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For 2QFY2011, Bank of India registered robust net profit growth of 90.8% yoy to `635cr,
in line with our estimates of `617cr. Net profit growth was aided by lower base of
provisioning expenses and lower effective tax rate. Advances grew moderately by
2.6% qoq and 20.8% yoy, while deposits increased by 3.2% qoq and 21.3% yoy. On a
sequential basis, calculated NIMs remained flattish at 2.58% (down 2bp), in line with
expectations. This resulted into healthy NII growth of 26.1% yoy. Gross and net NPA ratio
of the bank improved to 2.64% (from 2.71% in 1QFY2011) and 1.14% (from 1.18% in
1QFY2011), respectively, with a provision coverage ratio of 70.0%, including write-offs
(68.3% in 1QFY2011). The bank’s CAR was healthy at 13.0%.
At the CMP, the stock is trading at 1.69x FY2012E ABV, which we believe fully prices in the
expected improvement in the bank’s fundamentals. Hence, we maintain a Neutral
recommendation on the stock.
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