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Informist, Wednesday, Jul. 22, 2026

 

By Kabir Sharma

 

MUMBAI – Bank of Baroda is expected to report a sharp decline in its profit for the first quarter of the financial year 2026-27 (Apr-Mar), with a one-time legal settlement related to its operations in the United Arab Emirates likely to eclipse otherwise stable operating performance. While analysts broadly expect the state-owned lender to post healthy year-on-year growth in net interest income, pressure on the net interest margin and slower sequential business growth are expected to drag its numbers lower.

 

According to the average of 14 brokerage estimates, Bank of Baroda is expected to report a net profit of INR 39.55 billion, down almost 30% sequentially and nearly 13% from a year ago. The net interest income, however, is seen rising almost 10% on year to INR 125.39 billion while remaining largely flat sequentially. 

 

The wide divergence in earnings estimates reflects differing assumptions regarding the financial impact of the one-time legal settlement. PhillipCapital (India) Pvt. Ltd. has the most optimistic view, estimating net profit at INR 60.80 billion. At the other end of the spectrum, SMIFS Ltd. has the lowest estimate at INR 12 billion. Kotak Securities Ltd. is the only brokerage expecting the bank to slip into a net loss of INR 4.82 billion after fully factoring in the exceptional charge arising from the UAE settlement.

 

The exceptional item has emerged as the defining factor for the quarter. Both SMIFS and Systematix Shares and Stocks (India) Ltd. have explicitly incorporated the one-time legal settlement, estimating a post-tax impact of around INR 43 billion, which significantly depresses reported profitability despite relatively healthy operating earnings. Consequently, investors are likely to focus more on the underlying trends in lending, deposits, and margins than on the headline profit number.

 

In June, Bank of Baroda had said its Abu Dhabi branch will pay $600 million to the joint administrators of NMC Health Public Ltd. Co., NMC Healthcare Ltd., and NMC Holding Ltd. to settle a case out of court. The case in Abu Dhabi was resolved without acceptance of wrongdoing and a concurrent case in the UK will also be discontinued, the bank had said. 

 

The case was with respect to the UK-based healthcare provider's insolvency proceedings that began in 2020. After the collapse of the publicly-traded company, it was taken into administration with legal proceedings continuing in both the UK High Court and Abu Dhabi's Global Market Court. Bank of Baroda will have no further liability in the proceedings, it had said.

 

On the revenue front, analysts expect core banking income to remain resilient, supported by healthy loan growth over the past year. The highest net interest income estimate among brokerages is INR 129.53 billion from Motilal Oswal Financial Services Ltd. The lowest estimate is INR 116.12 billion from Prabhudas Lilladher, indicating a relatively cautious stance on margin performance and interest income. 

 

Despite the healthy year-on-year growth in net interest income, most brokerages expect Bank of Baroda's margin to contract sequentially. The principal reason is the absence of the sizeable interest income received on income-tax refunds in the March quarter, coupled with higher funding costs. Kotak Securities expects the net interest margin to decline by around 15 basis points sequentially to 2.7%, citing lower non-operating interest income from tax refunds and continued pressure on deposit costs. The brokerage also expects operating profit to decline more than 15% on year because of weaker treasury income and lower recoveries from written-off accounts. 

 

Motilal Oswal expects the net interest margin to contract by around 9 bps sequentially, arguing that the absence of tax refund-related income would outweigh the benefit of healthy loan growth. The brokerage expects the margin to settle near the lower end of the bank's guidance range of 2.75-2.90%. It expects only modest treasury gains during the quarter.

 

Nomura also expects a sequential decline in the net interest margin of about 9 bps, attributing it to changes in the loan mix and lower interest earned on income-tax refunds compared with the March quarter. PhillipCapital echoes the view, expecting sequential margin compression primarily because of lower tax refund-related interest income. Systematix also sees the net interest margin moderating sequentially. YES Securities Ltd., however, is more constructive and expects the margin to remain broadly stable with the increase in lending yields offsetting the rise in funding costs.

 

The net interest margin was 2.89% as on Mar. 31, up from 2.79% in the December quarter.

