Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bank of India's 2QFY12 results were below expectations, led by disappointing asset quality performance. While, NII was
marginally lower than our estimate of INR19.4b, the disappointment came from higher than expected provisions. Strong
growth in non-interest income (20% above our estimate, led by trading gains and recoveries) and write-back of tax
(INR940m; utilized MAT credit of INR770m) aided profitability.
Slippages disappoint: Gross slippages during the quarter were INR28.2b (annualized slippage ratio of 6.1% v/s
3.8% in 1QFY12 and 1.8% in FY11). Of the overall slippages, ~57% were on account of loans below INR1m (led by
system-based NPA recognition) whereas INR4.3b slipped from restructured loans.
Aggressive write-offs - GNPA up 13% QoQ: In 2QFY12, BOI aggressively wrote off INR16b of loans as against
INR1.5b in 1QFY12 and INR8.8b in FY11. As a result, PCR (calculated) declined to ~35.2% v/s 53.5% in 1QFY12.
PCR including technical write-offs was 59.1% v/s 66.8% in 1QFY12.
NIM improves QoQ: Reported domestic NIM improved 34bp QoQ to 2.8%. However, post adjustment for one-offs in
1QFY12 (other interest income of INR1.8b - impact of ~15bp), NIM would have been higher. During the quarter, the
bank reversed interest income of INR1b as against INR1.8b in 1QFY12 on account of higher slippages, which further
aided NIM.
Muted business growth: Loans grew just 1% QoQ (18% YoY), whereas deposits grew ~2% QoQ (24% YoY).
Domestic CD ratio stood at 64.6%, providing adequate liquidity in the balance sheet.
Valuation and view: Volatile asset quality performance remains the biggest concern. On several occasions in the past,
BOI has disappointed on asset quality performance. In the last two quarters, we have downgraded our earnings estimates
for FY12 and FY13 by over 25%. We now expect RoA of ~0.7%, RoE of 15-17% and earnings CAGR of ~14% over FY12-
13. The stock trades at 1x FY12E and 0.9x FY13E BV. Maintain Neutral.
Slippages increase significantly - a disappointment
Slippages during the quarter were INR28.2b (annualized slippage ratio of 6.1% v/s 3.8%
in 1QFY12). Of the overall slippages, ~57% were on account of loans below INR1m (led
by system-based NPA recognition) whereas INR4.3b slipped from restructured loans.
The management mentioned that the bank has shifted 100% of its portfolio to CBS for
NPA recognition and consequently expects slippages to decline significantly from 3QFY12.
Credit cost for the quarter increased to ~1.9% from 0.7% in 1QFY12. During the quarter,
BOI restructured loans worth INR7.7b (36bp of overall loans). The outstanding restructured
book stood at INR111b (5.1% of loan book), and cumulatively, restructured loans of
INR26.6b (24% of outstanding restructured book) have slipped into NPAs.
Aggressive write-off - GNPA up 13% QoQ
Despite significantly higher slippages, aggressive write-offs (INR16b v/s INR1.5b in
1QFY12 and INR8.8b in FY11) resulted in a 13% QoQ increase in GNPA while NNPA
was up 58% QoQ. In percentage terms, GNPA increased to 3% v/s 2.7% a quarter ago.
PCR (calculated) declined sharply to 35.2% as compared to 53.5% a quarter ago. PCR
(including technical write-offs) declined to 59% from 66.7% in 1QFY12. GNPA in the
agriculture segment increased from INR9.9b to INR12b, whereas GNPA in the industry
segment was up from INR18.6b a quarter ago to INR24.1b. The Services and Personal
Loan segments reported QoQ decline in GNPA. Overseas GNPA stood at INR7.2b as
against INR5.4b a quarter ago.
Domestic NIM improves 30bp+ QoQ
Reported domestic NIM improved 34bp QoQ to 2.8%. However, post adjustment for
one-offs in 1QFY12 (other interest income of INR1.8b - impact of ~15bp), NIM would
have been higher. The bank reversed interest income of INR1b in 2QFY12 as against
INR1.8b in 1QFY12 on account of higher slippages, which further aided NIM. The NIM
improvement was led by containment of cost of deposits (up 20bp QoQ) and higher yield
on funds. Domestic yield on loans was up 85bp QoQ, whereas yield on investment improved
45bp QoQ. Overseas NIM was largely stable at 1.2% and global NIM improved by 25bp
QoQ to 2.4%.
