Brokerages cut target prices for BoB post Q1 result

Brokerages have slashed target prices for Bank of Baroda after the lender on Monday posted a net loss of Rs 864 crore on a standalone basis in the quarter ended June due to increased provisioning for standard accounts.

The bank had reported a profit of Rs 710 crore in the corresponding quarter last year.

The scrip traded 1.13 per cent down at Rs 48 on BSE, while the benchmark BSE Sensex traded 0.86 per cent higher at 38,511.

While retaining a ‘Hold’ rating on Bank of Baroda, Emkay Global Financial Services cut the target price to Rs 55 from Rs 58. It, however, said that a healthy capital position and higher retail orientation should be structurally positive for the stock in the long run.

Total provisions and contingencies for the quarter increased 71.32 per cent to Rs 5,628 crore from Rs 3,285 crore.

The lender’s asset quality improved with the gross non-performing assets (NPAs) falling to 9.39 per cent of the gross advances as on June 30, from 10.28 per cent by the end-June 2019.

Net NPA ratio fell to 2.83 per cent from 3.95 per cent as on June 30, 2019, the bank said.

Nirmal Bang Securities retained ‘Accumulate’ rating on the stock with a target price of Rs 50 (Rs 56 earlier).

For FY21, the bank is looking to deliver a credit growth of 7-8 per cent, which the brokerage house believes may not materialise given the current economic situation.

“Given the book under moratorium and management commentary, we have increased our credit cost assumption for FY21, resulting in net earnings downgrade,” Nirmal Bang said, adding the rating reflects their cautious stance on the bank.