Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BOB: Taking positive strides - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Apr 12, 2001

    BOB: Taking positive strides

    Bank of Baroda (BOB), India's premier nationalized bank and the second largest among Indian banks based on its overseas network, was established in 1908. It now has over 2,600 branches, including 38 overseas and several subsidiaries around the world.

    Notwithstanding its nationalised bank status, BOB has taken several major initiatives to achieve global standards in banking. It has appointed Gartner, world-renowned IT consulting firm to evolve its business and IT strategies. With the help of Gartner, BOB will expand its activities in core banking, Internet banking and increase delivery channels - ATMs and Kiosks. These will enable the bank reach customers using wide area networking.

    During the year FY01, BOB has launched three new products under the name OmniBOB and become the first nationalized bank to introduce smart-card based on-line products at over 250 branches all over the country. The three products launched were: AnyBOB, a smart card based any branch banking service, DialBOB, a centralized telebanking service and connect BOB, an e-banking service, which can also be accessed by mobile phones. It has computerized over 1,200 branches, covering 72% of its Indian business. The bank currently has 25 ATMs and plans to increase the number to 300 in the next three to six months. In its continuous thrust for up-gradation of technology, the bank plans to invest Rs 2.5 – 3.0 bn in the next 2 to 3 years.

    It has also introduced better cash management product, BOB Cash Reach for customer convenience using these technologies. The initiatives taken by the bank are expected to enhance customer satisfaction and achieve higher volumes of business, which are expected to improve its bottomline growth in the coming years.

    The performance of the bank during the first nine months of FY01 is satisfactory. While its topline grew by 13%, profits witnessed a growth of 16%. Its operating margins of 33.4% are among the best in the sector. This is due to low cost of funds as saving account deposits contributed 21% to total deposits as on FY00. BOB is planning to achieve a growth of around 20% in retail advances in the next 2-3 years from the current 7.5%. This will bring down the cost of funds further resulting in higher operating margins. To reduce the operating cost further, it had launched voluntary retirement scheme in FY01 and received 6,731 (14% of total employees of 47,054) applications for the same. The scheme is expected to cost the bank Rs 5 bn but it would significantly add to its returns on equity in future.

    Financial snapshot
    (Rs m) 4QFY00 4QFY01E Change 9m FY00 9m FY01 Change
    Interest Income 13,984 16,797 20.1% 38,218 43,235 13.1%
    Total Income 16,231 18,976 16.9% 42,385 47,278 11.5%
    Interest Expenses 9,236 10,967 18.7% 25,831 28,774 11.4%
    Operating Profit 6,996 8,009 14.5% 16,554 18,504 11.8%
    Other Expenses 3,447 3,765 9.2% 9,063 9,757 7.7%
    Depreciation 242 346 42.6% 281 375 33.2%
    Profits Before Tax 3,307 3,898 17.9% 7,210 8,372 16.1%
    Tax 1,081 1,282 18.6% 1,320 1,540 16.7%
    Profits After Tax 2,226 2,616 17.5% 5,890 6,832 16.0%
    Provisions & contingencies 918 1,011 10.2% 2,170 2,540 17.1%
    Net Profit 1,308 1,605 22.7% 3,720 4,292 15.4%
    Equity shares (m) 296 296   296 296  

    Key ratios
    (Rs m) 4QFY00 4QFY01E 9m FY00 9m FY01
    OPM 34.0% 34.7% 32.4% 33.4%
    Tax / PBT 32.7% 32.9% 18.3% 18.4%
    NPM 13.7% 13.8% 13.9% 14.5%
    EPS (Rs) 17.7 21.7 16.7 19.3

    Apart from these positives, there are certain concerns over BOB’s future profit growth. The bank derives 38% of its operating income from investments. It has an exposure of around 21% of total net-worth in the equity markets (Rs 500 m in shares). However, the bank indicated that it did not finance any kind of stock market lending to brokers. Considering the recent downfall in the capital markets, BOB may have to make higher provisions for diminution in the value of its investments. This could impact its profits growth during the year.

    At the current market price of Rs 42, Bank of Baroda is trading at a P/E of 2.1 times FY01 projected earnings and a Price/Book Value ratio of 0.3 times. The bank is expected to record a rise of 13% in total income and 17% in profits for the year ended March ’01. Its capital adequacy ratio of 12% and non-performing assets to advances ratio of 7% are in line with its public sector peers. Adaptation to technology will help the bank in streamlining all procedures and reducing processing time. The valuations will be re-rated once its shows improved performance in the coming year with these strategies.



    Equitymaster requests your view! Post a comment on "BOB: Taking positive strides". Click here!


    More Views on News

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    SBI: Merger Pushes up Bad Loans (Quarterly Results Update - Detailed)

    May 23, 2017

    State Bank of India (SBI) ended FY17 on a healthy note but concerns on bad loans from associate banks remain.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in BANK OF BARODA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Detailed Quarterly Results With Charts