Angel Broking neutral on Bank of India

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Angel Broking neutral on Bank of India

Angel Broking has maintained neutral rating on Bank of India, in its January 31, 2011 research report.

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Angel Broking has maintained neutral rating on Bank of India , in its January 31, 2011 research report.

"For 3QFY2012, Bank of India posted a moderate set of results, with net profit growing by 9.6% yoy to `716cr, above our estimates on account of higher sequential rise in NIM than expected by us. We recommend Neutral on the stock."

"The bank's advances growth picked up during 3QFY2012, growing by 7.5% qoq (up 19.5% yoy). Deposit growth was moderate during the quarter, growing by 2.7% qoq (up 21.7% yoy). As a result of faster rise in advances sequentially, credit-to-deposit (CD) ratio increased by 331bp qoq to 75.0%. CASA deposits grew by rather moderate 13.4% yoy with SA deposits growing at a slightly better pace of 14.3% yoy. Domestic CASA ratio improved sequentially to 32.4% in 3QFY2012 from 31.3% in 2QFY2012. Domestic NIM of the bank improved by 14bp qoq in 3QFY2012 to 2.9%, on the back of uptick in yield on advances (up 24bp qoq) to 11.9%. Fee income performance was robust during the quarter, growing by 31.5% yoy (up 1.2% qoq). Recoveries from written-off accounts nearly trebled on a yoy basis to `186cr. The bank's NPA levels improved during 3QFY2012, with both gross and net NPA levels declining by 2.5% and 3.6% sequentially, respectively. As of 3QFY2012, gross NPA ratio stood at 2.7% (3.0% in 2QFY2012), while net NPA ratio stands at 1.8% (2.0% in 2QFY2012). Provision coverage ratio continued to remain low at 60.9% in 3QFY2012 (59.1% in 2QFY2012). The 9MFY2012 annualized slippage ratio for the bank stands at 3.1% compared to 1.5% for 9MFY2011. The bank witnessed a chunky slippage of ~`500cr from its aviation account during the quarter."

"At the CMP, the stock is trading at cyclically moderate valuations of 1.1x FY2013E ABV compared to historical range of 1.05-1.55x, with a median of 1.25x. However, valuations are higher than peers, considering the poor RoE outlook for the bank due to the macro headwinds. Accordingly, we recommend Neutral on the stock," says Angel Broking research report.  

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To read the full report click on the attachment