Shareholders of Bank of Baroda (USE: BOBU) will smile all the way to the bank following a 48.7% reported increase in net profit. According to results published last weekend, the lender’s profit grew from UGX49.4bn to UGX73.48bn- thanks to a 12.6% rise in income coupled with 6% drop in total costs.
Total income rose from UGX174bn in 2017 to UGX196bn while total expenditure declined from UGX109.9bn to UGX103.3 bn.
The bank’s earnings were buoyed by a 22.8% rise in lending- from UGX616.6bn to UGX757.2bn leading to a 16.6% rise in interest income- UGX74.1bn in 2017 up to UGX86.4bn
Interest income formed 44% of the bank’s entire income in 2018.
Fees and commissions income also grew by 40% from UGX20.9bn to UGX29.2bn.
Customer deposits grew by 11.8% from UGX1.53 trillion in 2017 to UGX1.71 trillion in 2018.
An average decline in industry interest rate on deposits from 1.65% in 2017 to 1.4% in 2018 allowed Baroda to reduce interest expense on deposits by 16.2% from UGX58.2bn in 2017 to UGX48.8bn; that coupled with a 6.3% decline in operating expenses- saw an above industry average profit surge.
The 2018 performance, marks the first full year of Ashwini Kuma being in charge and as such is a test of his credentials as a Managing Director. Kumar took over the bank’s management on 12th April 2017 following the exit of Birbal Singh Dhaka, the bank’s boss, since December 2013.
2017 performance was tepid- total assets increased by 4.02% while net profit increased by 0.27%. Customer deposits grew 0.3% while lending grew by 5.2%.
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UGX25 billion in dividends
The bank’s board has proposed a 33.3% increase in dividends from UGX7.5 per share to UGX10. The bank has set aside UGX25bn (34% of the profit) for dividend pay-outs.
The largely conservative Baroda is emerging as an attractive investment compared to its ‘noisier’ competitors on the stock exchange.
The bank’s dividend yield stands at an attractive 8% compared to Stanbic’s (USE: SUHL) 6% and dfcu bank’s (USE: DFCU) 4.9%).
Based on the published 2018 results, Baroda posted also posted competitive return on assets (ROA) of 4.80% compared to Stanbic’s 3.99% and dfcu bank’s 2.04%. Baroda’s return on equity of 22.12% also compares favourably to that Stanbic’s 23.5% and by far outstrips dfcu’s 11.6%.
Baroda’s Earning Per Share (EPS) is also up to UGX29.39 in 2018 from UGX19.76 in 2017, implying an attractive Price to earnings (PE) ratio of 4.42x and PB of 0.87x (Stanbic 1.82x, DFCU 0.96x).
EPS is the net reported earnings of a company per share and is an indicator of a company’s profitability. The price-to-earnings ratio on the other hand measures a company’s current share price relative to its per-share earnings (EPS).