Hold Bank of India; target of Rs 355: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey has recommended hold rating on Bank of India with a target of Rs 355, in its January 29, 2013 research report.
 
“Bank of India reported recovery in reported earnings with PAT of Rs803 cr, growing at 11.9% y-o-y & 166.2% q-o-q, in line with our expectation. NII grew 11.7% y-o-y & 5.1% q-o-q aided by steady NIM expansion and healthy loan book growth 20% y/y. Core fee income decreased 8.6% y-o-y & reflecting balance sheet slowdown and fall in fresh sanction. Sequential 5% increase in non interest income was largely attributable to strong recovery from written off accounts (up 48% Q-o-Q). Employee expenses rose 19.1% q-o-q on the back of ad hock provision. Provisions went up 41% q/q to Rs916 crs, mainly due to moderation in incremental slippages. The bank has restructured loans amounting to Rs2206crs (0.8% of loans). Sequentially, asset quality has been stable as Gross NPAs have declined 3% Q-o-Q with stable coverage at 60.7%. Loan and deposit growth were 20.0% y-o-y and 13.6% y-o-y respectively. CASA ratio improved 107bps Q-o-Q to 33.8% driven by healthy saving bank deposits 13.2% y/y. Maintain HOLD.”
 
“NII increased 11.7% y-o-y / 5.1% q-o-q aided by strong loan book growth. NIMs decreased 6bps q-o-q to 2.36% primarily attributable to higher low yield overseas loan book growth and incrementally lower margin in overseas business. Domestic and overseas margin stood at 2.8% and 1.1% respectively. We believe net interest margin remain under pressure and unlikely to improve on the back continuous pricing pressure in retail and subdued industrial credit demand. We expect NII to grow at CAGR 14.2% over FY12-14e driven by 16.0% CAGR in loan book. Non- interest income increased 10% y-o-y and 4.8% q-o-q to Rs937 crore driven by stronger cash recoveries (up 48% q-o-q). Trading gains were Rs86 crore vs. Rs103 crore, contributing 9.4% to PPP. Core fee income growth remained weak at negative 8.6% y/y.”
 
“Although the bank has shown improvement in reported NPAs numbers but internals continued to remain volatile. GNPA decreased 3% Q-o-Q supported by higher write offs and 41% Q-o-Q decline in slippages. But The bank has seen large loan restructuring amounting to Rs2206crore (0.8% of loans) during the quarter. Restructured asset pool stood at 6.5% of loans (borrower wise). Loans amounting to Rs 828 crore turned into NPA from the restructured book, cumulative slippage from restructured book stood at 18.7%. Gross and Net NPAs stood at 3.1% and 2.0% respectively with provision coverage ratio 60.7%. BOI has reported another operationally weak performance during the quarter. The bank has been quite volatile in terms of earning growth and asset quality trend in last two and half years. Given the management’s guidance on incremental asset quality positioning, the stock has moved up 23.8% in last three months factoring betterment on asset quality front.”
 
“We have cut our FY13 & FY14 earnings estimates by 1.8% & 5.2% respectively factoring higher provisions. The stock is trading at 0.9x FY14 adjusted book, 5.4x FY14e earnings, fairly valued given the lower RoA & RoEs. We recommend HOLD rating on the stock with target price of Rs355,” says KRChoksey research report.

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