Buy Bank of India; target of Rs 413: Angel Broking

Angel Broking is bullish on Bank of India and has recommended buy rating on the stock with a target of Rs 413 in its May 24, 2014 research report.

May 26, 2014 / 13:38 IST

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Angel Broking`s research report on Bank of India

“For 4QFY2014, Bank of India (BOI) reported asset quality pressures, with annualised slippage rate at 5.0 percent (vs 2.4 percent in 3QFY2014). On the operating front, the NII for the bank grew healthy by 23.1 percent yoy (12.1 percent growth qoq) on back of 28.1 percent yoy growth in advances. The other income excluding treasury de-grew by 11.3 percent yoy. Continuing the trend of last three quarters, the opex grew higher by 31.4 percent yoy. Overall the earnings for the bank de-grew by 26.3 percent yoy.”

“During 4QFY2014, the bank registered a strong 28.1 percent yoy growth in its overall advances, aided by a robust growth in its international loan book (at 24.8 percent yoy partly on back of INR depreciation). Even overall deposits for the bank grew at a strong pace of 24.9 percent yoy. The CASA ratio for bank dipped sequentially by 34bp to 22.1 percent. Domestic NIM declined by 4bp sequentially to 2.9 percent. Overall global NIMs declined 4bp qoq to 2.3 percent. The bank’s performance on the non-interest income (excluding treasury) front was weak, as it witnessed de-growth of 11.3 percent yoy to Rs831cr. On the asset quality front, the bank witnessed pressure as absolute Gross and Net NPA levels increased 16.5 percent and 20.7 percent yoy sequentially. Slippages for the bank came at Rs3,600cr (annualised slippage ratio at 5.0 percent compared to 2.4 percent in 3QFY2014 and 2.0 percent in 2QFY2013). The bank’s recoveries/upgrades for the quarter were at Rs1,300cr as compared to Rs1,104cr in 3QFY2014 and Rs889cr in 2QFY2014. The PCR decreased sequentially by 509bp to 58.7 percent; as a result, absolute Net NPA levels increased 20.7 percent sequentially. During the quarter, the bank sold off Rs1,071cr worth of assets to ARCs. During the quarter, the bank restructured advances worth Rs2,400cr (compared to Rs1,146cr restructured in 3QFY2014), thereby taking its total standard restructured book to ~Rs13,557cr (~4.4 percent of its loan book). Going ahead, as per the Management, the restructuring pipeline stands at ~Rs1,100cr.”

“BOI’s asset quality performance over the last two quarters has been reasonable (aided by healthy recoveries/upgrades largely on back of asset sale to ARCs, while slippages and incremental restructuring still remain elevated). Going ahead, the Management has guided for a stable to improving outlook on its asset quality. Inspite of the recent run up in the stock price, the bank is trading at relatively cheap valuations of 0.7x FY2016E ABV. We recommend a Buy rating on the stock with a target price of Rs413,” says Angel Broking research report.

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