Bank of Baroda touches new 52-week high

Investors found Bank of Baroda very bankable today on talk that the bank plans to return Rs 50-90 crore equity back to the government.

The scrip of the fourth-largest Indian bank in terms of assets scaled a new high of Rs 133 early today but dipped slightly thereafter to Rs 132.90, still higher by 3.54% over its yesterday's close. At 10:00 IST, volumes had already reached 53,386 shares on the counter.

The scrip has done exceedingly well of late, in the general uptrend in banking stocks, rising 65% from Rs 80.50 on 29 April 2003.

The scrip is being bolstered currently on market talk that the public sector bank plans to return equity amounting to around Rs 50-90 crore out of the total equity of Rs 296 crore held by the government in the bank. Currently, the Union Government holds 66.2% stake in Bank of Baroda (BOB).

If the bank reduces capital by Rs 90 crore, its EPS (on the basis of its nine-month results) will rise from Rs 25.9 to Rs 37.

Market players also expect impressive fourth quarter results from the company. BoB will announce its Q4 and FY 2002-03 results on 27 May 2003.

BoB has been placing a strong emphasis on the retail loans segment of late, and this has driven growth in the previous financial year. For the nine-month period ended 31 December 2002, BoB's interest income rose 4% to Rs 4,583.56 crore. During the period under review, net profit after making adjustment for income-tax refund rose 45% to Rs 569.64 crore. During the nine-month period ended 31 December 2002, the bank's global advances rose 16% to Rs 34,449 crore on a y-o-y basis. Similarly, global deposits rose 12% to Rs 66,820 crore. When compared to March 2002, the same grew by 8%.

Bank of Baroda's provisioning cover has grown impressively from 54% in FY 1999 to 70% in the nine months to FY 2003 and its net non-performing loans (NPLs) have fallen from 7.6% to 4% during the same period.

Bank of Baroda is the fourth-largest bank in terms of asset size. The bank's branch network is concentrated in the western region with a significant presence in the northern region as well. Its presence in the south and east is limited. The western region accounts for 65% of its total business. Banking analysts say, fundamentally, the stock is good and it is undervalued as it currently trades below its projected FY 2003-04 adjusted book value of Rs 140 per share.

As on 31 March 2003, public and institutions held 11.61% and 17.61% stake, respectively.