Sharekhan's research report on Bank of India
Bank of India (BOI) reported strong loan growth of 15% y-o-y/ 5% q-o-q versus 9% y-o-y in the last quarter, led by strong growth in retail (18.5% y-o-y), agri, and overseas book (19% y-o-y /31% y-o-y). However, the bank has guided for 10-12% loan growth in FY2023E. Total credit cost reported stood at 1.5% (of average advances) versus 0.3% q-o-q. Restructured book stood at 4.0% of net advances versus 4.7% q-o-q. Credit cost guidance given by the bank stands at 1% for FY2023E versus 1.1% reported in FY2022. NII grew by 36% y-o-y/17% q-o-q, led by higher loan growth and margin improvement. NIM improved by 31 bps q-o-q to 2.58%, led by increased investment yields due to reclassification. Core operating profit also saw healthy growth due to higher NII and contained opex. Asset quality saw sharp improvement with GNPA and NNPA ratios falling by 48 bps/32 bps q-o-q to 9.98%/2.34%. PCR improved by 180 bps q-o-q to 78.4%. At the CMP, BOI trades at 0.4x and 0.4x its FY2023E and FY2024E core ABV, reflecting weak business franchise and below par return profile.
We have downgraded the stock from Buy to Hold with a revised PT of Rs. 50. We believe the bank would continue to report higher slippages and higher credit cost accruing from its restructured book, which is significantly higher than peers.
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