Bank of Baroda

Bank of Baroda is India's second-largest public sector bank by business volume and the country's most internationally distributed state-owned lender, operating roughly 8,200 domestic branches, 10,000 ATMs, 1,200 self-service e-lobbies and 20,000 business correspondents, plus about 100 branches and subsidiary offices across 20 countries. Global business crossed INR 30 lakh crore in FY2026. The bank sits at an unusual intersection: it carries quasi-sovereign funding advantages and a policy-delivery mandate, while running the most credible retail and MSME growth engine among public sector peers, with organic retail advances compounding in the high teens and asset quality (GNPA 1.89% at March 2026) now comparable to large private banks. Its distinguishing asset is the overseas franchise — a legacy of a century of trade and diaspora banking — which is also its distinguishing liability, as the USD 600 million NMC Health settlement in July 2026 demonstrated. The equity trades below book value, reflecting persistent state-ownership and governance discounts.

The bank announced in September 2026 a recruitment drive for 2,482 officers with local-language proficiency across 20 states, indicating active net hiring rather than attrition management.

What the bank does

Bank of Baroda is a universal commercial bank. It intermediates between depositors and borrowers across the full spectrum of Indian credit demand — retail mortgages and consumer loans, agriculture, micro/small/medium enterprises, mid-corporate and large-corporate lending, and infrastructure — and supplements that spread business with fee income from transaction banking, third-party product distribution, government agency business, foreign exchange and trade finance, and treasury operations.

The bank's own characterisation

In its standing corporate description, the bank states that its vision is to build a future-ready, world-class banking institution that consistently creates value for all stakeholders through commitment to core values and compliance. It frames financial inclusion as a social commitment to provide universal banking services to all sections of society at affordable cost, and identifies digitisation and the migration of transactions to digital channels as an operational priority. Its stated growth strategy is calibrated: focusing on high-yielding retail loans while aligning advances growth with deposit mobilisation.

Independent characterisation

The economics are those of a spread-plus-fee lender with a state-guaranteed liability franchise. Roughly 89% of FY2026 gross income was interest income (INR 1,26,994 crore of INR 1,42,751 crore total income); non-interest income was 11%. This is a materially less diversified revenue mix than large Indian private banks, and it makes the bank a leveraged bet on two variables: loan growth and net interest margin.

Three structural features distinguish Bank of Baroda within the Indian banking system:

Liability structure. Domestic CASA of INR 5,45,034 crore at March 2026 against domestic deposits of INR 14,01,290 crore gives a CASA ratio near 39% — competitive within the PSU cohort but below the best private franchises. Crucially, cost of deposits fell to 4.66% in Q1FY27, down 39 basis points year-on-year, which is the single most important driver of near-term margin defence in a falling-rate environment.

International franchise. International advances of INR 2,65,992 crore at June 2026 grew 23.3% year-on-year, materially faster than the domestic book. Roughly 12% of consolidated revenue is booked internationally. No other Indian public sector bank has this footprint. It brings dollar-funding access, trade-finance fee pools and diaspora deposits — and it brings the compliance surface area that produced the NMC exposure.

RAM orientation. Retail, Agriculture and MSME ("RAM") stood at 62.9% of advances at June 2026, up from a corporate-dominated book a decade ago. This is the deliberate output of the post-2019 restructuring and is the primary reason the bank's return on assets converged with the sector.

Revenue model

There is no subscription or licensing revenue of consequence. The model decomposes as:

Value chain position and customers

The bank is a balance-sheet principal, not an agent — it originates, underwrites, holds and services credit risk. Where it acts as distributor (insurance, mutual funds, cards) it earns commission and, through subsidiaries, manufacturer economics. Customer types span retail individuals (salaried, self-employed, pensioners, NRIs), agricultural households, micro and small enterprises, mid-corporates, large corporates and conglomerates, financial institutions and NBFCs, central and state governments and their agencies, and multilateral trade counterparties.

End-markets served through credit exposure include housing and real estate, automotive retail, education, healthcare, infrastructure and power (including renewables, which grew 60% year-on-year in FY2026), agriculture and allied activity, manufacturing MSMEs, services and trade.

