Bank of Baroda, one of India’s largest public sector banks, has consistently improved its asset quality metrics and capital position in the post-COVID period. Citi’s latest update applauds BoB’s operational discipline, stating that the bank’s domestic Loan-to-Deposit Ratio (LDR) has remained stable even as loan growth accelerated. This balance between expansion and liquidity management is viewed as a sign of prudent credit execution.

Citi also observed that BoB’s steady growth across MSME and retail portfolios was backed by healthy fee income traction. The brokerage emphasized that the bank’s transformation efforts, especially in digital onboarding and data-driven underwriting, continue to yield visible operational benefits.

In its Q2 update, Citi highlighted that advances surged 6% quarter-on-quarter, marking one of the strongest performances among PSU peers. This growth was broad-based, led by retail lending, SME financing, and corporate disbursements. BoB’s management commentary suggests sustained traction in personal loans and vehicle financing, aided by digital process automation.

The 6% sequential loan growth not only beat Citi’s expectations but also surpassed industry averages. This underscores BoB’s ability to capture market share amid rising competition from private banks and small finance institutions. Such credit acceleration, while maintaining stable asset quality, is a key reason for Citi’s continued optimism.

Citi’s note further highlights that the domestic LDR for Bank of Baroda remained stable, indicating balanced credit and deposit growth. The bank’s CASA mix continues to support liquidity, while term deposit mobilization keeps pace with advances. BoB’s liability franchise, which had shown volatility earlier, now demonstrates consistent growth backed by higher retail participation.

Analysts believe that this stability will provide a cushion against NIM pressure in the near term. BoB’s focus on cost optimization, branch rationalization, and fee-based income is expected to strengthen its return ratios as market conditions evolve.

Citi estimates that core NIMs could see 7–8 basis points of pressure over the next quarter due to rising funding costs and competition for retail deposits. However, the brokerage expects margins to stabilize by the second half of FY26, supported by re-pricing of assets and higher-yielding retail segments. The bank’s non-interest income stream, led by treasury and cross-selling, remains a key profit lever.

With the macroeconomic backdrop favoring credit growth and PSU balance sheets strengthening, Citi believes that Bank of Baroda’s valuation remains attractive. The current market price, relative to its projected return on equity, implies upside potential if credit costs remain contained.

Citi’s ₹310 target reflects a clear confidence in Bank of Baroda’s fundamental strength, stable asset quality, and consistent credit expansion. The bank’s ability to deliver above-industry loan growth while maintaining risk discipline positions it favorably among PSU peers. Though near-term NIM compression is likely, the long-term trajectory remains positive with improving efficiency ratios and stable profitability metrics.

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