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For 2QFY2012, Bank of India posted a disappointing performance, with net profit
declining by 20.4% yoy due to a sharp increase in provisioning expenses as the
bank completed the exercise of switchover to system-based NPA recognition
during 2QFY2012. Write-back of tax provisions amounting to `75cr and
recognition of MAT credit entitlement worth `77cr supported bottom-line growth.
We recommend an Accumulate rating on the stock with a target price of `346
Asset quality disappoints again; NIM improves post the battering in 1QFY2012:
The bank’s business growth remained slow during the quarter, with advances
declining by 0.3% qoq (up 18.1% yoy) and deposits increasing by 2.0% (up
24.1% yoy). Domestic NIM of the bank improved by 34bp qoq in 2QFY2012,
following a sharp drop of 95bp qoq in 1QFY2012, to 2.8% on the back of a
sharp uptick in yield on advances (up 85bp qoq) to and better yields on
investments. Overall, other income performance was robust, with fee income
growing by 19.0% qoq (up 8.3% yoy) during 2QFY2012. Recoveries from writtenoff
accounts nearly trebled sequentially to `88cr, although on a low base.
Treasury income gains also rose sharply during 2QFY2012 to `154cr (up 40.7%
qoq). During 2QFY2012, overall asset quality deteriorated, with annualized
slippage ratio rising sharply to 5.3% from 3.2%. During the quarter, the bank
completed the exercise of switchover to system-based NPA recognition, which
contributed to the substantially higher slippages. Management attributed ~58% of
the slippages during 2QFY2012 to accounts worth `10lakhs and below.
Outlook and Valuation: We have cut our estimates for FY2012 and FY2013 by
16.1% and 3.1%, respectively, to factor in the higher-than-expected run rate of
slippages. We have kept our NIM assumption intact; however have increased the
slippages estimate to 2.3% from 1.8% for FY2012. At the CMP, the stock is
trading at 1.0x FY2013 ABV. We recommend Accumulate on the stock with a
revised target price of `346, giving an upside of 6.4%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, Bank of India posted a disappointing performance, with net profit
declining by 20.4% yoy due to a sharp increase in provisioning expenses as the
bank completed the exercise of switchover to system-based NPA recognition
during 2QFY2012. Write-back of tax provisions amounting to `75cr and
recognition of MAT credit entitlement worth `77cr supported bottom-line growth.
We recommend an Accumulate rating on the stock with a target price of `346
Asset quality disappoints again; NIM improves post the battering in 1QFY2012:
The bank’s business growth remained slow during the quarter, with advances
declining by 0.3% qoq (up 18.1% yoy) and deposits increasing by 2.0% (up
24.1% yoy). Domestic NIM of the bank improved by 34bp qoq in 2QFY2012,
following a sharp drop of 95bp qoq in 1QFY2012, to 2.8% on the back of a
sharp uptick in yield on advances (up 85bp qoq) to and better yields on
investments. Overall, other income performance was robust, with fee income
growing by 19.0% qoq (up 8.3% yoy) during 2QFY2012. Recoveries from writtenoff
accounts nearly trebled sequentially to `88cr, although on a low base.
Treasury income gains also rose sharply during 2QFY2012 to `154cr (up 40.7%
qoq). During 2QFY2012, overall asset quality deteriorated, with annualized
slippage ratio rising sharply to 5.3% from 3.2%. During the quarter, the bank
completed the exercise of switchover to system-based NPA recognition, which
contributed to the substantially higher slippages. Management attributed ~58% of
the slippages during 2QFY2012 to accounts worth `10lakhs and below.
Outlook and Valuation: We have cut our estimates for FY2012 and FY2013 by
16.1% and 3.1%, respectively, to factor in the higher-than-expected run rate of
slippages. We have kept our NIM assumption intact; however have increased the
slippages estimate to 2.3% from 1.8% for FY2012. At the CMP, the stock is
trading at 1.0x FY2013 ABV. We recommend Accumulate on the stock with a
revised target price of `346, giving an upside of 6.4%.
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