1. RETAIL RESEARCH Page | 1
HDFCSec Scrip Code Industry CMP Recommended Action Averaging Band Target Time Horizon
BANBAREQNR Banks Rs 898.5 Buy on dips Rs 717 – Rs 759 Rs 928 1 quarter
*applicable till next quarter results are announced
During Q1FY15, BOB’s reported NII of Rs 3328.3 cr, up 15.2% y‐o‐y and 6.5% q‐o‐q and net profits of Rs 1361.9 cr, up 16.6% y‐o‐y and 17.7% q‐o‐q. NIMs have come down marginally
from 2.41% to 2.35% y‐o‐y. Overall loans have gone up 18.8% y‐o‐y. CASA stands at 31.3% marginally down from 31.8% in Q4FY14. Restructured assets have come down to Rs 986 cr
from Rs 1157 cr in Q4FY14. However, GNPA and NNPA as a percentage has trended up to 3.11% and 1.58% in Q1FY15 compared to 2.99% and 1.69% in Q4FY14.
NIMs almost stable; Loan growth steady
Global NIMs of BOB have come down 6 bps y‐o‐y from 2.41% to 2.35%. However, Domestic NIMs have gone up 10 bps from 2.84% to 2.94% in Q1FY15. Overseas NIMs have gone down
14 bps to 1.18% during the same period. Sequentially NIMs have improved from 2.29% to 2.35%. Both yield on advances and cost of deposits have come down 9 bps and 10 bps y‐o‐y
respectively. Sequentially yield on advances have gone up 15 bps while cost of deposits have come down 8 bps. Interest spreads have gone up from 2.89% in Q4FY14 to 3.12%.
(Source : Company,HDFC sec)
Total Business of BOB stood at Rs 933421 cr, a growth of 18.4% y‐o‐y. Total deposits are up 18.1% y‐o‐y to Rs 551649 cr while total advances have gone up 18.8% y‐o‐y
to Rs 381772 cr. Overseas business continues to grow faster at 24.1% y‐o‐y compared to 15.8% growth in the domestic business. Loan growth in domestic business was
mainly led by Retail and SME lending which have gone up 17.2% y‐o‐y and 22% y‐o‐y. Under retail, home loans have gone up 22.1% y‐o‐y. Farm credit is up 15.2% y‐o‐y
to Rs 31259 cr.
RETAIL RESEARCH August 04, 2014Bank of Baroda (BOB) – Q1FY15 Result Update

2. RETAIL RESEARCH Page | 2
(Source : Company,HDFC sec)
CASA lower at 31.3%; Non‐ interest income down
Global CASA deposits have gone up 17.3% y‐o‐y but down 5.4% q‐o‐q to Rs 138632 cr. Domestic CASA deposits have gone up 13.3% y‐o‐y to Rs 114478 cr. Domestic CASA ratio has come
down marginally from 31.8% to 31.3% sequentially.
(Source : Company,HDFC sec)
Non‐interest income was down 16.7% y‐o‐y and 22.7% q‐o‐q to Rs 1024.5 cr. Out of this fee based income was up 6.9% y‐o‐y and down 19.7 % q‐o‐q to Rs 483.3 cr.
Non Interest Income Q1FY15 Q1FY14 % chg Q4FY14 % chg
Comm, Exchange & Brok 347.3 314.74 10.3% 419.2 -17.2%
Incidental Charges 71.8 83.9 -14.5% 112.5 -36.2%
Other Misc Income 64.3 53.35 20.4% 69.9 -8.1%
Total Fee Based Income 483.3 452.0 6.9% 601.6 -19.7%
Trading Gains 224.2 409.25 -45.2% -69.0 -424.8%

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Profit on Exch Trans 256.1 252.36 1.5% 9.1 2710.9%
Recovery from PWO 61.0 116.95 -47.8% 180.9 -66.3%
Total Non Interest Income 1024.5 1230.6 -16.7% 1326.3 -22.7%
(Source : Company,HDFCsec)
Cost to Income Ratio increases; PCR improves to 65.5%
BOB’s cost to income ratio has gone up sequentially from 42% to 43.1% in Q1FY15. Y‐O‐Y it has gone up from 40.5%. Employee expenses have gone up 9% y‐o‐y and 6.3% q‐o‐q to Rs
1105.5 cr. In accordance with RBI circular dated February 09, 2011, out of the additional pension fund liability as on March 31, 2011 of Rs. 1829.90 cr towards serving employees who
exercised option for pension, a proportionate sum of Rs. 91.50 cr has been charged to the Profit and Loss Account during the quarter ended June 30, 2014. The unamortized pension fund
liability of Rs. 274.48 cr will be charged proportionately in accordance with the directions contained in the said circular.
