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On Thursday, UBS analyst Vishal Goyal upgraded Bank of Baroda (NSE:BOB)’s stock rating from Neutral to Buy, adjusting the price target to INR290.00, up from the previous INR270.00. The upgrade reflects a positive shift in the bank’s loan growth outlook and a stable corporate asset quality.
Goyal noted that Bank of Baroda’s performance had been hindered by sluggish net interest income (NII) growth and an uncertain economic environment, which had suppressed loan growth. However, recent regulatory changes are expected to stimulate consumption and improve liquidity, which should, in turn, support loan growth.
The bank’s conservative approach to lending, with a lower proportion of unsecured loans at only 3% of the total loan book, along with a benign corporate cycle and stable trends in the micro, small, and medium-sized enterprise (MSME) segment, are seen as positive indicators for future growth and asset quality. UBS forecasts a loan growth of approximately 12% over the financial years 2025 to 2027.
Additionally, a higher mix of Marginal Cost of funds-based Lending Rate (MCLR) book is anticipated to limit the compression of the net interest margin (NIM). Consequently, UBS estimates a return on assets (RoA) and return on equity (RoE) of around 0.9% and 13%, respectively, for the financial years 2026 to 2027.
The bank’s stock price has experienced a correction of about 16% over the past year, currently trading at 0.8 times its September 2026 estimated price-to-book value (P/BV), which aligns with its five-year average. Goyal suggests that the current stock valuation does not fully reflect the bank’s improving growth and earnings outlook, presenting a potentially favorable risk-reward scenario for investors. This assessment has led to the decision to upgrade the stock rating to Buy.
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