Public sector lender Bank of Baroda was one of the best bets for retail investors in 2021 as it doubled investors' money in just eight months. Holders of this largecap bank stock earned a return of more than 90% as compared to 35% rally in Nifty PSU Bank index and 7% gain in BSE Bankex index. In comparison, the BSE Sensex added 12% in the past 12 months.
Bank of Baroda share price has surged from a 52-week low of ₹61.8 on April 22, 2021, to hit over two-year high of ₹118.35 intraday today, logging 91% return over the past eight months. The strong rally in share price was attributed to healthy financial performance, strong credit growth, and a decline in provisions.
Strong earnings boosted stock rally
Bank of Baroda shares have gained 45% over the past six months and 46% during the last one year. It has risen 40% since the beginning of the calendar year 2022 (year-to-date basis), and 28% over one month. The stock has risen 10.6% in the last two sessions as investors cheered its robust December quarter earnings.
With a market capitalisation of ₹60,970 crore, the share of largecap stock traded higher than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, according to stock research platform Markets Mojo. Technically, Bank of Baroda stock turned ‘Bullish’ from ‘Mildly Bullish’ on January 25, 2022 at ₹98.50, the research firm highlighted.
On Saturday, the PSU bank released a third quarter earnings report that topped market expectations on the back of higher net interest income and lower provisions. The lender’s net profit doubled to ₹2,197 crore in Q3FY22, from ₹1,061 crore in the year-ago period. Net interest income, the difference between interest earned and interest expended, rose 14.38% YoY to ₹8,552 crore in Q3FY22, while net interest margin increased by 36 basis points to 3.13% as compared to the year-ago period. On the asset quality front, gross NPAs and net NPAs improved both sequentially and on a YoY basis to 7.25% and 2.25%, respectively, in Q3FY22. Its slippages dropped to ₹3,491 crore from ₹5,802 crore in the previous quarter.
Analysts maintain ‘buy’ rating
Post December quarter earnings report, global brokerage Nomura upgraded Bank of Baroda to ‘buy’ from ‘neutral’, with a target price of ₹130.
Analysts at Motilal Oswal Financial Services also maintained a ‘buy’ rating on BOB with a target price of ₹150 per share. “BOB reported a commendable earnings performance led by a strong recovery in NII and lower provisions even as lower treasury gains impacted other income. Domestic NIMs expanded 31bp QoQ to 3.2% led by improvement in yields while the cost of deposits continues to moderate,” the brokerage said.
Domestic brokerage Emkay Global Financial Services has also retained buy/overweight rating on the stock with a target price of ₹145 per share.
Kotak Institutional Equities has an 'add' call on the Bank of Baroda, with a revised target price of ₹125. Yes Securities has also maintained a buy stance with a target price of ₹137 per share, citing improving business outlook along with containment of slippages.