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Bank of Baroda

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤4th Feb 26

Summary : Bank of Baroda reports strong Q3 FY2026 results with robust advances growth, improved asset quality, and consistent profitability, maintaining positive full-year guidance.

Management Perspective positive : The Bank continues to pursue a sustainable, consistent and a stable operating model. The global advance of 14.7% is one of the best in last 8 quarters. On an asset quality front, it is absolutely on a benign cycle, one of the best quarter we have.

Concall Report Analysis & Insights

Business Overview

  1. Global advances grew by 14.7% Y-o-Y, with domestic advances up 13.6%.
  2. Organic retail book grew 17.4%, agriculture 19%, and MSME 16.4%.
  3. Net profit for Q3 FY2026 was Rs 5,055 crore, a 4.5% Y-o-Y growth.
  4. Gross NPA ratio improved to 2.04%, Net NPA ratio to 0.57%.
  5. Return on assets consistently above 1% at 1.09% for the quarter.

Future Growth Prospects

  1. Full year credit growth guidance maintained at 11-13% with an upward bias.
  2. Deposit growth guidance remains 9-11% for the full year.
  3. Full year Net Interest Margin (NIM) guidance is 2.85-3%.
  4. Return on Assets (ROA) guidance above 1%, Return on Equity (ROE) 16-18%.
  5. Strong corporate loan pipeline of Rs 75,000 crore, targeting 10% Y-o-Y growth.

Management Insights

  1. Bank maintains a sustainable, consistent, and stable operating model.
  2. Q3 results reflect fundamental core strength, with no one-off profits.
  3. Achieved one of the strongest business growths in the last 8 quarters.
  4. Asset quality is in a benign cycle, showing continuous improvement.
  5. Prudent liability management led to a sequential decline in cost of deposits.

Signs of Skepticism

  1. Analyst questioned lower Q-o-Q NIMs compared to other banks improving.
  2. Analyst questioned conservative credit growth guidance despite strong performance.
  3. Analyst asked about potential future margin decline given current trends.
  4. Analyst inquired about the sustainability of interest on income tax refunds.

Risk Factors

  1. NIMs face pressure due to the current rate cycle.
  2. Wholesale market cost of funds continues to be elevated.
  3. Liquidity Coverage Ratio (LCR) dropped to 116%, below the 120% target.
  4. Potential impact from gold price volatility on gold loan portfolio.
  5. Asset-liability repricing dynamics could affect margins.

Good To Know

  1. Awarded 'Best Bank' by 'The Banker' global magazine.
  2. Won 4 out of 7 IBA technology awards, with a special mention in a fifth theme.
  3. Piloting an app for real-time language translation for customer interaction in non-native areas.
  4. No material impact from new Labour Code on gratuity provision.
  5. Standard restructured loan book stands at Rs 8,000 crore, no longer a stress book.

Key Drivers

  1. Strong advances growth across segments.
  2. Robust asset quality, declining NPAs.
  3. Consistent profitability, high ROA.
  4. Diversified loan book, strong pipeline.

Key Analyst Discussions

Market Trends & Consumer Behavior

  1. Retail gold loan book is small (Rs 10,000 crore), with sufficient margins for price volatility.
  2. Personal loans are not aggressively driven, primarily to salaried individuals with corporate/government tie-ups.

Financial Highlights

  1. Q3 NIM was 2.79%, 9-month NIM 2.88%, full year guidance 2.85-3%.
  2. Operating expenses increased due to repairs, depreciation, and legal charges, with no one-off items.
  3. Capital adequacy (CRAR) is 15.29%, adjusted for profits 16.47%; plans to raise Rs 8,500 crore equity.
  4. Credit cost for Q3 was 0.17%, full year guidance revised positively to below 0.60%.
  5. Global cost of deposits declined to 4.75%, domestic to 4.99%.
  6. LCR is 116% (target 120%), domestic credit-deposit ratio is 83%.
  7. Treasury income was roughly Rs 1,000 crore, with trading profit at Rs 836 crore.

Product Composition

  1. Corporate loans grew 8.1% in Q3, with a strong, broad-based pipeline across sectors.
  2. MSME book is mostly secured; unsecured portions are covered by CGTMSE/NCGTC.
  3. Farm loans comply with guidelines, including post-inspection for end-use verification.

Strategic Considerations

  1. Bank has a well-documented transfer policy, with transfers completed before June.
  2. Management refrained from commenting on the 5-day workweek for PSU banks, citing it as a government decision.
  3. Bank policy prevents discussing specific accounts like Vodafone AGR lending.
  4. ECL transition implies an ongoing provisioning impact of 18 bps, with a net CRAR impact of 0.6-0.7% over five years.