On Thursday, Jefferies analysts reduced the stock rating of Bank of Baroda (NS:BOB:IN) from Buy to Hold and lowered the price target to INR 270 from the previous INR 310. The revised outlook is based on several factors affecting the bank's potential performance over the coming years.
The analysts pointed out that among the public sector banks they analyze, Bank of Baroda has the highest loan-to-deposit ratio (LDR) and is experiencing slower deposit growth, which could limit its loan growth in the next two to three years. Consequently, Jefferies has slightly trimmed its credit growth forecasts for the bank.
The lowered expectations have led to a 2-4% reduction in earnings forecasts for the financial institution. Looking ahead, the analysts project a compound annual growth rate (CAGR) of 10% in loans and credit costs of approximately 80 basis points each for fiscal years 2026 and 2027. Additionally, they anticipate a return on equity (ROE) of 13% in fiscal year 2026.
The report suggests that due to these factors, there is limited scope for a valuation re-rating and compounding for Bank of Baroda's stock. The analysts' commentary reflects a cautious outlook on the bank's ability to leverage growth and ROE in the near future.
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