Bank of Baroda (BoB) has not had the best run over the past year, with its stock price falling nearly 16%, underperforming the Bank Nifty by around 24%. But in a fresh outlook, global brokerage firm UBS has upgraded the stock from Neutral to Buy, raising its price target to Rs 290 from Rs 270.
Here’s a breakdown of the three key reasons behind the upgrade-
UBS on Bank of Baroda: Improving loan growth outlook
One of the biggest concerns around Bank of Baroda in recent quarters was its muted loan growth. But UBS now sees green shoots emerging.
“Loan growth has been modest at c12% YoY in 3QFY25 driven by Retail (~20% YoY) and MSME (~14% YoY) segment,” according to the brokerage. The bank’s retail, agriculture and MSME (RAM) segments together contribute nearly 60% of the total loan book- a solid base for future expansion.
UBS believes the recent regulatory measures could support loan demand, especially in retail and MSME segments. “We expect loan growth of c12% over FY25-27 while a higher mix of MCLR book would keep the NIM compression modest,” the report said.
UBS on Bank of Baroda: Stable margins and controlled asset quality
As per the brokerage report, unlike some of its private sector peers facing margin pressure, Bank of Baroda could be relatively insulated. With about 47% of its loans linked to MCLR, the bank is expected to witness only a modest dip in net interest margins (NIMs), even in a lower rate cycle.
“NIMs to witness relatively lesser pressure vs private peers,” the brokerage firm noted. It expects Bank of Baroda’s margins to decline only slightly to around 3% by FY27E.
As per UBS, “a lower mix of unsecured loans and stable trends in MSME would likely keep the asset quality stable.”
UBS also expects credit costs to remain in check, revising its estimates lower by 20-25 basis points to 70-75bps for FY26/27E.
UBS on Bank of Baroda: Attractive valuation with scope for upside
At 0.8x Sep’26E price-to-book value (P/BV), Bank of Baroda is trading near its five-year average leaving room for upside if earnings improve. According to the brokerage, “This doesn’t appear to price in improving growth/earnings outlook and could provide a favourable risk reward.”
Despite the stock’s underperformance in the past year, the brokerage expects a turnaround.
“We upgrade our rating to Buy (from Neutral) and raise our residual income PT to Rs 290 (from Rs 270) which implies 1.0x Sep’26E P/BV on expectation of improvements in RoA/RoE and increase in EPS,” the report stated.