Bank of Baroda’s share price went from black to red territory on Monday as investors cheered the public lender’s improving asset quality but risk-off sentiment weighed on the broader market.

What Happened: The bank announced a net profit of ₹4,886 crore for the March quarter, reflecting a 2.3% increase compared with ₹4,775 crore in the year-ago period.

The bank’s gross non-performing asset (NPA) decreased to 2.92% from 3.79% in the corresponding quarter last year, while the net NPA for the quarter stood at 0.68% compared with 0.89% a year ago.

Net interest income for the quarter was reported at ₹11,793 crore, up from ₹11,525 crore last year. However, the net interest margin shrank to 3.18% from 3.31% last year.

Total domestic deposits grew to Rs 11.28 lakh crore, marking a 7.7% yearly increase from Rs 10.47 lakh crore, while domestic advances rose by 12.9% from Rs 7.95 lakh crore in Q4FY23 to Rs 8.98 lakh crore in Q4FY24.

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Analyst Reactions: Bank of Baroda’s Q4 profit met expectations but saw a notable increase in slippages, particularly in the agriculture and micro, small and medium enterprises (MSME) sectors. Provisions surged due to full provisioning for its aviation exposure. While analysts maintained a positive outlook on BOB’s prospects, they noted its valuation discount compared to State Bank of India (SBI) was justified.

Motilal Oswal valued the stock at ₹300, raising its earnings per share (EPS) estimates for FY25 and FY26 to account for stable margins and provisions.

Motilal Oswal commented that BOB’s Q4 results were impacted by one-offs. Adjusting for these, the bank’s return on asset (ROA) and return on equity (ROE) remained at healthy levels, and the brokerage added that the bank expects loan growth of 12-14% in FY25. Deposit growth remained robust, and the bank improved its current and savings account (CASA) mix while reducing dependency on bulk deposits, which is expected to support net interest margins (NIMs).

Nuvama noted that there was an unexpected rise in staff costs, contrary to street expectations. While BOB trades at a discount to SBI, Nuvama believes this discount is warranted due to SBI’s superior metrics in terms of loan-to-deposit ratio (LDR), asset quality and earnings stability.

IIFL Securities upgraded its earnings estimates and target price for BOB, citing a 40% discount to SBI despite similar profitability outlook.

Price Action: Bank of Baroda’s share price was down 0.21% at ₹254.15 in early trade on Monday, coming off a high of over 2%.

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