Reliance Securities has retained 'Neutral' on Bank of Baroda (BoB) after the company declared its first quarter results. The stock broker fixed price target to Rs 174.
Commenting on the results, Reliance Securities said, ''BoB 1QFY16 result was way above our and street estimates due to decline in provision expenses by 67% qoq to Rs 6 billion. This was due to lower provision for NPA and standard restructured loan portfolio. However, on sequential quarter basis, the bank reported higher incremental slippages (Rs 19.1 billion in 1QFY16 versus Rs 17.8 billion in fourth quarter of FY15 and Rs 20.2 billion in 1QFY15). Further, the bank has refinanced 2 loan accounts worth Rs45bn during the quarter under 5:25 refinancing scheme.''
Commenting on the investment rationale, the stock broker said, ''The management has guided that asset quality will remain weak in the coming quarters as there will be no restructuring window available. Hence, we remain cautious on the operational and asset quality performance of the bank.
Asset quality continued to remain a key concern for the bank, as its impaired loans were much above the comfort zone. Overall stressed asset (GNPA+ Standard Restructured Loans) of the bank stood at 9.8% of the loan book v/s 9.2% in 4QFY15 and 8.7% in 4QFY14. Further, credit cost is expected to remain at elevated level due to aging of existing NPA and slower recovery in economic activities. GNPA ratio increased by 33bps qoq to 4.13% and NNPA ratio grew by 18bps qoq to 2.07%. We maintain our Neutral view on the stock with a fair value of Rs 174 (valuing the stock at 0.9x FY17E Adj. Book Value).''
