Bank of Baroda shares jump 5% on plans to sell stake in credit card arm

Shares of Bank of Baroda (BoB) rallied nearly 5% and touched a 52-week high in intraday trade on Monday amid report the public sector lender is looking to divest its stake in the credit card business arm, BOB Financial Solutions Ltd. Currently, the credit card business is 100% owned by Bank of Baroda.

The PSU bank is reportedly planning to bring on a strategic investor and has floated a request for proposal for the same. According to a senior bank official, the process is expected to complete in one year.

BoB looks to sell up to 49% stake in BOB Financial Solutions through a combination of primary and secondary capital from one or multiple investors, news agency PTI quoted a bank official as saying. The move is intended to create more value in BOB Financial Solutions and take it to the next level of growth, as per the official.

Established in 1994, BOB Financial Solutions (formerly known as Bobcards) is a non-banking financial company, which is primarily engaged in credit cards and merchant acquiring business. The company issued 1.2 million credit cards in FY23, more than double from 0.5 million the previous year. Its net profit surged nearly 100% to ₹24.62 crore from ₹10.07 crore in the same period last year.

Reacting to the news, Bank of Baroda share price gained as much as 4.9% to hit a record high of ₹199.75 on the BSE. The banking stock settled the day at ₹199.10, up 4.6% against the previous closing price of ₹190.35, with a market capitalisation of ₹1.02 lakh crore. On the volume front, there was a surge in buying with 21.64 lakh shares changing hands over the counter on the BSE against a two-week average volume of 8.07 lakh stocks.

Last month, BoB, the country’s second-largest public sector bank, entered the elite club of companies with a market cap of ₹1 lakh crore or above. This is the second public sector bank to join the league after State Bank of India (SBI). The rise in market capitalisation (m-cap) of BoB was driven by a recent rally in the shares of the state-owned lender.

The banking heavyweight has risen 108% in the last one year, from its 52-week low of ₹95.70 touched on July 1, 2022. However, the stock seemed to have lost momentum in the last six months and added 9% during the same period. In the past one month, the counter has gained 7%, while it climbed 4% in a week.

In the March quarter of FY23, BoB delivered an expected result on the operating and assets quality front. The Vadodara-headquartered bank clocked its highest quarterly net profit of ₹4,775 crore in Q4FY23, up 168% from ₹1,779 crore in the year-ago period. For the full financial year, the bank recorded a profit of ₹14,110 crore, up 94% from ₹7,272 crore in the previous fiscal.

Net interest income for the bank rose 34% year-on-year to ₹11,525 crore, while other income also rose year-on-year to ₹3,466 crore. On the asset quality front, the gross non-performing asset ratio fell by 74 basis points sequentially to 3.79% in March quarter of FY24, while net NPA improved to 0.89% as compared with 0.99% in Q3FY23.

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