Stated strategic themes

The bank's articulated strategy rests on four pillars, in its own framing:

1. Future-ready, world-class institution — building an organisation that consistently creates value for all stakeholders through commitment to core values and compliance.
2. Financial inclusion as social commitment — universal banking services to all sections of society at affordable cost.
3. Digitisation and channel migration — continuously migrating transactions to digital channels to deliver superior customer experience through modern banking solutions.
4. Calibrated growth — focusing on high-yielding retail loans while aligning advances growth with deposit mobilisation to ensure balanced and profitable expansion.

The fourth pillar is the operative one and contains an internal tension the bank has not resolved: advances grew 17.4% against deposits at 13.8% in the twelve months to June 2026, which is not "aligned" in any strict sense. The credit-deposit ratio has climbed twelve percentage points in four years.

Announced initiatives, last 24 months

Management's medium-term guidance

Return on assets, return on equity and cost-to-income targets are not publicly disclosed as explicit multi-year guidance. The bank does not hold a formal investor day; strategic communication occurs through quarterly analyst calls and periodic investor conferences (it participated in the Ashwamedh-Elara India Dialogue on 2 September 2026 and held an investor engagement meeting on 22 June 2026).

Independent read

The strategy is coherent but conservative, and it is largely a continuation rather than a transformation. The single genuinely differentiated move of the last 24 months is the green infrastructure bond — a first for an Indian bank and a real cost-of-funds and franchise advantage if the bank can build a repeatable green asset pipeline. The renewable energy portfolio grew 60% year-on-year in FY2026 and the bank won the FinanceAsia award for Best Project Finance Deal on a green hydrogen project, which suggests the pipeline is real rather than presentational.

The subsidiary monetisation agenda — BOB Financial, Nainital Bank, IndiaFirst Life, NSE — has been announced far more consistently than it has been executed. Three of the four have been pending for two years or more. The NSE OFS, which is transaction-committed with shares already in escrow as of 8 September 2026, is the first to reach the finish line. That matters less for the proceeds (the bank's NSE stake generated only INR 76.90 crore in FY2026 dividends) than as evidence that the value-crystallisation programme can actually close.

Bank of Baroda does not publish a consolidated product-by-product pricing schedule; interest rates and fees are published per-product on the bank's website and revised frequently in line with repo and MCLR movements. Pricing is therefore marked "not consistently disclosed" throughout. Launch years for legacy deposit and loan products are generally not disclosed.

Retail liabilities

Savings accounts. The flagship domestic savings franchise runs on a tiered structure. bob Advantage is the core full-service savings product for mass-affluent retail customers, carrying free cheque leaves and debit-card benefits against a minimum balance requirement. bob Lite targets customers unwilling or unable to maintain minimum balances, offering a zero-balance construct with restricted free-transaction entitlements. Baroda Basic Savings Bank Deposit Account is the regulatory financial-inclusion product with no minimum balance and no charges, sold predominantly through business correspondents. Baroda Salary Account runs in Classic, Premium and Privilege variants, differentiated by minimum salary credit, overdraft entitlement (typically a multiple of monthly salary) and bundled insurance. bob CGESP is a purpose-built variant for Central Government employees launched in the current cycle with exclusive benefit bundles. Baroda Mahila Shakti targets women customers; Baroda Champ targets minors; Baroda Pensioners Savings targets pension-credit customers with age-linked concessions.

Current accounts. Baroda Premium Current Account and its variants target established businesses with high transaction volumes, offering free NEFT/RTGS entitlements scaled to average quarterly balance. Baroda Small Business Current Account is positioned at proprietorships and micro-enterprises with lower balance thresholds. Current account pricing is a schedule of free transaction limits above which charges apply; not consistently disclosed in aggregate.

Term deposits. Baroda Advantage Fixed Deposit is the standard callable/non-callable retail term deposit. Baroda Tiranga Plus Deposit Scheme is a recurring special-tenor high-rate deposit used tactically to defend deposit share during liability squeezes. Baroda Tax Savings Term Deposit is the five-year Section 80C-eligible instrument. Baroda Green Deposit was introduced under the sustainable finance suite, with proceeds ring-fenced for eligible green lending. Senior-citizen premia of 50 basis points and super-senior premia above that are standard.

