Bank of Baroda: No Further Slippages

Update on the Indian Equity Market:

On Wednesday, NIFTY closed -0.6% lower. Among sectoral indices, NIFTY media (-4.5%), NIFTY PSU Banks (-3.1%), NIFTY Metal (-2.0%), NIFTY Bank (-1.8%), NIFTY PVT Bank (-1.8%) closed lower. None of the NIFTY sectoral Index ended on a positive note. The biggest losers were Yes bank (-5.7%), GAIL (-4.8%), ZEEL (-4.7%), whereas Britannia (+4.9%), TCS (+3.7%) and Reliance (+2.9%) ended with gains.

Bank of Baroda: No Further Slippages

Excerpts from an interview of Mr Murali Ramaswami, executive director, Bank of Baroda with CNBC-TV18:

• Speaking about slippages, Mr Ramaswami mentioned that slippages during the last quarter were Rs 6,001 cr and 4 accounts constituted 60%-65% of it.
• He said there is nothing to worry about as the worst is behind. Bank’s provision coverage ratio is adequate and the operating performance is growing continuously.
• In total watch list of Rs 14,500 cr, DHFL is having exposure of Rs 1,900 cr.
• Mr Ramaswami doesn’t expect any further slippages in the corporate book. About BBB accounts he says, that those are from quite some time with the bank and there are no new accounts.
• Total exposure to NBFC’s is Rs 1.05 trillion and Rs 97,000 Cr is outstanding. One of the groups NBFC have slipped last quarter but as of now none of them are showing any sense of overdue.
• Out of Rs 97,000cr outstanding, around Rs 10,000 cr is non reputed private sector.
• Speaking about NPA’s he says, Gross NPA has come down from 10.28% to 10.25% on a quarterly basis. It will be sub-10% by the end of December quarter.
• Net Interest Margin stood at 2.81%. Retail growth is primarily driven by auto and home loans. The current growth rate for auto and home loan is 16% and the expectation is that it will increase to 20%.
• Retail loan, which is around ₹1.05 trillion is expected to rise to ₹1.3-1.35 trillion in this quarter. But overall advances are flat.
• Some NBFCS have paid back and the bank didn’t take any additional exposure because of stress in that sector.
• He added that HR integrations are complete, and the bank has saved ₹150 crores in amalgamation profits.
• Speaking about MD, he says, that the bank does miss Mr Jayakumar. The government has given power to the ED’s to manage the business so there is no impact.

Consensus Estimate (Source: market screener website & Investing.com)

• The closing price of Bank of Baroda was ₹ 93 /- as of 13-November-2019. It traded at a price to Book Multiple (P/B) multiple of 0.59x/0.54x/0.48x of the consensus book value estimates for FY20/21/22E of ₹ 157/172/192 respectively. 
• Consensus target price of ₹ 128 /- implies a P/B multiple of 0.6x on B/V of ₹ 192 for the year ending Mar-22E.