Bank of Baroda

Bank of Baroda, or BoB, is a preferred pick in the public sector. A higher concentration in industrialised states such as Maharashtra and Gujarat gives greater push to its business. In FY10, deposits grew 25.3 % over the previous year.

The yearly growth in advances was lower than the previous year, but, at 22.2 %, it was still higher than the average for the banking industry. The asset quality remained high, with net NPA at 0.34 % of the net advances, which is the best among PSU banks.

The bank maintains a strong balance sheet by provisioning 74.90 % of NPAs. Another positive aspect of this bank is the low volatility of its treasury income, unlike other PSU banks, as it categorises most securities as held-to-maturity, which are not marked-to-market as bond yield fluctuates.

Factoring better earning visibility and superior asset quality, at Rs 710, BoB's share is trading 8.5 times its FY10 EPS.

The Bank has declared 150% or Rs.50 per share as final dividend the record date for which is 26-Jun-2010.

Why Buy:
Bank of Baroda: High growth in advances, best asset quality among PSU banks, high NPA provisioning, less volatile treasury income.