Retail assets

Baroda Home Loan. The single largest retail product line. Offered on floating rates linked to the Baroda Repo Linked Lending Rate, with tenors to 30 years and loan-to-value within RBI ceilings. Baroda Home Loan Advantage attaches an overdraft sweep facility allowing surplus balances to offset interest. Baroda Home Improvement Loan funds renovation. Baroda Top-Up Loan extends against existing home-loan equity. Home loan growth was 14.7% year-on-year at June 2026 — the slowest-growing of the major retail lines, reflecting the maturity of the mortgage book.

Baroda Mortgage Loan / Loan Against Property. The fastest-growing retail line at 27.4% year-on-year at June 2026. Secured against residential or commercial property, typically at higher yields than home loans, and increasingly used as a proxy for small-business credit.

Baroda Car Loan and Two-Wheeler Loan. Up to 90% on-road-price financing on the auto product. Auto loans grew 25.3% year-on-year at June 2026, the second-fastest retail line, benefiting from the bank's dealer-tie-up network and digital pre-approval journeys.

Baroda Personal Loan and Baroda Digital Personal Loan. Unsecured, with the digital variant underwritten through the bank's Digital Lending Platform using bureau, account-aggregator and internal transaction data for instant approval and disbursal. Baroda Pre-Approved Micro Personal Loan is a small-ticket product pushed to existing liability customers through bob World.

Baroda Education Loan / Baroda Vidya, Baroda Scholar. Domestic and overseas study financing, with government interest-subsidy schemes overlaid. Grew 10.8% year-on-year at June 2026.

Baroda Gold Loan. Secured lending against gold ornaments, distributed through branches and increasingly through dedicated gold-loan desks.

Baroda Yoddha. A dedicated retail lending proposition for defence personnel, bundling concessional pricing across personal, home and auto products.

MSME and agriculture

MSME. The organic MSME book stood at INR 1,63,264 crore at June 2026, up 20.3% year-on-year. Products include Baroda MSME Capital Expenditure Loan, Baroda SME Loan Pack (composite working-capital-plus-term facility), GST-return-based cash-flow lending, Baroda Vidyasthali Loan (educational institutions) and Baroda Arogyadham Loan (healthcare providers), the Pradhan Mantri MUDRA Yojana suite (Shishu, Kishore, Tarun), and CGTMSE-guaranteed unsecured lending. The bank flagged an intent to disburse approximately INR 12,000 crore under the government's ECLGS 5.0 scheme.

Agriculture. The agriculture portfolio was INR 1,91,989 crore at June 2026, up 18.7%. Products include the Baroda Kisan Credit Card, agriculture gold loans, warehouse receipt finance, farm mechanisation and irrigation term loans, allied-activity financing (dairy, poultry, fisheries), and self-help-group linkage lending. The Baroda Kisan digital platform aggregates advisory, weather, mandi price and credit application journeys.

Cards

Issued and managed through BOB Financial Solutions Limited, a wholly owned subsidiary. The credit card range spans a premium-to-entry ladder — Eterna at the top of the proprietary stack, followed by Premier, Select and Easy — with co-branded propositions historically including HPCL (fuel), IRCTC (rail) and Snapdeal (e-commerce), plus Varunmitra for corporate/institutional use. Debit, prepaid, business and travel cards are issued directly by the bank. Pricing (annual fees, interest rates, forex markups) is published per card and is not consistently disclosed in aggregate.

Digital platforms

bob World. The flagship mobile banking application, launched September 2021 as the successor to M-Connect Plus, organised into four pillars (Save, Invest, Borrow, Shop) and carrying 220-plus services in current builds. It supports video-KYC account opening, cardless cash withdrawal, spend analytics, dual-PIN security, a senior-citizen persona, and embedded investment journeys into PPF, Sukanya Samriddhi and Atal Pension Yojana. A refreshed flagship app was launched in the current cycle.

bob World Lite. A feature-phone banking channel co-developed with Reliance Jio, extending mobile banking and UPI functionality to non-smartphone users. This is the bank's most distinctive financial-inclusion technology asset and has no close analogue among peers.

bob World Internet. Retail and corporate internet banking, migrated during FY2026 to a new domain as a security hardening measure.

Other channels. UPI (P2P, P2M, UPI Lite, UPI on credit), WhatsApp banking, missed-call and SMS banking, self-service e-lobbies (1,200-plus), and the phygital branch model being expanded under the current transformation programme.

