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Bank of Baroda gains on improved assets quality in Q2

SI Reporter/Mumbai 15 Nov 17 | 10:59 AM

Bank of Baroda was up 4% to Rs 181 on the BSE in intra-day trade after the state-owned lender reported improved operational performance and assets quality in September quarter (Q2FY18). The stock rebounded 7% from its early morning low of Rs 169.

Bank of Baroda reported 13% year on year (YoY) growth in its operating profit at Rs 3,042 crore during Q2FY18, driven by growth both in interest and fee income.

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Net interest income for the quarter rose by 8.58% to Rs 3,720 crore from Rs 3,426 crore in the corresponding period of the previous year. Other income which includes fees and commissions rose by 11.2% to Rs 1,737 crore.

Domestic net interest margin during Q2FY18 has improved by 20 bps sequentially at 2.68% driven by reduction in cost of deposits & improvement in yield on advances, Bank of Baroda said in a statement.

Asset quality improved as gross non-performing assets (NPA) ratio and net NPA ratio stood at 11.16% and 5.05% on September 2017, against 11.35% and 5.46% respectively as on September 2016. Gross NPA and Net NPA stood at 11.40% and 5.17% as on June 2017.

Net profit during the quarter under review however declined 35.7% to Rs 355 crore against Rs 552 crore in a year ago quarter due to sharp rise in provisions and contingencies.

According to analysts at Edelweiss Securities, Q2FY18 performance is encouraging with respect to asset quality and growth; but, sustainability is key.

The brokerage firm maintains ‘buy’ rating on the stock with target price of Rs 243. Analysts believe, the government’s mega recap plan will address asset quality swings & encourage lending.

At 10:55 AM; the stock was up 2.5% at Rs 179, as compared to 0.28% decline in the S&P BSE Sensex. A combined 27.31 million shares changed hands on the counter on the BSE and NSE so far.

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