This is how Bank of Baroda is set to perform post merger with Dena Bank, Vijaya Bank
Combining Dena and Vijaya in its ambit, BoB now has a strong entity base with network close to 9500 branches, approximately 13000 ATMs across India.
After Bank of Baroda's (BoB) merger with Dena Bank and Vijaya Bank, its shares have become a hot pick for the investors. Post the merger, the banks have a network of close to 9500 branches and approximately 13000 ATMs across India. Not only this, BoB has become second largest public sector Bank in the country and third largest bank after State Bank of India and ICICI Bank. Many experts are very optimistic about this bank, and have given a buy rating. At around 1235 hours, BoB share was trading at Rs 131.95 per piece up by just 1% on Sensex. However, so far the bank has given nearly 3% return to investors by rising to intraday high of Rs 134.20 per piece in early hours of Monday's opening session.
The latest one to give buy rating on BoB is Axis Direct. Taking into consideration Q3FY19 performance, Axis stated that, the data showed significant improvement with domestic growth momentum building up, driven by retail portfolio and asset quality improvement. Management expects the trend to continue with focus on quality growth and further improving the rating profile. Notably, the bank will soon declare Q4FY19 results. It has to be noted that the merger impact will be seen from Q1FY20 in BoB’s financial performance, and hence, Q4FY19 will be standalone.
"We have a BUY with a target of Rs. 144," Axis said.
Following the merger, recently, Credit Suisse mentioned that, while coverage is healthy at 59%, provisioning will likely remain elevated, as policies are aligned (BOB has a more conservative provisioning policy) and harmonisation of NPA recognition. It said that with ageing related provisions and given lower IBC exposure (~0.9% of loans to List 1) recoveries will not be strong, and forecast FY20 credit costs at 1.7% vs 1-1.2% for preferred corp. Banks.
“With RoE likely to remain muted at ~7% in FY20E, we prefer SBI among PSU Banks. Cut EPS by 23-38% and increase target price to Rs115 as we incorporate merged numbers and factor in dilution," it added.
Meanwhile, Sameer Kalra, Equity Research Analyst & Founder Target Investing had mentioned that, he merger of BoB, Vijaya and Dena Bank has ended up working as an acquisition because on BoB brand will exist going forward. And the management is expected to remain of BoB. This will give boost to valuation of the bank and recent capital infusion will help raise funds from market."
Thereby, Kalra has given three set of target price of Rs 134, Rs 137 and Rs 141 on BoB ahead. From the above mentioned target, if we compare current market price, then BoB is going to give maximum over 9% return to investors ahead in short term.
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