Shares of Bank of Baroda (BoB) tumbled over 3 percent in trade today (October 11) after the Reserve Bank of India (RBI) directed the country's second largest state-owned lender to suspend any further onboarding of its customers onto the ‘bob World’ mobile application with immediate effect.

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At 9:40 am, the scrip was trading 2 percent lower at Rs 210.05 apiece on the NSE today. On Tuesday, the stock settled 1.02 percent higher at Rs 213.90 apiece. The scrip has gained nearly 65 percent in the past one year and 15 percent on a year-to-date (YTD) basis.

BoB insisted the fresh move, which was based on certain supervisory concerns that the central bank observed in the lender's mobile banking onboarding processes, would not have a material impact on the bank’s overall business and growth plans.

The PSU bank said that the onboarding of customers on the application would be subject to further strengthening of related processes by the bank to the satisfaction of RBI.

What analysts say on RBI ban

Citi: Global brokerage Citi maintains a 'Buy' call on BoB following the embargo on customer onboarding onto the ‘BoB World’ mobile application. "This will moderate the pace of new customer acquisition to an extent. Moderation as 43 percent of fixed deposits and recurring deposits and 44 percent public provident fund accounts are being opened through the BoB World," it said.

Citi further noted that 89 percent of personal loans (PLs) were sanctioned digitally. PLs were offered primarily to existing to bank (ETB) customers.

"PL's digital sourcing will not be meaningful as it constitutes merely 2 percent of advances. PL's digital sourcing growth came in at 83 percent YoY," the brokerage stated.

At Rs 245 per share, Citi's target price suggests a further upside of 14.5 percent from the current market prices.

Macquarie: Macquarie has a 'Neutral' rating on Bank of Baroda, with a target of Rs 188. This indicates a 10% downside from the current market levels.

The brokerage said that the duration of the ban remains a key monitorable. It expects the restriction on digital sourcing to hamper both its asset and liability growth in the near term.

"As seen with the largest private sector bank, it took 15+ months for RBI to lift the ban on commencing new digital launches, indicating that a thorough due diligence is done by the regulator before the ban is revoked," it stated.

HSBC: HSBC has downgraded BoB to 'Hold' from 'Buy', with a target of Rs 220. HSBC feels the stock’s valuation is expensive at current levels and may trigger stock rerating.

The brokerage said that peaking BOB earnings are likely to weigh on stock returns.

Motilal Oswal: The ban, as per domestic brokerage house Motilal Oswal, may impact BoB's ability to sustain healthy business growth, as about 98 percent and 91 percent of saving account and current account acquisitions are currently done through digital channels. Moreover, 58 percent of fixed deposits and 42 percent of recurring deposits are also booked via digital channels.

Motilal Oswal has a target of Rs 240 on the BoB stock. "While there may not be any near-term asset quality implications of this ban, but given the rising mix of digital sourcing and the higher cross-sell rate that the bank has been focusing on via BOB World, this ban can affect the growth trajectory in the retail product segments over the near term."

First Published:Oct 11, 2023 9:20 AM IST