Wealth, investment and insurance distribution

Baroda Wealth is the mass-affluent wealth platform; Baroda Radiance is the private banking proposition for high-net-worth clients. Three-in-one accounts link savings, demat and trading through BOB Capital Markets. Mutual funds are manufactured through the bank's asset management interest and distributed alongside third-party schemes. Life insurance is manufactured by IndiaFirst Life Insurance Company Limited (65% owned) and distributed through the branch network under long-term agency agreements that also survive with Union Bank of India. General and health insurance are distributed on a corporate-agency basis.

NRI and international

NRE, NRO and FCNR(B) deposits, Resident Foreign Currency accounts, Baroda Remit Xpress and rapid funds2india remittance corridors, NRI home loans, and portfolio investment scheme accounts. The overseas branch and subsidiary network delivers local retail and trade banking in 20 countries.

Corporate and institutional

Working capital (cash credit, overdraft, WCDL), term and project finance, structured and infrastructure finance, trade finance (letters of credit, guarantees, bill discounting, export credit), supply chain finance, external commercial borrowings, loan syndication, foreign exchange and derivative hedging, and the BarodaCONNECT cash management and corporate internet banking suite. The bank operates an IFSC Banking Unit at GIFT City, Gandhinagar, for offshore-currency corporate business.

Government business

Pension disbursement, direct and indirect tax collection, PPF and Sukanya Samriddhi agency, Atal Pension Yojana, Sovereign Gold Bond distribution, and state government treasury business.

All figures standalone in INR crore unless stated. Source: audited annual results and quarterly results releases for FY2025 and FY2026; exchange-filed historical statements for FY2022–FY2024.

Income statement

FY2025 and FY2026 operating profit (INR 32,435 crore and INR 32,259 crore) are as reported in the bank's results releases. The bank separately reports FY2025 Net Interest Income of INR 45,659 crore and Non-Interest Income of INR 16,647 crore on a different classification basis; the derived figures above are used for internal consistency across the five years.

Bank of Baroda does not report gross profit, EBITDA or EV/EBITDA, and these constructs are not meaningful for a deposit-taking institution. They are marked not applicable throughout rather than fabricated.

Margins and efficiency

Growth and CAGR

Total income CAGR FY2022–FY2026: 15.1%. Net profit CAGR FY2022–FY2026: 28.8%, though this is distorted by the depressed FY2022 base; the FY2024–FY2026 net profit CAGR is 6.1%, which is the honest run-rate.

Balance sheet

FY2024 through FY2026 are as disclosed in current releases.

Goodwill and intangibles are not separately broken out in the bank's published balance-sheet format and are not publicly disclosed at this granularity. "Net debt", "working capital" and "cash conversion cycle" are not applicable to a bank's balance sheet, where deposits and borrowings are raw material rather than leverage in the corporate sense; they are omitted rather than fabricated.

Business and asset quality metrics

FY2025 and FY2026 figures are from current disclosures (FY2025: GNPA 2.26%, NNPA 0.58%, PCR 93.29% with technical write-offs and 74.87% without, slippage 0.78%; FY2026: GNPA 1.89%, NNPA 0.45%, PCR 93.94% with and 76.66% without, slippage 0.72%, credit cost 0.46%).

Capital adequacy

For reference, CRAR was 17.61% and CET-1 14.12% at 30 June 2025; consolidated CRAR and CET-1 at 30 June 2026 were 16.70% and 14.36% respectively. Quarterly average Liquidity Coverage Ratio (standalone) was approximately 127% in Q1FY27.

Returns and ratios

The gap between the bank's reported FY2025 RoE of 16.96% and the derived 15.7% arises from the bank computing return on average equity excluding revaluation and certain other reserves. Both are presented rather than one being suppressed. Q4FY26 RoE was reported at 17.27% and Q4FY26 RoA at 1.15%; the FY2026 full-year RoA of 1.06% is as reported. Current ratio, ROIC, debt-to-equity, net-debt-to-EBITDA and interest coverage are not applicable to a bank and are omitted; the regulatory analogues (CRAR, leverage ratio, LCR) are given above.

