Accumulate Bank of India; target of Rs 369: KRChoksey

KRChoksey is bullish on Bank of India and has recommended accumulate rating on the stock with a target of Rs 369 in its May 2, 2012 research report.

“Bank of India (BOI), posted strong earnings of Rs 953 crore, growing 93% y-o-y & 32.7% q-o-q, above our expectation and market consensus. NII grew strongly 8.4% y-o-y & 21.0% q-o-q aided by 31bps sequential NIM expansion and 7.9% q-o-q loan book growth. Core fee income saw smart rebound by increasing 1.4% y-o-y /9.7% q-o-q. Non interest income increased 17.5% y-o-y /13.5% q-o-q supported by core fee income and forex income. Cost to income ratio increased 130bps q-o-q to 42% driven by sharp increase in other operating expenses. Provisions increased only 1.3% q-o-q to Rs702 crs, reflecting marked improvement in asset quality and lower NPV loss on incremental restructuring. The bank has restructured loans amounting to Rs3,780 crs (1.5% of loans). Strong NII, Pick up in non interest income and stable provisions resulted into strong bottom line performance. Broadly asset quality has been a mixed bag as Gross & Net NPAs declined while loan restructuring has increased significantly. Loan and deposit growth were 16.5% y-o-y and 6.5% y-o-y respectively.”

“NII showed strong growth of 8.4% y-o-y / 21.0% q-o-q driven by 31bps margin expansion and healthy loan book growth. NIMs increased 31bps qo- q to 2.86% led by both domestic book (up 38bps q-o-q) and overseas book (up 13bps q-o-q). The management has guided that domestic NIM to further improve on the back of changing loan book mix and better pricing environment whereas overseas NIMs are likely to sustain at current levels. We expect NII to grow at CAGR 18.8% over FY12-14e driven by 16.0% CAGR in loan book. Non- interest income grew strongly 17.5% y-o-y and 13.5% q-o-q to Rs967 crore driven by smart rebound in fee income (up 9.7% q-o-q) and strong growth in forex income (37% q-o-q). Trading gains sustained at Rs74 crore, contributing 5.6% to PBT. Forex income pegged at Rs 170 crore, up 27% y-o-y/ 37% q-o-q. We are factoring 12% CAGR in core fee income over FY12-FY14e.”

“BOI delivered strong core operating profits and PAT during the quarter. Strong NII growth, sharp NIM expansion, healthy core fee income growth, strong growth in forex income and decline in both gross NPA and net NPs were key positives from the numbers. However, higher loan restructuring and sequential decline in domestic deposits were key disappointments from the result. The stock is trading at 1.0x FY13 adjusted book and 5.8x FY13e earnings, fairly valued given weaker ROE levels in medium term. We have revised our FY13 earnings estimates upward by 4.7% factoring higher NIMs and lower provisions. We upgrade our investment rating on the stock from REDUCE to ACCUMULATE with revised target price of Rs369,” says KRChoksey research report.   

Non-Institutions holding more than 90% in Indian cos

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