Bank of Baroda Shares Rise 5% on Record Q2 Profit, Brokerages Say

Treasury Gains Power Bank of Baroda’s Record Quarter, While Margins Bear Watching

A record profit and stronger lending momentum lifted the shares, but a large treasury contribution makes the quality of earnings an important focus.

A sharp jump in treasury income shaped the result

The bank’s profit growth was supported by a substantial increase in non-interest income, which nearly doubled to ₹6,881 crore. Treasury income reached ₹4,093 crore, compared with ₹1,086 crore in Q2FY26 and ₹893 crore in the preceding quarter. The lender attributed the sharp rise in non-interest income partly to the sale of a portion of its National Stock Exchange shares during the exchange’s IPO.

This helped deliver the highest quarterly profit in the bank’s history, but it also means investors will want to distinguish gains linked to treasury activity from income generated by the core lending business. Net interest income, a key measure of the difference between interest earned on loans and paid on deposits, rose 9% year on year to ₹13,026 crore. That growth provides a separate sign of operating progress, even as the exceptional strength in treasury income lifted the overall result.

Loan growth strengthened, but the margin slipped

Bank of Baroda’s loans grew 18% year on year, with growth led by the retail, agriculture and MSME segment. The bank also leveraged ₹605 billion against FCNR(B) deposits. Deposits rose 16% year on year and 7% sequentially, supported by healthy FCNR(B) inflows. Excluding these deposits, loan and deposit growth was reported at 13.5% year on year and 11.2% quarter on quarter.

The pace of lending matters because sustained credit growth can support future interest income. However, the cost and composition of deposits remain relevant to how much of that growth translates into margins. Net interest margin contracted by 3 basis points from the previous quarter to 2.74%. Motilal Oswal said the bank expects NIM to remain in a 2.75%-2.95% range, with a bias towards the upper end; the coming quarters will show whether that outlook is achievable.

Cleaner asset quality and provisions add resilience

Asset quality improved during the quarter. Gross non-performing assets fell 21 basis points sequentially to 1.78%, while net NPAs declined 13 basis points to 0.37%. These measures suggest a lower burden from stressed loans, an important support for a bank seeking to grow credit without weakening its balance sheet.

Motilal Oswal also noted additional prudential provisions of about ₹16 billion and a floating provision of ₹25 billion, which it said could help the transition to expected credit loss provisioning. Such buffers can provide a cushion, though the quality and durability of earnings will still depend on lending growth, margins and asset quality holding up over time.

Brokerages differ on how much upside remains

The shares rose more than 5% intraday after the results, reaching ₹250.89, before trading 2.6% higher at ₹244.75 at 12:30 PM. More than 12.5 million shares changed hands on the NSE by that time. The reaction reflects investor interest in the record profit and business momentum, but the brokerage views show that confidence in the outlook does not translate into a uniform assessment of valuation.

Motilal Oswal retained a Neutral rating and raised its target price to ₹270, while increasing its FY27 and FY28 earnings estimates by 15% and 4%, respectively. Axis Direct maintained a Buy rating with a ₹290 target, citing the prospect of a sustainable return on assets of 0.95%-1%. It expects earnings to benefit from credit growth, contained asset quality and a favourable NIM trajectory. These are brokerage assessments, not assured outcomes.

Key Highlights

• Q2FY27 net profit rose 36% year on year to a record ₹6,532 crore.
• Net interest income increased 9% to ₹13,026 crore, while non-interest income nearly doubled.
• Treasury income climbed to ₹4,093 crore, including a contribution linked to the sale of NSE shares.
• Loans grew 18% year on year; deposits rose 16% over the same period.
• Gross and net NPA ratios improved sequentially, while NIM eased to 2.74%.

Investor Note: Bank of Baroda’s result combines stronger core income, loan growth and improving asset quality with an unusually large treasury contribution. Investors assessing the shares should watch whether margins recover towards the bank’s stated range and whether earnings momentum holds without a similar boost from treasury gains.