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India Equity Research Reports, IPO and Stock News
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H i g h e r s l i p p a g e s & p r o vi s i o n s w e i g h o n P A T …
Bank of India’s (BoI) Q2FY12 results were dismal with profits declining
20.4% YoY (5.1% QoQ) to | 491.1 crore (our estimate: | 528.5 crore) on
account of high provisions (excluding taxes) of | 1060 crore (up 103.5%
QoQ) despite a tax write-back. GNPA rose 13% QoQ to | 6548 crore with
high slippages of | 2822 crore., ~57% of slippages were due to migration
of sub | 10 lakh loans to system based NPA recognition. Write-offs were
higher at | 1596 crore, which led to provisions declining and,
consequently, a greater rise in NNPA (up 58%QoQ) to | 4245 crore. Other
highlights include flat credit growth with foreign advances up 9.8% QoQ
(probable impact of | depreciation) and domestic loans shrinking 2%
QoQ. NII grew 7.2% YoY to | 1904 crore while NIM improved 25 bps QoQ
to 2.44% despite flat credit growth and interest income reversal of | 100
crore. We are cautious on asset quality and have built in higher credit
costs, thus lowering PAT estimates by 15% for FY12E and 7% for FY13E.
ƒ Margins pick up despite sluggish credit growth…
Sequential business growth was sluggish (1.6% QoQ) as deposits
increased 2% QoQ (24.1% YoY) to | 299074 crore and advances
were flat QoQ (17.7% YoY) at | 216951 crore. While domestic
advances declined 2% QoQ, foreign loans grew 9.8% QoQ to |
59087 crore (27% of global advances). NIM, which plummeted to
2.19% in Q1FY12, inched up 25 bps to 2.44% as YoA improved 52
bps QoQ to 9.4% with CoD up only 8 bps QoQ to 6.1%. We expect
NIM to stabilise at 2.5-2.6% for FY12E.
ƒ Asset quality worsens; overhang to remain…
Slippages were higher than expected at | 2822 crore (| 4505 crore in
H1FY12) of which 57% were due to shifting sub | 10 lakh loans to
system based NPA recognition, thus completing the process. GNPA
rose 13% QoQ to | 6548 crore while NNPA shot up a whopping 58%
QoQ to | 4245 crore as high write-offs of | 1596 crore depleted
outstanding provisions. We expect slippages to remain high in
H2FY12E and estimate GNPA @ 2.6% and NNPA @ 1.4% by FY13E.
V a l u a t i o n
BoI has been facing asset quality concerns and, hence, has consolidated
over a long time. We have factored in higher slippages and provisions,
thus lowering our PAT estimates and FY13E ABV by 6%. Hence, we have
valued the stock at 1.2x FY13E ABV and lowered our target price from |
352 to | 331. We have revised our rating to HOLD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H i g h e r s l i p p a g e s & p r o vi s i o n s w e i g h o n P A T …
Bank of India’s (BoI) Q2FY12 results were dismal with profits declining
20.4% YoY (5.1% QoQ) to | 491.1 crore (our estimate: | 528.5 crore) on
account of high provisions (excluding taxes) of | 1060 crore (up 103.5%
QoQ) despite a tax write-back. GNPA rose 13% QoQ to | 6548 crore with
high slippages of | 2822 crore., ~57% of slippages were due to migration
of sub | 10 lakh loans to system based NPA recognition. Write-offs were
higher at | 1596 crore, which led to provisions declining and,
consequently, a greater rise in NNPA (up 58%QoQ) to | 4245 crore. Other
highlights include flat credit growth with foreign advances up 9.8% QoQ
(probable impact of | depreciation) and domestic loans shrinking 2%
QoQ. NII grew 7.2% YoY to | 1904 crore while NIM improved 25 bps QoQ
to 2.44% despite flat credit growth and interest income reversal of | 100
crore. We are cautious on asset quality and have built in higher credit
costs, thus lowering PAT estimates by 15% for FY12E and 7% for FY13E.
ƒ Margins pick up despite sluggish credit growth…
Sequential business growth was sluggish (1.6% QoQ) as deposits
increased 2% QoQ (24.1% YoY) to | 299074 crore and advances
were flat QoQ (17.7% YoY) at | 216951 crore. While domestic
advances declined 2% QoQ, foreign loans grew 9.8% QoQ to |
59087 crore (27% of global advances). NIM, which plummeted to
2.19% in Q1FY12, inched up 25 bps to 2.44% as YoA improved 52
bps QoQ to 9.4% with CoD up only 8 bps QoQ to 6.1%. We expect
NIM to stabilise at 2.5-2.6% for FY12E.
ƒ Asset quality worsens; overhang to remain…
Slippages were higher than expected at | 2822 crore (| 4505 crore in
H1FY12) of which 57% were due to shifting sub | 10 lakh loans to
system based NPA recognition, thus completing the process. GNPA
rose 13% QoQ to | 6548 crore while NNPA shot up a whopping 58%
QoQ to | 4245 crore as high write-offs of | 1596 crore depleted
outstanding provisions. We expect slippages to remain high in
H2FY12E and estimate GNPA @ 2.6% and NNPA @ 1.4% by FY13E.
V a l u a t i o n
BoI has been facing asset quality concerns and, hence, has consolidated
over a long time. We have factored in higher slippages and provisions,
thus lowering our PAT estimates and FY13E ABV by 6%. Hence, we have
valued the stock at 1.2x FY13E ABV and lowered our target price from |
352 to | 331. We have revised our rating to HOLD.
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