Bank of Baroda becomes second public sector lender to hit ₹1 lakh crore market cap

• Albeit briefly, the bank became the second PSB to clock in ₹1 lakh crore in market value.
• India’s largest bank, SBI, has a market cap of over ₹5 lakh crore.
• As of Monday’s valuation, the BoB stock has more than doubled in the past year.

Bank of Baroda became the second Indian bank public sector bank or PSB to hit a market cap of over ₹1 lakh crore in trade on Monday. As it gained over 2% in the morning session, its market cap breached the mark and fell back to ₹99,419 crore by 1:30 pm.

Albeit briefly, the bank became the only PSU bank to clock in that market value, after India’s largest bank, SBI which has a market cap of over ₹5 lakh crore. The bank has has no looking back in size ever since state-owned Dena Bank and Vijay Bank merged into it in 2019.

Beyond that, its stock has been on an uptrend, like in the case of most bank and financial sector stocks. In the last one year, the stock can be considered a multibagger as it has gone up from ₹96 apiece to ₹183 on Monday.

On a growth path, say analysts

The stock has been gaining on the back of strong earnings growth that has been delivering for the last three quarters. A recent report by Kotak Institutional Equities says that levers are in place for its ability to hold up profitability going forward.

“While we are currently in a period of subnormal credit cost and supernormal net interest margin (NIM) for most banks, BoB seems to have adequate levers in place to ensure that return ratios sustain for some more time,” said the Kotak Institutional Equities report.

The company management is confident about growing at a faster pace than the industry, led by retail, including unsecured loans, where it sees strong potential for further mining the existing customer base.

A report by ICICI Direct says it expects credit growth to be in the range of 12-14% YoY for FY24. It says that repricing of liabilities at a faster rate is expected to put pressure on margins, and also expects operating expenditure to remain elevated.

“Overall, we expect earnings to improve in FY24, albeit at a slower pace as compared to FY23. Thus, sustainable credit growth coupled with healthy return ratios is expected to drive valuation, though we remain selective on stock,” ICICI Direct said.