Hold Bank of India; target of Rs 77: Sharekhan

Sharekhan's research report on Bank of India

Bank of India (BOI) reported robust growth in PPoP up (26% yoy/ 55% qoq) driven by sharp improvement in NIMs (up 49bps qoq/ 62bps yoy) and strong loan growth (21.5% yoy/ 4.0% qoq). Total credit cost was contained and reported at 1.7% of Avg. advances. Despite strong performance, PAT was down 9% yoy reported at Rs. 960 crore and return ratio failed to impress with ROA at just ~ 47 bps (annualized) due to weak core operating profitability (1.5% annualized in H1FY23) Slippages were down by 54% q-o-q at 1.4% (annualized) vs 3.1% qoq, coupled with higher recoveries & upgrades and contained write offs, asset quality saw sharp improvement with GNPA and NNPA ratios falling by 79 bps/29 bps q-o-q to 8.51%/1.92%. PCR at 79% vs 78% q-o-q.

Outlook

At the CMP, BOI trades at 0.6x and 0.5x its FY2023E and FY2024E ABV, reflecting weak business franchise and below par return profile. We maintain our hold rating on the stock with a revised PT of Rs. 77. We believe its restructured book is significantly higher than peers, which is likely to aid higher slippages going forward.