Bank of Baroda’s (BoB) stock saw a sharp rise of nearly 5% on Monday, 28 October, after the bank reported an increase in profits and net interest income (NII) for the second quarter (Q2FY25). This surge in stock value reflects investor optimism, especially for those looking to invest in stocks within India’s banking sector. The bank’s share price reached an intraday high of ₹250.55 on the Bombay Stock Exchange (BSE), reinforcing BoB’s robust performance this fiscal year.
Profit increase and market capitalisation
The public sector lender’s Q2 net profit saw a notable 23.2% year-on-year (YoY) rise, reaching ₹5,238 crore compared to ₹4,394.3 crore in the previous year’s quarter. Sequentially, BoB’s net profit improved by 17.5% from Q1FY25’s ₹4,458 crore. By 9:48 AM, the bank’s stock was trading 2.71% higher at ₹246 per share, while the BSE Sensex registered a modest 0.10% rise, standing at 79,484.85. The bank’s market capitalisation at that time was ₹1,27,215.51 crore.
Net interest income and net interest margin
The bank’s NII, a critical revenue driver, expanded by 7.33% YoY to reach ₹11,622 crore for Q2FY25, up from ₹10,831 crore in Q2FY24. BoB also reported a marginal improvement in its net interest margin (NIM), which rose to 3.1% in Q2FY25 from 3.07% in the same period last year. Despite this YoY growth, the NIM saw a slight sequential dip of eight basis points from Q1FY25’s 3.18%.
Non-interest income growth and asset recovery
BoB’s non-interest income posted a 24.2% YoY increase, amounting to ₹5,181 crore in Q2FY25. This growth was bolstered by a significant rise in asset recoveries from written-off accounts, which more than doubled from ₹1,231 crore in Q2FY24 to ₹2,525 crore in Q2FY25. The robust performance in non-interest income areas highlights BoB’s effective asset management strategy.
Improvement in asset quality and NPA reduction
The bank’s asset-quality profile improved notably, with gross non-performing assets (NPAs) dropping to 2.5% in September 2024 from 3.32% in September 2023. Similarly, net NPAs decreased from 0.76% to 0.60% over the same period. Provisions for NPAs also declined, with the bank allocating ₹1,733 crore in Q2FY25, a 24.2% drop from ₹2,285 crore in Q2FY24.
Growth outlook and sector focus
Bank of Baroda has maintained its NIM guidance of 3.15% ± 5 basis points for FY25, as it does not anticipate significant fluctuations in its yield on advances. Looking ahead, the bank has also announced plans to accelerate its growth in agriculture and micro, small, and medium enterprises (MSMEs) sectors.
The target growth for these sectors is set at 12-14%, an increase from the current 11-12%. Corporate loan growth is expected to rise by approximately 10% YoY, underlining BoB’s commitment to bolstering its lending portfolio.
Stock performance and investor sentiment
Over the past year, BoB shares have gained 21.6%, reflecting solid growth potential for investors, particularly those looking to invest in stocks within the Indian banking sector. This gain is against the backdrop of the Sensex’s 24.4% rise, marking BoB as a promising stock in the financial market.
Bank of Baroda’s Q2 results signal strength in its core banking operations, improved asset quality, and increased profitability, which likely contributed to Monday’s stock surge. The market response underscores investors’ confidence in the bank’s sustained growth trajectory.
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