Angel Broking reviews BoI's Q2 earnings

In an interview to CNBC-TV18, Vaibhav Agrawal, Banking, Angel Broking reviewed the second quarter earnings of public sector lender Bank of India. The bank reported poor numbers due to sharp rise in bad loans in the July-September quarter.

Net profit fell by 38.5 percent year-on-year and 66 percent quarter-on-quarter to Rs 302 crore in the quarter. Net interest income rose lower than expected 15 percent to Rs 2,196 crore from Rs 1,904 crore during the same period.

Below is an edited transcript of Vaibhav Agarwal's interview on CNBC-TV18.

Q: Is it a bad howler like PNB?

A: I would like to add for BoI, as far as analyst expectations, probably a bit of behavior analysis is backfired. Most of us thought that these results are to be presented by the outgoing chairman. There were some expectations of lower provisioning this quarter and more to come in the next quarter. But the pain has come in this quarter itself.

In any case even if there would have not been the aspect of management change in the minds of analyst, I don't think anyone would have factored in as low as Rs 300 crore on the bottom-line. Estimates would take a significant turn in case of BoI as well.

Q: You must expect the slippages to be nearly equal to Rs 2,000 crore because the gross NPLs have gone up from Rs 6,752 crore on June 30 to Rs 8,898 crore. Are we correct in assuming that fresh slippage would be around Rs 2,000 crore?

A: It could be even more. If they also add good amount of write-off being taken because provisioning number in P/L is quite high, they may have taken a lot of write-offs as well. So, possibly the gross slippage number would be even higher than that.

Q: What have you made of the overall performance? Will you derate the stock? What could be the price target?

A: Bank of India, in any case, has seen a lot of volatile performance and pretty weak numbers. That is not the situation with Bank of India. It was anyways not really a very favoured stock for us. After the results, again the estimates will be reduced atleast by four-five percent. The target price would come down to fair value estimates. Although we will be reviving our recommendation, but clearly it is not one of our preferred picks.

Q: The provision coverage ratio, the banks says, works out to 60.96 percent basically 61 percent. How does that compare with its previous record?

A: This has maintained on a sequential basis. It was 60.9 in first quarter as well. So, they have maintained that atleast.