Bank Of Baroda Slumps 11%, Prabhudas Lilladher Says 'Accumulate'

Shares of Bank of Baroda on Monday slumped as much as 10.66 per cent to Rs 168 on the National Stock Exchange after the public sector lender's third-quarter earnings came in below the Street's expectations. Though Bank of Baroda reported a net profit of Rs 253 crore in December quarter as compared to a loss of Rs 3,342 crore in the year-ago period, the number was below the Street's estimates.
 
The lender reported a net interest income (interest earned over interest expended) of Rs 3,134 crore as compared to Rs 2,705 crore in the year-ago period. Asset quality remained stable with net NPA ratio falling to 5.43 per cent in December quarter, from 5.46 per cent in September quarter.  Gross NPA ratio came in at 11.40 per cent in Q3 against, 11.35 per cent in Q2.
 
Provisions and contingencies increased to Rs 2,079 crore in the third quarter from Rs 1,795 crore from the previous quarter.
 
"The trend on stressed asset formation was on the higher side and still far away from normalcy (FY12-FY15). Consolidation is expected to continue for the next couple of quarters. We have doubts on its loan recovery guidance of Rs10,000 crore for FY17. Its RoE is likely to remain sub-optimal and below the cost of equity for the next couple of years," domestic brokerage said in a note. Nirmal Bang has a sell rating on the stock, with target price of Rs 130.
 
R Sreesankar, head of institutional equities at Prabhudas Lilladher, says there could be pressure on Bank of Boroda's earnings for the next couple of quarters but the stock looks attractive from a perspective of 2-3 years. Prabhudas Lilladher has an accumulate rating on the stock.