 "Bank of Baroda Q2 preview: Profit may rise upto 26% Y-o-Y; NIM outlook eyed")
Bank of Baroda Q2 rsults preview: State-owned lender Bank of Baroda's (BoB's) net profit may rise up to 26 per cent year-on-year (Y-o-Y) in the July to September quarter (Q2) of the current financial year (FY24) on the back strong credit growth, analysts believe.
However, net interest margins (NIM), they said, may remain under pressure due to increasing cost of funds (CoF) during the quarter.
The public sector bank is scheduled to report its Q2FY24 results on Saturday, November 4.
"We expect earnings and business growth to remain healthy in Q2FY24 with net profit seen rising 21 per cent Y-o-Y to Rs 4,000 crore. This would be driven by 18 per cent Y-o-Y growth in operating profit at Rs 7,120 crore, and 9 per cent increase in net interest income (NII) at Rs 11,120 crore," said analysts at Motilal Oswal Financial Services.
Bank of Baroda posted net profit of Rs 3,313.4 crore in the corresponding quarter of the previous year (Q2FY23), and Rs 4,070.1 crore in Q1FY24.
NII, meanwhile, was Rs 10,174.5 crore last year, and Rs 10,964.2 crore in the June quarter of FY24 (Q1FY24).
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In term of range, analysts expect net profit to come in anywhere between Rs 3,484.4 crore (up 5.2 per cent Y-o-Y) and Rs 4,178.9 crore (up 26 per cent Y-o-Y).
According to analysts at Prabhudas Lilladher, NII could decline by 1.3 per cent Q-o-Q, but rise 6.7 per cent Y-o-Y, to Rs 10,853.8 crore due to faster increase in cost of funds.
Net interest margin (NIM) is projected to contract in the range of 10bps to 16bps to Q-o-Q to 3.17 per cent. NIM was 3.33 per cent in Q1FY24 and 3.4 per cent in Q2FY23.
That said, analysts expect asset quality to improve further on healthy recoveries.
"Slippages are likely to be elevated due to the recognition of Go Air as NPA (Rs 1,300 crore). However, the bank may benefit from Srei Infra (partly) and ILFS recovery," noted Emkay Global.
Those at Kotak Institutional Equities expect slippages at 2.2 per cent (Rs 5,500 crore), most of which is likely to come from their exposure to a specific aviation account.
Gross non-performing assets (GNPA), thus, may remain steady at 3.5 per cent, while NNPA may improve to 0.7 per cent from 0.8 per cent sequentially.
Loan book is seen growing 17.4 per cent Y-o-Y to Rs 9.82 trillion, and deposit book is seen increasing 14.4 per cent Y-o-Y to Rs 12.47 trillion.
Analysts said the key discussion would be the sustainability of loan growth, deposit-related challenges, and NIM outlook in the near term.