Nomura has downgraded Bank of Baroda (BoB) to ‘Neutral’ from ‘Buy’ and slashed its target price to ₹235 from ₹265, following what it termed a “weak quarter” and muted outlook for net interest margins (NIMs). The brokerage flagged rising macro headwinds and likely repo rate cuts as factors that could pressure margins in the coming quarters.
BoB has guided for FY26 NIMs to remain broadly consistent with FY25, but Nomura believes this may be optimistic. The firm now expects FY26/FY27 NIMs to be lower by 18bps/14bps, respectively. The pressure is expected to stem from repricing of loans at lower rates amid an easing rate cycle and potentially higher cost of deposits.
As a result of the anticipated NIM compression, Nomura has cut its EPS estimates by 8–10% for FY26 and FY27, primarily due to lower net interest income (NII) growth. While credit growth remains steady and asset quality stable, the brokerage sees limited upside from current levels, justifying the downgrade.
Disclaimer: The above views are those of the brokerage and not the publication. Investors should consult a certified financial advisor before making investment decisions.
