Bank Of Baroda Upgraded To 'Buy' By UBS On Stable Metrics, Inexpensive Valuations

UBS has upgraded Bank of Baroda Ltd. to a 'buy' rating, citing stable metrics and attractive valuations. The bank's loan growth outlook is improving, and its corporate asset quality remains stable, making it a favourable investment opportunity, according to the brokerage.

It also raised the target price on the stock to Rs 290 from Rs 270. The revised target price factors in higher earnings per share estimates for FY26-27, driven by improved loan growth, stable asset quality, and controlled credit costs.Bank of Baroda's performance had previously been affected by weak net interest income growth and an uncertain economic environment, which led to a decline in loan growth.



However, the outlook for loan growth is now improving, bolstered by recent regulatory announcements that could enhance consumption and ease liquidity, UBS said.The bank's lower proportion of unsecured loans (3% of total loans), a favourable corporate cycle, and stable trends in the MSME segment are positive indicators for its growth and asset quality.UBS expects BoB's loan growth to be around 12% over FY25-27, with a higher mix of MCLR (Marginal Cost of Funds based Lending Rate) book likely to keep net interest margin compression modest.

The brokerage estimated a return on assets of approximately 0.9% and a return on equity of around 13% over FY26-27.UBS Cuts IT Sector Target Price But Sees More Upside Than DownsideThe stock price of Bank of Baroda has corrected by approximately 16% over the past year and currently trades at 0.

8 times its September 2026 estimated price-to-book value, near its five-year average. This valuation does not fully reflect the improving growth and earnings outlook, presenting a favourable risk-reward scenario, UBS said.In the third quarter of FY25, BoB's loan growth was driven by the retail (approximately 20% YoY) and MSME (around 14% YoY) segments, with the Retail, Agri, and MSME segment contributing about 60% of total loans.

Deposit growth was steady at around 12% YoY, with a healthy Current Account Savings Account mix of approximately 40%. UBS expects recent liquidity measures, along with a comfortable liquidity coverage ratio of around 130% and a modest loan-to-deposit ratio of approximately 83%, to enable further loan growth.Stock Market Live: GIFT Nifty Near 23,200; Bajaj Finance, HDFC Bank, Mazagon Dock Share Prices In Focus.

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