On Monday, Investec has updated its outlook on Bank of Baroda (BOB:IN), raising the price target to INR300 from the previous INR290, while continuing to recommend a Hold rating on the stock.
The bank's annual report for the fiscal year 2024 underscored its strategy to diminish concentration in advances and deposits by emphasizing high-yield retail assets and low-cost retail deposits.
The report also noted a robust growth in fee income, attributed to various banking initiatives. Asset quality has shown improvement across different segments, including the priority sector categories. In a significant development, the Reserve Bank of India (RBI) has removed the restrictions on Bank of Baroda for adding new customers through its digital platform, BoB World. This move is expected to aid the bank in attracting new clientele.
Bank of Baroda has adhered to the Priority Sector Lending (PSL) targets without engaging in Priority Sector Lending Certificates (PSLC) transactions during the fiscal year. Despite these positives, the analyst anticipates that overall credit growth will likely be limited to 12-13% due to the peak Credit Deposit (CD) ratio of around 80%. Consequently, the Return on Assets (RoA) is projected to be 1.1% for the fiscal year 2025 and 1.0% for 2026. The Hold rating is retained with these considerations in mind.
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