Nomura has maintained its 'Neutral' rating on Bank of Baroda after the lender's pre-Q1 FY27 business update, saying muted loan growth and the $600 million settlement with NMC Health's administrators are the key monitorables.
The brokerage noted that the bank's overall loan growth remained subdued at -0.9% quarter-on-quarter and 17.4% year-on-year, with overseas advances outperforming domestic loans. Domestic retail advances, however, remained resilient, growing 2.4% sequentially and 18.5% year-on-year.
Deposit growth also moderated, with overall deposits declining 0.9% sequentially while rising 13.8% year-on-year. Nomura added that the domestic loan-to-deposit ratio remained largely stable at 83.3%.
On the NMC Health settlement, Nomura said Bank of Baroda has shifted from a "robust defence" to agreeing to a USD600 million (around Rs 57 billion) settlement "with no admission of liability or wrongdoing." The brokerage said the move eliminates prolonged litigation and uncertainty but represents a significant change in stance within a single quarter after the bank had continued to defend the case in its FY26 annual report.
Nomura estimates the Rs 57 billion payout is equivalent to around 4% of the bank's FY26 net worth, adding that the stock has already corrected by a similar magnitude.
The brokerage expects the settlement charge to be recognised in the June quarter, stating, "We do not believe BOB has provided for the settlement and expect the hit to land in 1Q itself." It added that the payout would "effectively wipe out close to one quarter's PAT."
Looking ahead, Nomura said net interest margin (NIM) performance will be the key metric to watch in the June quarter. While Bank of Baroda outperformed its public sector peers on NIM in the March quarter, the brokerage expects a sharper sequential decline in Q1 as the benefit from interest earned on income tax refunds is likely to be significantly lower.