Accumulate Bank of Baroda; target of Rs 280: Prabhudas Lilladher

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Loan growth ex-FCNR was muted: Credit growth ex-FCNR was soft at 2.3% QoQ due to weak corporate accretion, while RAM growth was decent at 5.5%.
  • Asset quality remains a silver lining: Lower net slippages/credit costs and a floating provision buffer of ~INR 25bn support the investment thesis.
  • NIM movement: Incremental loan mix will determine NIM movement, with a retained FY27 NIM guidance of 2.75-2.95%.
  • Fee income and opex: Fees remain an area for improvement, with management expecting some upside over the next two quarters, while opex was higher due to staff costs.

Thesis Validation Checklist

To validate the 'ACCUMULATE' thesis, watch for:

  • Loan growth: Achievement of the upper end of the revised credit growth guidance of 13-15%.
  • Asset quality: Continued lower net slippages and credit costs.
  • NIM expansion: Movement towards the higher end of the NIM guidance range.
  • Fee income growth: Improvement in fee income, particularly from monetizing the large loan book. These signals will indicate whether the investment thesis is playing out as expected.