Axis Securities Bullish on Bank of Baroda; Target Price at Rs 290

Q2FY27 PAT reached Rs 65.3 billion, marking a 35.8% year-on-year increase.
Credit growth guidance has been raised to 13-15% from the previous 12-14% range.

Reader Takeaway: Strong credit pipeline and margin recovery potential drive the upgrade, though NIM volatility remains a key watch point.

What just happened

Axis Securities has released a research note maintaining a bullish stance on Bank of Baroda. The brokerage has set a target price of Rs 290, highlighting the bank's operational efficiency and upwardly revised growth targets. The report underscores the lender's solid performance in the second quarter of FY27.

Why this matters

The revision in credit growth guidance to 13-15% signals management's confidence in the demand across retail, agriculture, and MSME (RAM) segments alongside corporate lending. While margins faced a minor compression of 3 basis points sequentially due to FCNR(B) lending, the brokerage anticipates a recovery in the second half of the year as the interest rate cycle shifts.

Risks to watch

Investors should monitor the potential impact of a systemic credit growth slowdown, which could challenge current estimates. Additionally, any unexpected deterioration in asset quality could lead to elevated credit costs, despite the current stable metrics.

Context metrics

Bank of Baroda reported GNPA and NNPA levels of 1.78% and 0.37%, respectively. The bank is currently allocating approximately 10% of its operating profit toward technology and cybersecurity upgrades to sustain its digital transformation efforts.

What to track next

Key metrics for investors include the NIM trajectory in the coming quarters and the bank's ability to maintain a sustainable 1% return on assets (RoA). Management's strategy for managing FCNR(B) liquidity remains a critical factor for margin stability.