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On Tuesday, Morgan Stanley (NYSE:MS) revised its stance on Bank of Baroda (NSE:BOB:IN) shares, downgrading the rating from Equalweight to Underweight and adjusting the price target to INR215 from the previous INR260. The adjustment comes as the firm anticipates a less favorable risk-reward balance for the bank’s stock. Analysts at Morgan Stanley have expressed concerns based on the bank’s financial projections, citing a price to book ratio of 0.8 times for the fiscal year 2026 and an expected return on assets (ROA) of 1%.
The downgrade is accompanied by a decrease in earnings per share (EPS) forecasts for the fiscal years 2026 and 2027. Morgan Stanley analysts have reduced the EPS estimate by approximately 6% for fiscal year 2026 and 5% for fiscal year 2027. These revisions reflect anticipated lower net interest margins (NIM) and core pre-provision operating profit (PPOP), which are largely attributed to reduced margins and core fees. However, some of these negative impacts are expected to be mitigated by lower credit costs in both fiscal years.
Morgan Stanley’s assessment also includes a shift in the valuation timeframe, moving it forward three months to March 2027 from the previous December 2026. This change in valuation horizon reflects the analysts’ updated expectations for Bank of Baroda’s financial performance.
The commentary from Morgan Stanley highlights the bank’s less attractive earnings outlook as a key reason for the downgrade. The firm’s analysts have taken into account various financial metrics and projections to arrive at the new rating and price target for Bank of Baroda shares.
Investors in Bank of Baroda will be monitoring the stock’s performance closely following Morgan Stanley’s updated analysis and rating change. The bank’s future financial results and market conditions will determine the accuracy of the firm’s projections and the impact on the stock’s valuation.
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