Bank of Baroda shares saw a significant rise on Friday, with the stock price jumping by over 3% during intraday trading after the public sector bank announced impressive growth figures for Q2 FY25.
The stock surged to ₹252.70 per share at its peak, reflecting a 3.12% increase, before settling slightly lower. This comes after the bank unveiled its provisional business update for the second quarter of FY25, alongside its strategic decision to exit its Oman operations by selling them to Bank Dhofar.
Strong Growth in Global and Domestic Business
Bank of Baroda has posted a solid performance in the second quarter of FY25, with global business growing by an impressive 10.23% year-on-year (YoY), reaching ₹25.06 trillion as of September 30, 2024. This growth highlights the bank’s continued expansion both domestically and internationally, despite a turbulent global financial environment.
The bank’s global advances saw a jump of 11.60% YoY, hitting ₹11.43 trillion. Domestic advances grew even faster, soaring by 12.51% to ₹9.39 trillion. These numbers indicate a strong demand for credit in the domestic market, buoyed by robust growth in sectors like infrastructure, manufacturing, and retail.
On the deposit side, global deposits rose by 9.11% YoY to ₹13.63 trillion, up from ₹12.49 trillion in the same period last year. Domestic deposits grew at a slightly slower rate, climbing by 7.4% YoY to ₹11.50 trillion.
Retail Segment Shines
The bank’s retail deposit segment, a key driver of growth in the domestic market, also delivered strong results. Retail deposits saw a massive 19.9% increase, growing to ₹2.32 trillion compared to ₹1.93 trillion in Q2 FY24. This surge reflects a growing confidence among individual depositors and signals a shift in how Indians are parking their savings, with many opting for safer, regulated institutions like public sector banks in the face of market volatility.
Exit from Oman Operations: A Strategic Move
In addition to its strong business performance, Bank of Baroda also announced plans to sell its operations in Oman to Bank Dhofar. This move is part of the bank’s broader strategy to rationalize its international operations, a trend seen among many Indian banks as they refocus on high-growth domestic markets while exiting less lucrative international ventures.
The total business of Bank of Baroda in Oman stands at 113.35 million Omani rials (OMR), with a net worth of 25.54 million OMR. The decision to offload its Oman operations aligns with the bank’s effort to optimize its overseas footprint while concentrating on its core markets. Bank Dhofar, a leading financial institution in Oman, is poised to benefit from this acquisition, strengthening its presence in the region’s banking sector.
Share Price Movement and Market Response
Bank of Baroda’s share price reflected investor optimism following these updates. The stock climbed to ₹252.70 per share during the day, a 3.12% rise from its previous close. At the time of writing, the stock was trading at ₹252.10 on the Bombay Stock Exchange (BSE), up by 2.88%. The surge was notably higher than the broader market, with the BSE Sensex up by 0.47% to 82,885.52 at 11:02 AM IST.
However, despite Friday’s rally, the bank’s stock has somewhat underperformed compared to broader market indices over the past year. BoB’s stock has gained 18.6% in the last 12 months, whereas the BSE Sensex has risen 27% over the same period. Year-to-date, Bank of Baroda’s share price has increased by 7.7%, lagging behind the Sensex, which has risen by 14.6%.
The bank currently boasts a market capitalization of ₹1.30 trillion, with its shares trading at a price-to-earnings (P/E) ratio of 6.97 times, which is considered attractive by many investors, particularly in a market that has become increasingly selective when it comes to valuations. The bank’s earnings per share (EPS) stands at ₹35, reinforcing the view that the stock may still have significant upside potential.
Comparing BoB’s Performance with the Broader Market
Bank of Baroda’s share price performance in 2024 reflects the broader trends in India’s banking sector, particularly in the public sector. While private banks like HDFC Bank and ICICI Bank continue to dominate in terms of market capitalization and profitability, public sector banks have been showing signs of resurgence, driven by government reforms, better management of non-performing assets (NPAs), and increased credit growth.
BoB, in particular, has been benefiting from a surge in demand for retail loans, particularly home and personal loans. With its large branch network and a strong presence in semi-urban and rural areas, BoB has been able to capitalize on the increasing credit penetration across India. Additionally, the bank’s focus on digitization and improved customer service has helped it attract more retail customers, further boosting its deposit and advance growth.
The domestic banking sector is expected to continue its upward trajectory in the coming quarters, bolstered by government spending on infrastructure, a revival in corporate capex, and steady consumer demand. Bank of Baroda, with its growing domestic advances and deposits, appears well-positioned to take advantage of these trends.
The Road Ahead for BoB
While the Oman divestment is part of a broader strategy to streamline its international operations, Bank of Baroda is also expected to continue expanding its footprint in other key overseas markets like the UAE and the UK, where it has a strong presence. The bank’s management has indicated that it will focus on optimizing profitability in these regions while ensuring compliance with local regulations and maintaining a strong risk management framework.