(Source : Company,HDFCSec)
Provisions & Contingencies (excluding tax provisions) have gone down 48.3% y‐o‐y and 54.3% q‐o‐q to Rs 526.7 cr with w/back in provision for depreciation on investments. Provision for
NPAs has gone up 14.6% and 21.1% to Rs 771.8 cr. BOB utilized Rs 318.9 cr provisioning reversal on its investment portfolio (on account of buoyant capital markets) towards making
higher provisions on NPAs thus improving its PCR sequentially. Bank’s PCR improved from 61.68% in Q2 to 62.22% in Q3 to 65.45% in Q4 of FY14 to 66.68% in Q1FY15.
Provisions & Contingencies Q1FY15 Q1FY14 % chg Q4FY14 % chg
Prov for NPA/Bad Debts 771.8 673.49 14.6% 637.4 21.1%
Prov for Dep on Inv -318.9 118.33 -369.5% 293.4 -208.7%
Prov for Std. Advances 79.9 227.86 -64.9% 191.3 -58.2%
Other Provisions -6.1 -1.82 235.7% 31.1 -119.7%
(Source : Company,HDFC sec)

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GNPAs & NNPAs rise; Incremental restructuring lower
Sequentially BOB’s asset quality has slightly deteriorated with slight increase in GNPAs and NNPAs to 3.11% and 1.58% respectively. It is up from 2.94% and 1.52% in Q4FY14 and 2.99%
and 1.69% in Q1FY14. For the quarter, bank reported higher slippages of Rs 1881 cr compared to Rs 1295 cr in Q4FY14 while increment restructuring has come down to Rs 986 cr.
In its global operations, the Bank restructured loans to the tune of Rs 986 cr (3,761 accounts) in Q1FY15 versus Rs 1,157 cr (6,556 accounts) in Q4FY14 and Rs 2,147 cr (10,257 accounts)
in Q1FY14. Within this, domestic restructuring was Rs 948 cr (3,758 accounts) versus Rs 1,157 cr (6,556 accounts) in Q4FY14. Global restructuring has shown a consistently declining trend
with Rs 2,147 cr in Q1FY14, Rs 1,637 cr in Q2FY14, Rs 1,213 cr in Q3FY14, Rs 1,157 cr in Q4FY14 and Rs 986 cr in Q1FY15 – as per the Bank’s guidance. Provision for Diminution in Fair
Value for Q1FY15 was Rs 25.7 cr versus Rs 151.8 cr in Q1FY14. Globally, Restructured Standard Advances (at Rs 22,832 cr) stood at 6.06% of Total Standard Advances. This ratio works out
to 7.75% for Domestic Restructured Standard Advances (at Rs 19,779 cr). Globally, restructured assets worth Rs 489 cr slipped to NPA during Q1FY15 vs Rs 2,126 cr during the full year
FY14 and Rs 6,002 cr cumulatively so far.
NPA Movement Q1FY15 Q1FY14
Opening Balance 11875.9 7982.6
Additions 2022.1 2165.5
-Fresh Slippages 1880.8 1960.2
Reductions 1811.2 385.5
-Recovery 562.6 199.2
-Upgradation 741.2 149.4
-PWO & WO 498.6 7.3
Exc Diff/Others 8.7 29.6
Closing Balance 12086.8 9762.6
Recovery in PWO 61.0 117.0

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Gross NPAs increased 15 bps qoq to 3.1% of loans (flat on an absolute basis at Rs.121 bn) while net NPAs increased 5 bps to 1.6% of loans—one of the lowest among
public banks. Outstanding restructured loans were flat qoq at ~6% of loans.
Other Highlights
• The Bank’s Capital Adequacy Ratio as on June 2014 stood at CRAR (Basel II) at 12.5%, with Tier 1 at 9.3%. CRAR as per Basel III stood at 11.9%, Tier 1 at 9.06% as on June 2014
• During the quarter Bank has sold financial Assets with net book value of Rs. 185.5 cr to Assets reconstruction companies on cash and security receipt basis in
accordance with RBI guidelines. The security receipts are treated as non SLR investments.
