Fundamental AnalysisIndia

Bank of Baroda – Fundamental Analysis

Sector – Banking

Industry – Public Bank

  1. Shareholding Pattern
Shareholders30-09-202130-06-2021 30-06-2020
Public Shareholding36.03%36.03%28.40%

* The Promoters i.e the President of India have diluted their shareholding from the company as on 31st March 2021.

  1. Market Capitalisation

Bank of Baroda holds 8th position in the banking sector in terms of its market cap. which is estimated to be Rs. 40,879.62 crore.

  1. Price-Earning (P/E) Ratio:

The P/E ratio of the company is 10.51 which is lower than the Industry P/E ratio i.e 18.98. This means there are high chances that the company’s P/E ratio will be on par with the Industry’s ratio in the coming days.

  1. Financial outlook :
  1. The company has posted strong Q3 ending consolidated net profit figures of Rs. 2167.85 crore as compared to Rs 1771.21 crore on a YoY basis.
  2. Investments made by the company have been in an increasing trend since the past few quarters and the value of investments for the Q3 ending is Rs 3,03,024 crore as compared to Rs. 2,81,859 crore as on 31st March, 2021.
  3. Borrowings by the company also increased on one hand, shaping the outlook of the financials a bit riskier.
  4. The company reported a negative net cash flow as on 31st March, 2021 of Rs. 2,344 crore. It means the company is in a cash deficit situation.

Business Overview:

Bank of Baroda is a public banking and financial institution governed by the government of India. Government has merged the Dena bank and Vijaya Bank with Bank of Baroda on 1st April 2019 with an aim to create the second-largest public bank after State Bank of India (SBI) and to assure a speedy growth in its operations with large customer base.

The company is marking its presence with a total number of 8533 branches, out of which 97 are Overseas branches and the rest pertaining to the domestic offices/branches.

Business Environment: Competitors

Private banks such as HDFC Bank, ICICI, and Axis banks are a major threat to the Bank of Baroda. HDFC, being the largest private bank in India, has the highest market capitalization among all in the industry.

SWOT Analysis

Strengths1. High net interest margin.
2. Huge customer base.
3. Diversified network branches.
Weakness1. Huge compile of NPAs every year.
2. Narrower presence in the international markets.
Opportunities1. Can attract customers with lower lending rates.
Threats1. Private banks.
2. High competition in this industry.

Other Points in consideration:

  1. Company’s CASA ratio* as on 31st March, 2021 stood at 40.15%, which is quite the average in the banking industry.
  2. Company offers 1.98% as return from equity, which is very low as compared to other banks.
  3. The State-owned company on 26th November, 2021 has raised Rs 1,997 crore by issuing Basel III-compliant bonds.

Recent initiatives taken by the bank:

Infrastructure developments

  1. It is the first Public Sector Bank in India to implement Integrated Treasury and Risk Management solution at its Treasury Branch, Mumbai.
  2. The Bank has built its own data centre hub for both of its domestic and international operations for running its centralized banking solutions.

Loan Book

  1. Bank of Baroda has funded the Ola electric under a 10-year debt scheme of $100 million, to finance their manufacturing unit.
  2. With Pratham, a co-lending program under the partnership with Urgo capitals, the bank is trying to help the MSMEs’ with lending loans at a competitive rate of interest. This partnership can infuse and attract a major chunk of small and retail MSME enterprises because of promising lower interest rates on loan.

Other Initiatives

  1. Project Navoday– To build next-gen capabilities in the domain of shared services, analytics and digital payments.
  2. Signs MoU with software technology parks to support start-ups in India.
  3. The Bank has recently come up with Rapidfunds2 India scheme, wherein NRIs’ can avail services from any of the overseas branches providing instant credit to the Indian accounts. 


NPAs of the bank has been piling up, however, after the creation of bad bank*** by the government, the Bank of Baroda has come up with restructuring its NPAs of worth Rs. 5.79 billion by selling them to the bad banks (or Asset Reconstruction companies).

Will the bank be able to reduce its NPAs in the upcoming years? The answer lies in how good the bank is managing its operations and recovering facilities. 

Beyond the numbers- ProCapitas Think Tank : 🧠

Will the bank from being the second-largest PSU bank in India be on par with the State of Bank of India?

The bank after its recent merger with Dena Bank and Vijaya Bank, has increased their branches and ATM services facilities all over India. In this way, with major participation, the bank can have greater influence on the people or the consumers and try to be on par with SBI.

The financials of the company seems to be strong and the growth can be seen with figures getting punched on every quarter. But, however, the company seems to neglect the fact that most of the banks have already set up their customer base with new and innovative financial products. In order to survive, the company can improve its CASA ratio by offering higher deposit rates which would in turn increase their net interest margin**.

By 2025, it is estimated that India’s fintech market will reach upto Rs. 6.2 trillion. Internet banking and ATMs will improve the operational efficiency of the banks. As of October 10, 2021, the number of bank accounts opened under the government’s flagship financial drive ‘Pradhan Mantri Jan Dhan Yojana’ reached 43.57 crore and deposits in the Jan Dhan bank accounts totaled Rs. 1.45 trillion. Rise in the working population and income will eventually push and drive this banking sector to new heights. 

No doubt BOB is restructuring itself to turn out to be one of the key banks of India & has an equal opportunity to participate in India’s fintech revolution & acquire a major chunk of it. 

It will be quite interesting to learn how its plan turns out in the future.

* CASA ratio means the ratio of the deposits made in Current and Savings accounts to the total deposits in the bank.

** Net interest margin is a measure of the difference between the interest income generated by banks and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets.

*** Bad banks are corporate entity that alienates illiquid and risky assets held by banks and financial institutions or a group of banks. It is created to help banks clean their balance sheets by transferring their bad loans so that the banks can focus on their core business of taking deposits and lending money.

Bank of Baroda – Technical Analysis

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