Hold Bank of India; target of Rs 205: Religare Retail

Religare Retail Research report on Bank Of India (BOI)

"BOI reported higher slippages of Rs 17.5bn (2.5 percent vs. 2.3 percent in Q2FY14); however, after adjusting for ARC sales, slippages could be much higher. Robust recoveries and write-offs helped check GNPL formation, resulting in a net GNPL addition of just Rs 1.4bn (Rs 4.7bn in Q2FY14). Fresh restructuring too remained high at Rs 11.5bn (of which only Rs 3bn was from CDR cases); however, the outstanding restructured book declined sharply to Rs 164bn (Rs 175bn in Q2FY14) as some accounts of Rs 20bn exited from CDR. Management indicated a CDR restructuring pipeline of Rs 15bn-17bn."

"Strong advances growth; NIMs contract 2bps QoQ - Global advances saw strong growth led by robust traction in agri/international books; growth in international advances mainly stemmed from INR depreciation. Growth in domestic corporate and SME segments remained subdued, while retail growth remained healthy. Global NIMs declined by 2bps QoQ to 2.37 percent largely due to pressure on domestic NIMs (-4bps QoQ to 2.89 percent). Growth in other income was driven by robust core fee income growth and higher treasury gains. Recoveries in written-off accounts, though down QoQ, remained elevated."

Maintain HOLD: "We pare our FY14/FY15 earnings estimates by 4 percent/8 percent as we factor in higher provisions on account of continued stress in asset quality. While valuations are inexpensive, we remain neutral on the stock amid a tough macro and BOI’s low core tier I ratio of ~7.8 percent. , says Religare Retail Research report.

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