Bank of Baroda Share Price Target at Rs 260: Sharekhan Research Suggests BUY CALL
Bank of Baroda is among value-buying stocks in the PSU banking segment. Bank of Baroda (BoB) has attracted renewed investor attention following Mirae Asset Sharekhan’s reaffirmation of its Buy rating on the PSU lender, maintaining a target price of Rs. 260. Despite facing pressure on its core operational performance in Q4FY25, BoB continues to exhibit resilience in asset quality and earnings stability. The bank's net interest margins (NIMs) declined, and net interest income (NII) missed expectations, but improved recoveries, lower slippages, and robust treasury gains supported profitability.
Q4FY25: NII Misses, But PAT Surprises Positively
Bank of Baroda reported Q4FY25 net interest income (NII) of Rs. 11,020 crore, down 7% YoY and 3% QoQ, largely due to a sequential decline in NIMs by 8 basis points to 2.86%. The fall in margins was attributed to lower yields on advances and higher cost of funds, despite a 5% QoQ uptick in loan book.
On the other hand, net profit stood at Rs. 5,048 crore, marking a 3% YoY increase, driven by a lower effective tax rate of 23.3% vs. 28.2% a year ago. Total provisions surged 19% YoY to Rs. 1,552 crore, fueled by higher write-offs.
Operating Metrics: Treasury Gains Help Offset Core Weakness
BoB's operating profit for Q4FY25 came in at Rs. 8,132 crore, flat YoY but propped up by strong treasury gains of Rs. 1,559 crore, compared to Rs. 936 crore in the previous quarter.
Core fee income rose 14% YoY and 26% QoQ, reflecting operational recovery in non-interest income streams. However, the cost-to-income ratio slightly worsened to 49.9%, impacted by rising operating expenses, which rose 3% YoY and 8% QoQ.
Asset Quality: Stable With Signs of Improvement
BoB reported improved asset quality metrics:
Gross NPA stood at 2.26%, down from 2.43% QoQ
Net NPA improved to 0.58% from 0.59%
Provision Coverage Ratio (PCR) held at ~75%
However, slippages increased to 1.2% (annualized), from 1.1% in Q3FY25. Net slippages rose to Rs. 1,216 crore vs. Rs. 1,094 crore QoQ.
The SMA-1 and SMA-2 books (above Rs. 5 crore) also declined to 0.33% of advances, compared to 0.49% QoQ — a positive indicator for future delinquencies.
Growth Drivers: Loan and Deposit Expansion Continues
BoB posted 13% YoY growth in total advances, reaching Rs. 12.09 lakh crore. Notably:
Retail loans grew by 19% YoY
Agriculture lending expanded by 14% YoY
MSME and corporate loans grew 14% and 9% respectively
Total deposits rose 11% YoY to Rs. 14.72 lakh crore, with CASA ratio at 33.7%, a slight decline from 35.1% last year.
Valuation and Outlook: Strong Fundamentals with Tactical Challenges
At the current market price of Rs. 233, the stock trades at:
0.8x FY26E ABV and 0.7x FY27E ABV
6.1x FY26E EPS and 5.8x FY27E EPS
According to Mirae Asset Sharekhan, return on assets (RoA) is expected to hold around 1.0% in FY26, buoyed by recoveries and treasury gains.
However, core profitability metrics may remain under pressure in H1FY26, with partial recovery in H2. The bank aims to maintain:
CD ratio at 82–84%
LCR above 120%
Focus areas include enhancing retail deposit share, reducing dependency on bulk deposits, and improving fee-based income to support return ratios.
Peer Comparison: Attractive Relative Valuation
| Bank | CMP (Rs) | Market Cap (Rs Cr) | FY26E P/E (x) | FY27E P/E (x) | FY26E P/B (x) | FY27E P/B (x) | RoE FY26E (%) | RoA FY26E (%) |
|---|---|---|---|---|---|---|---|---|
| Bank of Baroda | 233 | 1,20,384 | 6.1 | 5.8 | 0.8 | 0.7 | 13.4 | 1.0 |
| SBI | 802 | 7,15,710 | 7.0 | 6.6 | 1.0 | 0.9 | 15.3 | 1.0 |
Management Outlook: Steady on Growth, Cautious on Margins
BoB’s leadership, led by MD & CEO Debadatta Chand, maintains a stable guidance:
Loan growth target: 11–13%
Deposit growth: 9–11%
Slippages guidance: 1–1.25% of advances
Credit cost to remain under 0.75%
The bank acknowledges NIM compression in H1FY26 but expects stabilization by H2. The shift towards retail and CASA deposits, along with digital integration, is seen as key to enhancing structural profitability.
Shareholding and Market Sentiment
Promoter holding remains strong at 64%, with institutional interest from HDFC AMC, SBI Funds, Kotak AMC, ICICI Prudential, and global funds such as Blackrock and Vanguard.
The stock has underperformed the Sensex over the past year:
1M return: 0%
12M return: -10%
Relative to Sensex: -21.5%
However, Sharekhan sees this as a valuation re-rating opportunity, backed by robust balance sheet and asset quality.
Investment Takeaway: Tactical Patience, Strategic Reward
Mirae Asset Sharekhan recommends a BUY on Bank of Baroda with a revised price target of Rs. 260, reflecting a modest upside from current levels. While near-term margin pressures remain a concern, the bank’s improving asset quality, resilient return ratios, and undervalued metrics provide a solid investment case for FY26–FY27.
