Bank of Baroda Shares Slip Amid Margin Pressure and Slower Deposit Growth

July 12, 2025 | Mumbai — Shares of Bank of Baroda (BoB) have continued their downward trajectory, reflecting investor concerns over the bank’s narrowing margins and muted deposit growth. The stock closed at Rs 237.20 on Friday, marking a decline of over 10% from recent highs, and underperforming broader PSU bank indices.

The sell-off follows the bank’s Q4 FY25 earnings, which revealed a mixed performance. While BoB reported a modest 3.3% year-on-year rise in net profit to Rs 5,048 crore, core performance indicators raised red flags. The bank’s Net Interest Income (NII) declined 6.6% year-on-year, and Net Interest Margins (NIMs) shrank to 2.86%, triggering a wave of caution among investors.

Analyst Concerns: Weak Deposits and Margin Pressure

Brokerages have turned cautious, flagging a slowdown in deposit accretion and rising funding costs. A report by Jefferies noted that loan-to-deposit ratios are nearing the upper comfort threshold, potentially limiting the bank’s lending capacity in the coming quarters.

“Deposit growth has been tepid, and with the cost of funds rising, sustaining margins at current levels will be difficult,” said an analyst at a leading domestic brokerage.

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Share Performance Snapshot

• Current price: Rs 237.20

• 52-week high: Rs 266.80

• 52-week low: Rs 190.70

• Year-to-date performance: -6.2%

• Dividend yield: ~3.5% (Rs 8.35 per share declared in FY25)

Despite the short-term weakness, some analysts remain optimistic over the long term. UBS and Nomura have reiterated their Buy calls with price targets ranging between Rs 265 and Rs 290, citing strong credit growth and improving asset quality as key positives.

What’s Working in BoB’s Favor?

• Loan growth: Advances rose by 13.6% YoY in FY25

• Asset quality: Gross NPA at 2.26%, Net NPA at 0.58%, both improved

• Capital position: Well capitalized with comfortable Tier 1 ratios

• Dividend payout: Continues to offer attractive yield amid PSU dividend momentum

Investor Outlook: Cautiously Optimistic

While long-term fundamentals remain strong, the immediate outlook depends on BoB’s ability to revive NIMs, accelerate deposit growth, and manage provisioning efficiently. The stock’s current valuation at ~6× P/E remains attractive, particularly for value investors looking at the PSU banking space.

However, broader PSU bank sentiment has turned cautious in recent weeks amid sector-wide profit booking and rising geopolitical uncertainty.

Bank of Baroda’s share price is reflecting the market’s concern over operating pressures despite a steady earnings profile. Investors are advised to track upcoming quarterly results closely for signs of a margin rebound and improved liability management. Until then, the stock may remain range-bound, with near-term resistance around Rs 245–Rs 250.