“Bank of Baroda delivered another healthy performance during FY12 even though the year posed tough economic challenges in the form of acute industrial slowdown, high inflation and elevated interest rates. The Bank’s Total Income registered a healthy growth of 34% (y-o-y) to reach the level of Rs 33,096.05 cr in FY12 proving again the Bank’s ability to produce sufficient earnings even during tough market conditions. While, Net Interest Income increased by 17.2% (y-o-y) to Rs 10,317.01 cr, Other Income (or Non-Interest Income) grew by a 21.8% (y-o-y) to Rs 3,422.33 cr, primarily driven by impressive treasury gains and strong recovery from the written off accounts. Tax Provisions, however, declined this year due to an income tax refund (a usual seasonality) received by the Bank during Q4FY12. Book Value stood at Rs 639.79 per share in FY12 as compared to Rs 504.43 per share in FY11.”
“Bank of Baroda reported a healthy growth for Q4FY2012. However management is confident that the asset quality of the bank continues to be robust. Going forward Bank is not going to see further incremental slippages or restructuring. On the margins front, Bank has guided that NIM to stay near 3.4% in FY12-13. For Deposits and Advances, growth will be in the range of around 20-21% as against RBI guidance on deposit and advances to grow by about 16-17% in the current fiscal year. We have raised our estimates by 20% for FY12-13. At CMP of Rs 700.00, the stock is trading at valuation of PE of 5.1x of FY13E EPS and at an adjusted P/BV of 0.97x FY13E BV. Historically, the stock has traded at 0.9x�"1.5x one-year forward P/ABV multiple. We have valued the Bank at P/BV of 1.2x FY13E & maintain our BUY rating on the stock with a revised target price Rs 864 from Rs 889 with an upside potential of 23% from current levels,” says Magnum research report.
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