Cash flow

For banks, operating cash flow is dominated by movements in deposits, advances and investments and is a liquidity statement rather than an earnings-quality signal. The FY2023 and FY2024 negative operating cash flow reflects advances growing faster than deposits during the post-merger credit acceleration; the FY2025–FY2026 reversal reflects the deposit-led balance-sheet expansion and the INR 15,000 crore-plus of bond issuance in FY2026. Capital expenditure is subsumed within investing activities and is not separately disclosed at annual granularity; free cash flow is therefore not a meaningful construct here and is omitted.

Commentary on trends, inflections and drivers

FY2022 — the inflection year. Net profit multiplied nine-fold off a depressed FY2021 base as credit costs fell from crisis levels to 1.11%. Provisions of INR 13,003 crore still consumed 58% of operating profit. This is the last year in which asset quality was the dominant variable.

FY2023 — normalisation. Total income rose 22.4% and net profit 94%. Provisions halved to INR 7,130 crore. Net interest margin peaked at 3.31% as the repo-linked asset book repriced upward faster than the deposit book — the classic rising-rate windfall for a floating-rate lender. This year, not FY2026, is the high-water mark for margin.

FY2024 — scale. Total income grew 27.6% to INR 1,27,101 crore as the full effect of deposit repricing flowed through interest expense (up 40.9%). Net interest margin compressed 13 basis points. Return on assets peaked at 1.17%.

FY2025 — the plateau. Total income growth decelerated to 8.6% and net profit growth to 10.1%. Non-interest income did the heavy lifting, rising 14.8% on a reported basis. Margin fell to 3.02%. The bank still delivered record profit and record global business.

FY2026 — the squeeze. This is the year the model came under genuine pressure. Total income grew only 3.4% and net profit 2.2%. Operating profit actually fell 0.5%. Three forces converged: net interest margin compressed a further 13 basis points to 2.89% as the repo rate cycle turned and the asset book repriced downward before the deposit book could follow; non-interest income was flat to down, with Q4FY26 non-interest income falling 16.2% year-on-year and the Other Banking Operations segment losing 18.6% of revenue; and the cost-to-income ratio deteriorated to 49.2%. Provisions rose 19.5% to INR 7,149 crore — not because asset quality worsened (GNPA improved to 1.89%) but because the bank chose to build a INR 1,500 crore floating provision in Q4, pushing Q4 credit cost to 0.76% from 0.44%. That is a conservative balance-sheet decision rather than a stress signal. The headline was rescued by an effective tax rate of 20.3%, down from 26.0%, contributing roughly INR 2,000 crore of the reported profit.

Q1FY27 — the exceptional item. Reported net profit collapsed 71.8% to INR 1,278 crore after absorbing the USD 600 million (INR 5,680 crore) NMC Health settlement charge. Excluding it, net profit would have been INR 5,528 crore, up 21.7% year-on-year — the strongest underlying quarter in the bank's history. Underlying return on assets would have been 1.10% and return on equity 16.57%. Operating profit fell 1.3% to INR 8,127 crore because non-interest income dropped 25.8% on a weak treasury base, but net interest income rose 9.5% and operating expenses were held flat at INR 7,868 crore. Global NIM at 2.77% sits at the bottom of management's 2.75–2.95% guidance band.

The through-line. The bank has converted an asset-quality story into a growth story. Advances grew 17.4% year-on-year at June 2026 against deposits at 13.8%, pushing the credit-deposit ratio to 86.7% from 74.3% four years earlier. That is a deliberate re-leveraging of a balance sheet that had been running with excess liquidity. It is also the source of the next constraint: with CRAR at 16.30% and CET-1 at 13.90%, and no equity raise since FY2021, the bank is funding growth from retained earnings and Tier-2 issuance. Sustaining high-teens advances growth against low-single-digit profit growth is arithmetically finite.

Management guidance

No explicit return on assets, return on equity, cost-to-income or absolute profit guidance is provided.

Consensus expectations

Thirty-four analysts maintain a Buy consensus with an average twelve-month target of INR 290.26 (high INR 350, low INR 225), implying approximately 22% upside from INR 238. Targets have been reduced roughly 11% over five months. On a consolidated basis, FY2026 revenue was INR 636.62 billion on the vendor-normalised basis (down 1.05%) with earnings of INR 198.46 billion (down 4.20%), which is a materially more negative characterisation than the standalone reported figures and reflects consolidation and classification differences.

