At 3.05 pm today, the shares of Bank of Baroda (BoB) were trading at ₹213.30, reflecting a decrease of ₹9.09 or 4.09 per cent on the NSE. The stock hit its 52-week low at ₹211.05 during the trading session.
BoB has revised its net interest margin (NIM) guidance downward for FY25 to 3-3.1 per cent after experiencing a 16 basis points quarter-on-quarter decline in Q3FY25 margins to 2.94 per cent. Despite this, the bank reported better-than-expected profits primarily due to lower provisions being made.
The margin decline was partly attributed to penal interest being reclassified as penal charges, resulting in a 5-7 basis points impact on NIMs in 9MFY25. Additionally, the bank decided to scale back growth in high-yielding personal loans due to concerns about asset quality in this segment, although other retail secured portfolios remained stable.
BoB’s Special Mention Account (SMA1+SMA2) book saw a slight increase to 0.49 per cent from 0.47 per cent in September 2024. The management maintains its FY25 guidance for slippages at 1-1.2 per cent and anticipates that credit costs will stay below 75 basis points.
In response to these developments, Axis Securities has upheld its “Buy” rating on the stock but has adjusted the target price to ₹280 from ₹310 per share. The brokerage has based its valuation on the bank at 1.0x September 2026 estimated adjusted book value, citing reasonable valuations despite immediate margin pressures. Furthermore, the firm has revised its estimates by reducing NII projections by 2.4-2.6 per cent for FY25-27 while increasing the FY25 PAT estimates by 2.4 per cent.
