HDFC Securities has maintained 'Buy' on Bank of Baroda with target price of Rs 1,167 as against current market price (CMP) of Rs 1,060 in its report.

Commenting on the investment rationale, HDFC Securities said, ''Impairments to be higher vs. 2Q (Rs 32 billion) led by rise in restructuring. Loan growth to match industry avg. of 13-15% by Mar-15. NIM (2Q: 2.4%) expected to remain largely stable. With higher wage hike provisions  and relatively lower pension discounting rate (8.5%), BOB is better placed vs. peers.

Management hinted that a 100bps downward revision in discount rate would lead to Rs 2.5 billion additional pension cost. The decline in yields, management hinted for better treasury gains and MTM reversals in the equity book (hit of Rs 1.8 billion in 2Q) which should provide a cushion to earnings.

Amongst PSBs, BOB continues to stands out, given high tier I at 9.3%, improving granularity within B/S and lower impaired ratio. Further, we believe BOB’s asset quality is likely to peak ahead of its peers, given that it has a relatively better credit underwriting. BOB trades at 1.1x FY17E ABV with an ROA of 0.8%. Maintain Buy and revise TP to Rs 1,167 (1.2xFY17E ABV).''

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