• During Q1FY15, the Bank’s “Overseas Business” contributed 33.1% to its Total Business, 25.8% to Gross Profit and 29.5% to Core Fee‐based income. Out of the
Total Overseas Loan‐book, 53.35% was Buyers’ Credit/BP/BD; 27.97% was in Syndicated Loans/ECBs (mostly to Indian corporates) and 18.68% was in Local Credit.
The Bank’s exposure to non‐India related companies is around 31.6% of its overseas loan‐book as on 30th June, 2014. While the GNPA (%) in domestic operations
was at 4.00%, it was 1.18% for overseas operations as on 30th June, 2014. In Q1FY15, the NIM (as % of interest‐earning assets) in Overseas operations stood at
1.18%; Gross Profit to Avg. Working Funds ratio at 1.10% and Return on Equity at 16.98%. The Outstanding balance of restructured loans in overseas operations as
on 30th June, 2014 was at Rs 3,913 cr, out of which the Standard restructured loans were at Rs 3,053 cr. The Bank restructured three accounts in its overseas
operations in Q1FY15 worth Rs 37.8 cr. During Q1FY15, the Bank opened one new branch in its Overseas Subsidiary – Bank of Baroda (Kenya) Ltd. at Meru in
Kenya.
• Bank has pan Indian presence with 4,872 branches as on June 2014. During Q1FY15, the Bank opened 25 new branches. In FY15 Bank proposes to open 400 new
branches.
Branch Network Split Q1FY15 Q4FY14 Q3FY14 Q2FY14 Q1FY14 Q4FY13 Q3FY13
Gujarat 18.8% 19.0% 19.5% 19.6% 20.3% 20.0% 20.4%
Maharashtra 10.8% 10.9.% 11.2% 11.2% 11.5% 12.0% 11.7%
Rajasthan 10.5% 10.6% 10.9% 11.1% 11.2% 11.0% 11.3%
South India 11% 11.0% 10.8% 10.8% 11.0% 11.0% 11.2%
UP and Uttaranchal 23% 23.0% 23.7% 23.4% 22.0% 22.0% 21.9%
Rest of India 25.9% 25.6% 23.9% 24.0% 24.0% 24.0% 23.5%
(Source: Company,HDFC sec)
• Bank has made provision @ 20% on the Secured Sub‐standard Advance as against the Regulatory requirement of 15%. Further, Bank has made additional ad‐hoc
provision of Rs. 340.6 cr for the quarter in certain non performing domestic advance accounts.
• During Q1FY15, BOB’s management focused on massive recruitment and talent acquisition to take care of the HR gaps. It has proposed new hiring upto 7600
numbers in FY15

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Concerns
• In wake of rising NPAs, BOB’s asset quality could be under pressure in case the asset quality environment (globally as well as domestically) worsens further especially given its
global presence and rising exposure to SME.
• Cost to income ratio still remains high at 43% in Q1FY15. It is important that the bank controls its cost to income ratio, failing which it could get a hit on its bottom‐line.
• It is important that the bank is able to stabilize/raise its NIMs going forward. If the bank is unable to get cheaper borrowing, the spreads could narrow down thereby putting
pressure on the margins of the bank.
• The bank features amongst the frontrunners in the PSU banking space in terms of overall operating efficiency. Having said that, the bank does not have a very sizeable market
share in any product segment and does not offer very stiff competition to its peers in the PSU or private sector banking space.
• The bank has quite an exposure in the international arena. There is a possible risk of global slowdown recurring again or the current slowdown not phasing out soon. This could
lead to low margins from the international operations and a possible increase in NPAs in those areas.
• Domestic CASA of the bank has been under pressure since Q2FY11. The bank needs to maintain its CASA at strong levels going ahead failing which it could see its interest costs
rising and could therefore face pressure on its margins.
• The recent deregulation guideline by RBI for saving deposit interest rate may impact NIMs of the bank with saving deposits accounting for nearly 26% of its total domestic
deposits. However none of the large PSU or Private sector banks has so far increased savings account interest rates so far.
Outlook and Valuation
BOB is among the top three banks in the country with a loan book size of Rs 381772 cr and deposits of Rs 551649 cr. After SBI, BOB has the largest presence in the overseas market. Its
overseas business is doing well in terms of advances, deposits, NIMs etc. BOB has shown consistent growth and profitability for about last 24‐36 months. Loan growth, which lagged the
industry historically, has now been in line or more. However risk of incremental restructuring is rising for the entire sector and in particular for PSU banks.