Business growth muted QoQ; liquidity remains high
Loans grew just 1% QoQ (18% YoY) to INR2.2t, whereas deposits grew ~2% QoQ
(24% YoY) to INR3t. Global CD ratio declined 80bp QoQ to 72.5%. Domestic loans
were down 2% QoQ (up 9% YoY), whereas domestic deposits were flat QoQ (up 19%
YoY). International business growth was strong, with sequential loan growth of 10% and
deposit growth of 15%. The strong growth in international business could have been partially
led by sharp rupee depreciation. The share of international business increased further to
~22% v/s ~20% a quarter ago and 18% a year ago.
CASA ratio improves QoQ
Domestic CASA deposit growth moderated to 12.6% YoY (3% QoQ), led by sequential
decline in CA deposits. While savings deposits growth was strong at 8% QoQ (17%
YoY), CA deposits declined 14% QoQ (6% YoY), leading to moderation in CASA growth.
Reported domestic CASA ratio improved 116bp QoQ to 31.6%.
Higher trading profits and recoveries boost non-interest income
Non-interest income grew 28% QoQ and 44% YoY, led by trading gains and higher
recoveries. During the quarter, the bank booked treasury gains of INR1.5b as against
INR1.1b a quarter ago and INR360m a year ago. Fee income (excluding forex) grew
~11% YoY (up 21% QoQ on a lower base), whereas forex income stood at INR1.5b (flat
QoQ).
Valuation and view
Stress on asset quality has led to a sharp downgrade in our earnings estimates. We have
cut our EPS estimates for FY12/13 by 10%+, largely led by higher credit cost. For FY12,
BOI has guided (1) ~18% loan growth, (2) global NIM of ~2.6% (down 30bp YoY), and
(3) GNPA of 2.5% as against 3% at the end of 2QFY12. Volatile asset quality performance
remains the biggest concern. BOI has disappointed on asset quality performance on several
occasions in the past.
In the last two quarters, we have downgraded our earnings estimates for FY12/FY13 by
25%+. For FY12, we model margin compression of ~40bp, slippage ratio of 3.1% (v/s
1.7% in FY11) and credit cost of 73bp (v/s 63bp in FY11). For FY13, we model flat NIM
and credit cost of 90bp.
We now expect RoA of ~0.7%, RoE of 15-17% and earnings CAGR of ~14% over
FY12-13. We estimate EPS at INR46 for FY12 and at INR59 for FY13, and estimate BV
at INR328 for FY12 and at INR375 for FY13. The stock trades at 1x FY12E and 0.9x
FY13E BV. Maintain Neutral, with a target price of INR415 (1.1x FY13E BV).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bank of India's 2QFY12 results were below expectations, led by disappointing asset quality performance. While, NII was
marginally lower than our estimate of INR19.4b, the disappointment came from higher than expected provisions. Strong
growth in non-interest income (20% above our estimate, led by trading gains and recoveries) and write-back of tax
(INR940m; utilized MAT credit of INR770m) aided profitability.
Slippages disappoint: Gross slippages during the quarter were INR28.2b (annualized slippage ratio of 6.1% v/s
3.8% in 1QFY12 and 1.8% in FY11). Of the overall slippages, ~57% were on account of loans below INR1m (led by
system-based NPA recognition) whereas INR4.3b slipped from restructured loans.
Aggressive write-offs - GNPA up 13% QoQ: In 2QFY12, BOI aggressively wrote off INR16b of loans as against
INR1.5b in 1QFY12 and INR8.8b in FY11. As a result, PCR (calculated) declined to ~35.2% v/s 53.5% in 1QFY12.
PCR including technical write-offs was 59.1% v/s 66.8% in 1QFY12.
NIM improves QoQ: Reported domestic NIM improved 34bp QoQ to 2.8%. However, post adjustment for one-offs in
1QFY12 (other interest income of INR1.8b - impact of ~15bp), NIM would have been higher. During the quarter, the
bank reversed interest income of INR1b as against INR1.8b in 1QFY12 on account of higher slippages, which further
aided NIM.
Muted business growth: Loans grew just 1% QoQ (18% YoY), whereas deposits grew ~2% QoQ (24% YoY).
Domestic CD ratio stood at 64.6%, providing adequate liquidity in the balance sheet.
Valuation and view: Volatile asset quality performance remains the biggest concern. On several occasions in the past,
BOI has disappointed on asset quality performance. In the last two quarters, we have downgraded our earnings estimates
for FY12 and FY13 by over 25%. We now expect RoA of ~0.7%, RoE of 15-17% and earnings CAGR of ~14% over FY12-
13. The stock trades at 1x FY12E and 0.9x FY13E BV. Maintain Neutral.
Slippages increase significantly - a disappointment
Slippages during the quarter were INR28.2b (annualized slippage ratio of 6.1% v/s 3.8%
in 1QFY12). Of the overall slippages, ~57% were on account of loans below INR1m (led
by system-based NPA recognition) whereas INR4.3b slipped from restructured loans.
