Karvy is bullish on Bank of India and has given an Outperformer rating on the stock with a target price of Rs 195.

Karvy report on Dena Bank

“Recently, Bank of India (BoI) has taken 76% stake in an Indonesian bank, P T Bank Swadesi Tbk at around Rs.1.12 billion. BoI would make open offer for the rest 24% stake later. BoI has presence in Indonesia for last three decades through representative office. The bank foresees strong growth potential in Indonesia and bilateral business with India. The acquisition is the part of international expansion to cash in on developing opportunities in international trade. This is the first overseas acquisition by BoI; the bank already has footprint in 12 countries through 24 branches and representative offices. The bank generates considerable chunk of business from international operations.”

“The Bank's international operation has been augmenting overall margins and spread. Over the period we witness improvement in spread. The bank has been selective in choosing the area of operation and offering whole gamut of financial products. The bank has been mainly targeting Indian Diaspora across globe.”

“PT Bank Swadesi Tbk is an Indonesia-based financial institution. The Bank's products and services include funding products, loans, foreign exchange transactions and other related services. The Bank is comprised of seven divisions: the Compliance, Research and Development division, the Personnel and General Affair division, the Information and Technology division, the Operation and Administration division, the Treasury division, the Marketing and Credit division and the International Banking division. Headquartered in Jakarta, Indonesia, the Bank is supported by four branch offices, five sub-branch offices and six cash offices and a mobile cash unit nationwide.”

“The initiative taken by the bank is quite encouraging and would add value to BoI's bottomline in long term. Recent RBI's decision to increase CRR (cash reserve ratio) by 50 basis points would impact the bank's bottomline by Rs.500 million (3.8% of FY08 PAT). We rate the stock as an OUTPERFORMER with a target price of Rs195 per share.”