Financial institution of Baroda – Looking for portfolio stability in key segments
Financial institution of Baroda’s Q1 FY26 earnings marginally missed estimates on the again of softer traction in price revenue and better credit score prices. Deposit development (~10% YoY; -2.5% QoQ) was gentle as home present account and financial savings account declined to 39.3% (-64 bps QoQ). Mortgage development (+13% YoY; -2% QoQ) was weak sequentially, with average development in company segments.
Largely steady margins have been offset by decrease traction in price revenue, resulting in in-line working efficiency. Regardless of its handicap of comparatively softer NIMs on the again of a big abroad portfolio (18% of loans), BOB persistently delivered higher return ratios than friends, largely on the again of decrease credit score prices and superior buyer franchise.
Nevertheless, we flag the fixed rise in retail slippages of the financial institution coupled with the comparatively inferior high quality of the MSME portfolio. An elevated home C/D ratio at ~82% (highest amongst PSBs) is prone to prohibit mortgage development, given intense competitors for retail deposits.
We construct in 13% pre-provision working revenue compound annual development price and 10% EPS CAGR over FY25-27E, factoring in comparatively higher margin administration and average normalization of credit score prices.
We reiterate Purchase on BOB, with an unchanged goal value of Rs 290 (1.0x Mar-27 adjusted e book worth per share).