During Q1FY15, BOB’s reported NII of Rs 3328.3 cr, up 15.2% y‐o‐y and 6.5% q‐o‐q and net profits of Rs 1361.9 cr, up 16.6% y‐o‐y and 17.7% q‐o‐q. NIMs have come down marginally from
2.41% to 2.35% y‐o‐y. Overall loans have gone up 18.8% y‐o‐y. CASA stands at 31.3% marginally down from 31.8% in Q4FY14. Restructured assets have come down significantly to Rs 986
cr from Rs 1157 cr in Q4FY14. However, GNPA and NNPA as a percentage has trended up to 3.11% and 1.58% in Q1FY15 compared to 2.99% and 1.69% in Q4FY14.
Growth in loan book may slow down as the bank is trying to limit its exposure to sectors like Airlines, Media, Iron & steel, Telecom, SEBs etc. Rising NPAs is a cause of concern for most
PSU banks. Provisions may remain at higher levels, as asset quality issues will continue over FY15. While the asset quality situation still remains relatively better than peers, deterioration
in asset quality over the past five quarters had eroded the valuation premium enjoyed by BOB.
While gradual shift in its advances to the domestic operations could result in NII expansion, BOB could benefit less from reversal of investment depreciation.
We are introducing FY16 numbers. With its fairly large overseas exposure, any global slowdown can hit the bank’s performance. Superior PCR ratio of the bank also provides enough
cushion to earnings pressure. BOB was one of the better banks among the PSU lot in terms of lower earnings volatility, better return rations, higher provision coverage ratios, lower
slippages and better capitalization. But lately it has suffered from asset quality issues.
The stock has sharply rallied in the last couple of months on stable political scenario, improving economic sentiments and relatively better financial performance by BOB. Improved PCR
and lower slippages are some positives during the quarter besides stability in loan growth and improved NII & net profit growth. Slippages however remain high. Management change in
July 2014 remains overhang. This could result in a possibility of throwing in the kitchen sink ‐ meaning a common tactic for new managers to put all the bad news out at once to make the
results as bad as possible with the idea being that the new boss would look like a company hero the following year after his or her first year on the job.
In our Q4FY14 result update on BOB dated March 15, 2014 (CMP Rs 921.2) to buy the stock at CMP and add on dips in the band of Rs.795‐Rs 820 (close to 1.10x FY15E Adj BV) for a target
of Rs 1040 (1.4xFY15E Adj BV) in the next one quarter. Post the issue of the report the stock a high of Rs 1010 on 16th
May 2014.

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We feel investors could look to add the stock on dips in the band of Rs.717‐Rs 759 (0.85x‐0.9x FY16E Adj BV) for a target of Rs 928 (1.10xFY15E Adj BV) in the next one quarter.
Quick Estimates ‐ Standalone
Particulars (Rs in cr) FY10 FY11 FY12 FY13 FY14A FY15E FY16E
FY15ENet Interest Income 5939.5 8802.3 10317.0 11315.3 11965.4 13690.3 16017.7
% Chg 15.9 48.2 17.2 9.7 5.7 14.4 17.0
Other Income 2806.3 2809.2 3422.3 3630.63 4462.74 4677.0 4957.6
% Chg 0.8 0.1 21.8 6.1 22.9 4.8 6.0
Operating Profit 4935.4 6981.6 8630.4 9073.78 9353.2 10779.7 12720.0
% Chg 14.6 41.5 23.6 5.1 3.1 15.3 18.0
Profit before Taxes 4238.2 5650.3 6025.8 4831.23 5497.3 6500.9 8321.2
% Chg 26.8 33.3 6.6 ‐19.8 13.8 18.3 28.0
Profit after Taxes 3058.5 4241.7 5007.0 4480.72 4541.1 4875.7 5908.0
% Chg 2.5 38.7 18.0 ‐10.5 1.3 7.4 21.2
EPS 83.7 108.0 121.4 106.05 105.4 113.2 137.2
