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Investing.com - Nomura/Instinet upgraded Bank of Baroda (BOB:IN) to Buy from Neutral and raised its price target to INR320.00 from INR240.00 following the bank’s strong second-quarter fiscal 2026 performance.
Bank of Baroda reported core pre-provision operating profit of INR62.5 billion in 2QFY26, representing a 9% quarter-over-quarter increase and exceeding Nomura’s estimate by 8%. The outperformance was driven by net interest margin expansion of 5 basis points quarter-over-quarter, stable core fee income, and controlled operating expenses.
The bank demonstrated robust growth with loans increasing 6% quarter-over-quarter and 12% year-over-year, while deposits grew 5% quarter-over-quarter and 10% year-over-year. The credit-deposit ratio rose to 83.9%, up 124 basis points from the previous quarter.
Bank of Baroda created INR4 billion in floating provisions during the quarter to prepare for the transition to expected credit loss norms, bringing total floating provisions to INR10 billion. Management expects the net impact of these new norms on capital adequacy ratio to be limited to approximately 75 basis points, which can be spread over five years.
Nomura raised its earnings per share estimates for Bank of Baroda by 6% for fiscal 2026 and by 9-11% for fiscal 2027-2028, citing higher net interest income and lower credit costs. The firm expects the bank to deliver average return on assets of approximately 1.0% and return on equity of 13.7% over the FY26-28 period.
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