Bank of Baroda
Weak credit growth, dragged by sluggish corporate loan off-take, coupled with muted operating profit and higher slippages may dent the March quarter (Q4FY21) earnings of state-owned lender Bank of Baroda.
“Elevated credit cost and modest net interest income (NII) is expected to dent earnings. Besides, asset quality may also remain under pressure during the quarter under study,” wrote analysts at Motilal Oswal Financial Services in an earnings preview note.
At the bourses, BoB stock has outperformed during the period under review, ACE Equity data show. In three months to March 31, the stock of the state-owned bank moved up 20.5 per cent, as compared to the Nifty50 and Nifty Bank indices’ 5 per cent and 6.5 per cent gain, respectively.
Movement in stressed assets’ pool, progress on the merger front, and the management’s outlook as regards growth and recoveries due to the second wave of Covid-19 will be keenly tracked by analysts.
Here’s what key brokerages see the bank’s Q4 report card:
The research and brokerage house expects BoB’s operating profit to stay muted at Rs 5,000.4 crore in Q4FY21, down 2 per cent on a yearly basis from Rs 5,120.8 crore reported in Q4FY20. On a sequential basis, this would mean an 11 per cent cut from Rs 5,590.6 crore reported in the December quarter of FY21.
However, moderation in credit cost and low base should drive the lender’s net profit growth up 41 per cent year-on-year (YoY) to Rs 715.5 crore from Rs 506.6 crore. On a QoQ basis, PAT may decline 33 per cent from Rs 1,061.1 crore.
Opposite to HSBC’s estimates, Emkay projects an over 57 per cent sequential cut in the net profit while the YoY contraction is pegged at 11 per cent. In absolute terms, PAT is seen at Rs 450.5 crore during the quarter. That apart, the bank may continue to report healthy growth in retail loans, but corporate loan book may remain sluggish, it said.
“Slippages in SME/Retail and mid-sized corporate book could remain high, but the bank should benefit from Bhushan Power resolution,” it added.
Motilal Oswal Financial Services
Maintaining an optimistic view relative to the previous two brokerages, MOFSL expects BoB’s net profit to grow 82.6 per cent YoY to Rs 925 crore on the back of a sharp decline in provisions.
From Rs 6,844.1 crore set aside in the year-ago period, the brokerage expects the lender to create provisions at Rs 4,684.6 crore in Q4FY21, down 31.5 per cent YoY. However, the same would be up 18 per cent QoQ from Rs 3,956.7 crore earmarked in Q3FY21. It also expects the lender’s gross NPA ratio to rise by 104 bps (1.4 percentage points) to 9.9 per cent from 8.5 per cent QoQ. NNPA is seen rising from 2.4 per cent to 3.8 per cent QoQ.
Lastly, with a 5.7 per cent and 5.5 per cent YoY growth in loan book (at Rs 7.29 trillion) and deposits (at Rs 9.98 trillion), respectively, MOFSL projects a 16.1 per cent yearly improvement in NII at Rs 7,890 crore. The same was Rs 6,798.2 crore in Q4FY20 and Rs 7,748.7 crore in Q3FY21.
Kotak Institutional Equities
This brokerage sees BoB reporting only a 7.1 per cent YoY growth in NII, which would be a 6.1 per cent contraction sequentially, at Rs 7,279.8 crore owing to a 4 per cent growth in credit. Besides, it also sees weak operating profit growth (1.2 per cent YoY, -7.3 per cent QoQ) at Rs 5,180.5 crore led by lower treasury income and modest NII growth. However, PAT is estimated at Rs 1,720.6 crore, up nearly 238 per cent YoY and 62 per cent QoQ, due to an over 55 per cent YoY (32 per cent QoQ) decline in provisions at Rs 1,413.2 crore.