BoI a cautious play as provisions likely to hit earnings: CLSA

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26 Aug, 2025 12:21

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Moneycontrol BureauBrokerage house CLSA has reduced its price target for Bank of India (BoI) to Rs 65 from Rs 70 earlier and maintained its ‘sell' rating after the bank’s fourth quarter earnings, saying going forward bank’s low profitability makes earnings highly sensitive to provisions.

Public sector lender Bank of India disappointed the Street on Tuesday by reporting a loss of Rs 3,587 crore in Q4 that widened significantly from a loss of Rs 56 crore in year-ago period. This was majorly led by provisions that shot up 52 percent quarter-on-quarter and 142.5 percent year-on-year to Rs 5,470 crore.

Bank’s gross non-performing loans (NPL) rose to 13 percent of loans in the quarter, pushing up credit costs, resulting in a loss of Rs 3,600 crore. The downgrades handed out by the RBI based on the asset quality review of the bank, together with the downturn in steel and infrastructure sectors led to a rise in the bank’s slippages, said the brokerage house.

Although the management aims to lower its gross NPL ratio in FY17 with lower slippages and higher recovery/upgrades, the broking house still remains cautious.

There were also other constraints.

“The bank’s loan book contracted 7 percent YoY, reflecting constraints on capital and slower current and savings account growth (12 percent YoY). Net interest income rose 12 percent but was boosted by some noncore income (interest on tax refund),” the note said.