Bull case

One. The margin trough is in and the recovery is mechanical. Cost of deposits fell 39 basis points year-on-year and 12 basis points sequentially in Q1FY27 while global NIM fell only 14 basis points year-on-year. Deposit repricing lags asset repricing by two to three quarters in a falling-rate environment. If the rate cycle has bottomed, NIM should recover toward the midpoint of the 2.75-2.95% guidance band during FY2027. On a base of INR 47,683 crore of net interest income, ten basis points of NIM is worth roughly INR 2,000 crore of annual pre-provision profit — approximately 10% of net profit.

Two. Underlying earnings are already at a record and the market is looking at the wrong number. Excluding the NMC settlement, Q1FY27 net profit was INR 5,528 crore, up 21.7% year-on-year, with return on assets of 1.10% and return on equity of 16.57%. Annualised, that is above INR 22,000 crore. At INR 238 and 517.9 crore shares, the stock trades at roughly 5.6x that run-rate. The settlement is a one-time cash cost against a resolved USD 5.4 billion claim.

Three. Four unpriced monetisation events. The NSE OFS is transaction-committed with shares in escrow and expected to close by end-September 2026. IndiaFirst Life holds SEBI approval with just over 89 million bank-held shares in the OFS. BOB Financial (49%) and Nainital Bank (majority) are board-approved. None is reflected in a 0.79x book multiple, and each would crystallise value carried at cost.

Bear case

One. The revenue mix is deteriorating on both sides. Corporate segment revenue fell 3.1% in FY2026 while corporate advances grew 15.3%, and corporate pre-tax income fell 35% — the bank is buying volume with spread. Simultaneously, non-interest income fell 25.8% in Q1FY27 and Other Banking Operations revenue fell 18.6% in FY2026. Roughly 44% of the revenue base (corporate plus other banking operations) is contracting.

Two. Growth is outrunning capital. Advances grew 17.4% while net profit grew 2.2%. CRAR fell from 17.61% (June 2025) to 15.82% (March 2026) and CET-1 from 14.12% to 13.16%. There has been no equity issuance since FY2021. At some point in FY2027 or FY2028 the arithmetic forces either a slowdown to guidance-level 11-13% credit growth or an equity raise at below book value. Moody's own upgrade trigger requires TCE/RWA above 14%, which is moving away, not toward.

Three. The compliance pattern is not idiosyncratic. The bob World supervisory action (2023), two RBI penalties (May 2025, July 2026), the NMC claims alleging AML control failures, a subsidiary penalty, and a terabyte data exfiltration through a single email account form a sequence, not a series of unrelated incidents. The Chief Technology Officer departed five weeks after the breach. DPDP Act penalties of up to INR 450 crore become enforceable. Each event is individually immaterial; the pattern justifies the persistent discount to book and could deepen it.

Catalysts and monitorables, next twelve months

Analyst verdict

Bank of Baroda is a well-run bank in a difficult year, priced as though the difficulty is permanent. The distinction matters.

The operating facts are these. Asset quality has completed a decade-long repair and now sits between HDFC Bank and ICICI Bank on gross and net NPA ratios — an achievement almost no one predicted in FY2016 when the bank lost INR 5,396 crore. Retail, agriculture and MSME lending compounds at 16-20% with sovereign guarantee cover across a meaningful portion. Cost of deposits is falling 39 basis points a year. Underlying Q1FY27 return on equity, stripping the settlement, was 16.57%. Leadership is secured through 2029.

Against that: net interest margin has fallen 54 basis points in three years and sits at the floor of guidance; non-interest income is 11% of revenue and shrinking; corporate banking is growing volume while destroying spread; CET-1 has fallen 96 basis points in nine months against 17% advances growth; and the compliance record over three years is genuinely poor.

At 0.79x standalone book with a 13.8% return on equity and a 3.6% dividend yield, the market is applying a cost of equity above 17%. That is defensible if you believe the compliance pattern is structural and the margin compression is permanent. It is too harsh if you believe FY2026 was a cyclical trough with a one-time legal charge on top.

The honest position is that both readings are live and the next two quarters will discriminate between them. If Q2 and Q3 FY27 show NIM stabilising above 2.80% and non-interest income turning, this is a materially mispriced asset. If NIM breaches 2.75% and CET-1 falls below 13%, the discount is earned. The NMC settlement, at 11 cents on the claimed dollar, was the right decision and removes the tail. What remains is an execution question, not an existential one.

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