Bank Of Baroda Posts Dismal Q3FY13 Scorecard, Shares Plunge 7%

Bank of Baroda (BOB) has posted a bad set of Q3FY13 numbers that clearly disappointed the street. For the December 2012 quarter, the Net Interest Income (NII) grew by 7% to Rs 2841 crore, while its profits saw de-growth of 22% to Rs 1011 crore on a YoY basis. These numbers were way below the street’s estimate of the NII and profit coming in at Rs 2942 and Rs 1239 crore respectively. One of the reasons for the lower growth in profit was the higher provisioning, which grew by 23% to Rs 1029 crore on YoY basis. The markets gave the result a thumbs down, and the stock plunged 7% to Rs 807 per share within a few minutes of the announcement.

The following are some of the key financial parameters of the bank:

As on December 31, 2012, the bank’s Capital Adequacy Ratio (CAR) as per the Basel II norms stands at 12.66% as against 13.45% in the similar period last year. While the CAR is at a decent level as of now, the expected capital infusion by the government would improve this further. Other details of the Q3FY13 results were not available at the time of writing this article.

At an earlier point, we at DSIJ had said that BOB would see some headwinds in the next couple of quarters and may post disappointing results. We hold that it may disappoint in the March 2013 quarter too, as there could be further rise in provisions and it may also see a deterioration in its asset quality.

On the valuations front, the bank is currently available at a Price-to-Book value of 1.05x. We believe the counter may see a further downside in the coming days and would advise investors to stay away. Risk takers could enter the counter below the Rs 750 level and hold the stock to garner better returns.