% Chg 2.5 29.1 12.4 ‐12.7 ‐0.6 7.4 21.2
BV 377.1 503.3 581.4 729.69 811.1 898.0 1011.1
% Chg 20.6 33.5 15.5 25.5 11.2 10.7 12.6
Adj. BV 360.6 483.1 543.9 630.48 671.0 743.1 843.4
% Chg 20.1 34.0 12.6 15.9 6.4 10.7 13.5
(OE: Original Estimates, RE: Revised Estimates, Source: Company, HDFC sec Estimates)
Quarterly Financials
Particulars Q1FY15 Q1FY14 % Chg Q4FY14 % chg
Interest Earned 10658.0 9486.9 12.3% 10288.6 3.6%
Interest/Discount on Advances 7740.4 6668.6 16.1% 7316.2 5.8%
Income on Investments 2260.5 2100.7 7.6% 2200.0 2.8%
Interest on bal with RBI 453.1 511.8 -11.5% 495.5 -8.6%
Others 204.0 205.8 -0.9% 277.0 -26.3%
Other Income 1024.5 1230.6 -16.7% 1326.3 -22.7%
Total Income 11682.5 10717.5 9.0% 11614.9 0.6%
Interest Expended 7329.7 6597.8 11.1% 7164.3 2.3%
Employee Expenses 1105.5 1014.0 9.0% 1039.9 6.3%
Other Operating Expenses 767.8 654.1 17.4% 831.1 -7.6%
Operating Expenses 1873.3 1668.0 12.3% 1871.0 0.1%
Total Expenditure 9202.9 8265.9 11.3% 9035.3 1.9%
Net Interest Income 3328.3 2889.1 15.2% 3124.3 6.5%
Operating Profit before Prov & Cont 2479.6 2451.6 1.1% 2579.6 -3.9%
Prov & Cont 526.7 1017.9 -48.3% 1153.2 -54.3%
Exceptional Items 0.0 15.6 -100.0% 15.6 -100.0%
PBT 1952.9 1418.2 37.7% 1410.9 38.4%

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Tax 591.0 250.3 136.1% 253.6 133.1%
PAT 1361.9 1167.9 16.6% 1157.3 17.7%
Equity 430.7 422.5 1.9% 430.7 0.0%
CAR - Basel III 11.91 12.46 12.28 11.91
EPS 31.6 27.6 14.4% 26.9 17.7%
Gross NPA 12085.8 9762.6 23.8% 11875.9 1.8%
Net NPA 6020.8 5440.7 10.7% 6034.8 -0.2%
Gross NPA% 3.11 2.99 0.12 2.94 0.17
Net NPA% 1.58 1.69 -0.11 1.52 0.06
(Source: Company,HDFC sec)
Segmental
Segmental Revenue Q1FY15 Q1FY14 % Chg Q4FY14 % Chg
Treasury 2824.2 3099.9 ‐8.9 2751.4 2.6
Wholesale Banking 4477.6 3872.1 15.6 4388.9 2.0
Retail Banking 2944.1 2578.6 14.2 3057.8 ‐3.7
Other Banking Business 1436.6 1166.9 23.1 1416.8 1.4
Total Segment Revenue 11682.5 10717.5 9.0 11614.9 0.6
Segment Results after Prov & Before Tax Q1FY15 Q1FY14 % Chg Q4FY14 % Chg
Treasury 959.0 497.5 92.8 150.9 535.5
Wholesale Banking 54.0 ‐77.1 ‐170.0 ‐478.1 ‐111.3
Retail Banking 478.4 582.4 ‐17.9 1347.5 ‐64.5
Other Banking Business 941.3 727.7 29.4 681.8 38.1
Total Segment Results 2432.7 1730.5 40.6 1702.0 42.9
Revenue Mix (%) Q1FY15 Q1FY14 Q4FY14
Treasury 24.2% 28.9% 23.7%
Wholesale Banking 38.3% 36.1% 37.8%
Retail Banking 25.2% 24.1% 26.3%
Other Banking Business 12.3% 10.9% 12.2%
Capital Employed Q1FY15 Q1FY14 % Chg Q4FY14 % Chg
Treasury 8540.0 8884.4 ‐3.9 7807.9 9.4
Wholesale Banking 10170.7 8942.3 13.7 10291.5 ‐1.2
Retail Banking 4844.7 4401.7 10.1 4559.3 6.3
Other Banking Business 13436.0 11257.8 19.3 12937.3 3.9
Unallocated 419.0 347.8 20.5 389.6 7.5
Total 37410.4 33833.9 10.6 35985.7 4.0
(Source: Company,HDFC sec)

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Analyst : Siji A Philip (Banks, Capital Goods, Power & Mid‐Caps) Email : siji.philip@hdfcsec.com
RETAIL RESEARCH Tel: (022) 3075 3400 Fax: (022) 2496 5066 Corporate Office
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022)
2496 5066 Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com
Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation. This document is not to be reported or copied or made available to
others. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or
complete and it should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform investment
banking, or other services for, any company mentioned in this document. This report is intended for non-Institutional Clients