The management mentioned that the bank has shifted 100% of its portfolio to CBS for
NPA recognition and consequently expects slippages to decline significantly from 3QFY12.
Credit cost for the quarter increased to ~1.9% from 0.7% in 1QFY12. During the quarter,
BOI restructured loans worth INR7.7b (36bp of overall loans). The outstanding restructured
book stood at INR111b (5.1% of loan book), and cumulatively, restructured loans of
INR26.6b (24% of outstanding restructured book) have slipped into NPAs.
Aggressive write-off - GNPA up 13% QoQ
Despite significantly higher slippages, aggressive write-offs (INR16b v/s INR1.5b in
1QFY12 and INR8.8b in FY11) resulted in a 13% QoQ increase in GNPA while NNPA
was up 58% QoQ. In percentage terms, GNPA increased to 3% v/s 2.7% a quarter ago.
PCR (calculated) declined sharply to 35.2% as compared to 53.5% a quarter ago. PCR
(including technical write-offs) declined to 59% from 66.7% in 1QFY12. GNPA in the
agriculture segment increased from INR9.9b to INR12b, whereas GNPA in the industry
segment was up from INR18.6b a quarter ago to INR24.1b. The Services and Personal
Loan segments reported QoQ decline in GNPA. Overseas GNPA stood at INR7.2b as
against INR5.4b a quarter ago.
Domestic NIM improves 30bp+ QoQ
Reported domestic NIM improved 34bp QoQ to 2.8%. However, post adjustment for
one-offs in 1QFY12 (other interest income of INR1.8b - impact of ~15bp), NIM would
have been higher. The bank reversed interest income of INR1b in 2QFY12 as against
INR1.8b in 1QFY12 on account of higher slippages, which further aided NIM. The NIM
improvement was led by containment of cost of deposits (up 20bp QoQ) and higher yield
on funds. Domestic yield on loans was up 85bp QoQ, whereas yield on investment improved
45bp QoQ. Overseas NIM was largely stable at 1.2% and global NIM improved by 25bp
QoQ to 2.4%.
Business growth muted QoQ; liquidity remains high
Loans grew just 1% QoQ (18% YoY) to INR2.2t, whereas deposits grew ~2% QoQ
(24% YoY) to INR3t. Global CD ratio declined 80bp QoQ to 72.5%. Domestic loans
were down 2% QoQ (up 9% YoY), whereas domestic deposits were flat QoQ (up 19%
YoY). International business growth was strong, with sequential loan growth of 10% and
deposit growth of 15%. The strong growth in international business could have been partially
led by sharp rupee depreciation. The share of international business increased further to
~22% v/s ~20% a quarter ago and 18% a year ago.
CASA ratio improves QoQ
Domestic CASA deposit growth moderated to 12.6% YoY (3% QoQ), led by sequential
decline in CA deposits. While savings deposits growth was strong at 8% QoQ (17%
YoY), CA deposits declined 14% QoQ (6% YoY), leading to moderation in CASA growth.
Reported domestic CASA ratio improved 116bp QoQ to 31.6%.
Higher trading profits and recoveries boost non-interest income
Non-interest income grew 28% QoQ and 44% YoY, led by trading gains and higher
recoveries. During the quarter, the bank booked treasury gains of INR1.5b as against
INR1.1b a quarter ago and INR360m a year ago. Fee income (excluding forex) grew
~11% YoY (up 21% QoQ on a lower base), whereas forex income stood at INR1.5b (flat
QoQ).
Valuation and view
Stress on asset quality has led to a sharp downgrade in our earnings estimates. We have
cut our EPS estimates for FY12/13 by 10%+, largely led by higher credit cost. For FY12,
BOI has guided (1) ~18% loan growth, (2) global NIM of ~2.6% (down 30bp YoY), and
(3) GNPA of 2.5% as against 3% at the end of 2QFY12. Volatile asset quality performance
remains the biggest concern. BOI has disappointed on asset quality performance on several
occasions in the past.
In the last two quarters, we have downgraded our earnings estimates for FY12/FY13 by
25%+. For FY12, we model margin compression of ~40bp, slippage ratio of 3.1% (v/s
1.7% in FY11) and credit cost of 73bp (v/s 63bp in FY11). For FY13, we model flat NIM
and credit cost of 90bp.
We now expect RoA of ~0.7%, RoE of 15-17% and earnings CAGR of ~14% over
FY12-13. We estimate EPS at INR46 for FY12 and at INR59 for FY13, and estimate BV
at INR328 for FY12 and at INR375 for FY13. The stock trades at 1x FY12E and 0.9x
FY13E BV. Maintain Neutral, with a target price of INR415 (1.1x FY13E BV).
No comments:
Post a Comment