1,720 crore towards NPAs, down by 18% as against the previous quarter.
- It posted a 29% increase in its net interest income to stand at Rs.4,381 crore during the first quarter of FY 2018-19, while its core fee income inclined by 17% to stand at Rs.794 crore for the said period.
State-owned Public Sector Unit (PSU) banks are showing signs of improvement as several analysts believe that the worst is over for the banking sector in India. Shares of some of biggest public and private banks have picked up as investors are moving their focus towards large corporate lenders such as the Bank of Baroda.
- The lender has posted a net profit of Rs.528 crore, a rise of 159.7% year-on-year for the quarter ending 30 June 2018, despite posting a loss during the previous quarter.
- The loss reported for Q4 FY18 was due to higher provisions towards bad loans and in Q1 FY19, the bank has resolved most of its bad loans to post a profit.
- The change in the performance compared to Q4 FY18 reflects the bank’s stable financials despite bad loans.
- A future outlook is an essential aspect when you’re looking to invest in a stock, especially if you’re looking to grow your portfolio. In the case of Bank of Baroda shares, the bank’s revenue is expected to double in the next couple of years, indicating a robust future.
- Also, if the expenses do not incline by the same rate, this top-line growth should lead to robust cash flows leading to a higher share value of the bank.
- The bank is positive about its future growth as its domestic advances growth was about 18%, while it feels its retail and its MSME segment has witnessed an improvement.
- The board of the lender has approved raising additional capital of Rs.10,000 crore in FY19. This would include Rs.6,000 crore of common equity by several modes such Qualified Institutional Placements (QIP) and Rs.4,000 crore through additional Tier 1 and Tier 2 capital instruments.
Future prospects of a company or a bank like Bank of Baroda is intrinsic for an investor before buying shares of the bank to grow their portfolio. As a potential investor of Bank of Baroda shares, the price of a share has gone past its true value; however, the positive outlook is quite encouraging for the bank.
This means you need to deep dive into the fundamentals in order to take advantage of the next price decline. As a shareholder of Bank of Baroda, the bank’s optimistic future growth seems to have been factored into the current share price of the bank, with shares trading more than its fair value. At this point, you might be thinking of selling the Bank of Baroda shares.
If you think that the shares of Bank of Baroda should trade below its current price, selling high and buying it when the price falls towards its real value can be profitable. However, before you make that decision, it’s worth analysing if the bank’s fundamentals have changed.
If you’re looking to invest in the shares of Bank of Baroda, this might not be the right time as its trading close to its fair value. That said, the future of the bank looks promising, which means diving deeper into the core fundamentals of the lender such as the balance sheet.
Additionally, with the worst seemed to be over for PSU banks, in terms of bad loans, a long-term investor stands to gain if you’re willing to wait for a couple of years, the Bank of Baroda stock could be the best bet. With provisions to bad loans almost complete, the NPAs could improve.
Also, with the lender raising additional capital of Rs.10,000 crore in FY19, the management team of the bank are capable of taking strategic decisions to improve the financial performance of the banking and financial services provider. Investors are expected to research before investing in stocks as they are subject to several terms and conditions.
For more such information, investors can also refer to BankBazaar.