 

Loan growth is expected to remain one of the brighter aspects of the quarter, although brokerages differ on the pace of expansion. Motilal Oswal expects advances to grow 22% on year and 2.9% sequentially, driven by healthy momentum in the retail, agriculture, and micro, small, and medium enterprises portfolio, though it expects the overseas loan book to decline. In contrast, PhillipCapital expects gross loan growth of 17.4% on year with domestic advances declining sequentially even as overseas loans post modest growth. YES Securities expects sequential loan growth to remain subdued at around 0.5%, reflecting what it describes as the bank's "idiosyncratic growth trajectory".

 

Bank of Baroda's domestic advances grew over 16% on year to INR 11.51 trillion as of Jun. 30, according to provisional figures released by the bank earlier in July. Its domestic deposits rose nearly 15% to INR 13.82 trillion.

 

Deposit mobilisation is expected to remain comparatively stronger than loan growth, a trend that several brokerages believe should support liquidity. Kotak Securities noted that deposits grew an impressive 16% on year, comfortably outpacing the industry average, while SMIFS observed that deposit growth exceeded that in the broader banking system despite sequential moderation. Investors are expected to monitor the management's commentary on mobilisation under the Reserve Bank of India's foreign currency non-resident (bank) deposit scheme, as several brokerages, including Kotak Securities and Nomura, have highlighted FCNR(B) inflows as an important parameter to monitor for the quarter.

 

Asset quality is expected to remain broadly stable, although fresh slippages may rise sequentially. Kotak Securities expects slippages of around INR 41 billion, largely driven by the retail and SME portfolios, but does not foresee any deterioration in the bank's overall asset quality outlook. Motilal Oswal Financial Services expects credit costs to remain contained at 40-50 bps, while Nomura also projects credit costs of around 40 basis points. Both SMIFS and Systematix expect slippages to increase on a sequential basis but believe the bank will utilise existing provision buffers, thereby limiting the impact on overall credit costs. YES Securities similarly expects provisions to decline sequentially despite somewhat higher slippages. 

 

In the trailing quarter, the bank's provisions had risen over 103% on year and nearly fourfold sequentially to INR 31.51 billion. Fresh slippages were at INR 29.44 billion. The bank's asset quality had, however, improved at the end of March, with the gross non-performing asset ratio at 1.89% and net non-performing asset ratio at 0.45%.

 

Operating expenses are likely to remain another area of focus. Systematix expects employee costs to increase sequentially, resulting in higher operating expenditure even as fee income moderates because of slower business growth. YES Securities, however, expects operating expense growth to remain below business growth, providing some support to pre-provision operating profit. 

 

Beyond the quarterly numbers, investors will be focusing on the management's outlook on net interest margin stability after the fading of tax refund-related income, the sustainability of deposit mobilisation under the RBI's FCNR(B) swap facility, loan growth across the retail and corporate segments, the trajectory of credit costs and asset quality, and the accounting and future implications of the UAE settlement. While the exceptional item is likely to distort reported earnings for the quarter, analysts believe Bank of Baroda's underlying operating performance remains resilient, with healthy business growth and stable asset quality expected to provide the foundation for an earnings recovery in the quarters to follow.

 

Of the 17 reports on the company available with Informist, 14 have a "buy" recommendation on the stock with an average target price of INR 323 per share. This is 30% higher than the stock's current market price of INR 245.75 as of Wednesday's close. Two brokerages have a "hold" recommendation, while one says "sell".

 

The following are the Apr-Jun earnings estimates, in INR billion, for Bank of Baroda from 13 brokerages, in descending order of the net profit estimate:

 

Brokerage	Net interest income	Net profit
PhillipCapital (India) Pvt. Ltd.	121.80	60.80
YES Securities (India) Ltd.	127.44	54.12
JM Financial Institutional Securities Pvt. Ltd.	128.50	53.60
Nirmal Bang Equities Pvt. Ltd.	126.40	51.84
Motilal Oswal Financial Services Ltd.	129.53	51.69
Nomura Equity Research	124.20	50.00
Dolat Capital Market Pvt. Ltd.	124.40	49.50
BofA Securities	129.10	40.36
Prabhudas Lilladher Pvt. Ltd.	116.12	35.29
Elara Securities (India) Pvt. Ltd.	122.42	28.57
Anand Rathi Share and Stock Brokers Ltd.	126.93	13.32
Systematix Shares and Stocks (India) Ltd.	126.32	13.12
SMIFS Ltd.	127.00	12.00
Average	125.39	39.55

 

End

 

US$1 = INR 96.48

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Himanshi Gupta

 

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