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Bank of India -Positives factored in price…
Bank of India (BoI) reported a healthy 23% YoY jump in the global
business mix, with deposits and advances growing 23% each to | 2525
billion and | 1928 billion. The key highlight of Q3FY11 was well
balanced business growth, expansion in margins, healthy growth from
non interest income and a remarkable improvement in asset quality.
Despite such an improvement, we believe there is limited upside for the
stock. Hence, we recommend an ADD rating on the stock at the CMP.
NIM bounces back QoQ, YoY
Yield on advances increased by 37 bps YoY and 31 bps QoQ to 8.8% (due
to BPLR hike and large upgradation). On the other hand, cost of deposits
declined 29 bps YoY and stayed stable QoQ at 5%. This helped the bank
to clock NIM of 3.1% for Q3FY11, much ahead of our estimates. This led
to a 33% rise in NII YoY to | 1987 crore. We expect rising cost of funds to
moderate NIM in the coming quarter and see NIM of 2.9% for FY11E.
…Asset quality development helps PAT growth
After five quarters, we have actually witnessed a substantial QoQ
reduction in GNPA and NNPA (both in absolute and percentage terms) to
2.4% and 0.9%, respectively, for Q3FY11. PCR improved further to 74.5%.
Higher reductions to GNPA of | 2141 crore and lower slippages of | 1912
crore for the quarter led to an improvement in asset quality. We expect
GNPA@ 2% and NNPA of 1% for FY12E.
The thrust for higher PAT of | 653 crore, up 61% YoY ahead of our
expectation, came from lower provisioning requirement for NPA. NPA
stood at | 124 crore against | 286 crore in Q2FY11 and | 447 crore in
Q3FY10. We see stabilising asset quality helping bottomline growth and
expect 46% CAGR in PAT over FY10-12E.
Valuation
At the CMP of | 467, the bank is trading at 1.6x FY12E ABV. Considering
RoA of 1.1%, RoE of 20%, improving NIM and changing scenario for
asset quality leaves little scope for outperformance. We have valued the
bank at 1.7x FY12E ABV and arrived at a fair value of | 490.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Bank of India -Positives factored in price…
Bank of India (BoI) reported a healthy 23% YoY jump in the global
business mix, with deposits and advances growing 23% each to | 2525
billion and | 1928 billion. The key highlight of Q3FY11 was well
balanced business growth, expansion in margins, healthy growth from
non interest income and a remarkable improvement in asset quality.
Despite such an improvement, we believe there is limited upside for the
stock. Hence, we recommend an ADD rating on the stock at the CMP.
NIM bounces back QoQ, YoY
Yield on advances increased by 37 bps YoY and 31 bps QoQ to 8.8% (due
to BPLR hike and large upgradation). On the other hand, cost of deposits
declined 29 bps YoY and stayed stable QoQ at 5%. This helped the bank
to clock NIM of 3.1% for Q3FY11, much ahead of our estimates. This led
to a 33% rise in NII YoY to | 1987 crore. We expect rising cost of funds to
moderate NIM in the coming quarter and see NIM of 2.9% for FY11E.
…Asset quality development helps PAT growth
After five quarters, we have actually witnessed a substantial QoQ
reduction in GNPA and NNPA (both in absolute and percentage terms) to
2.4% and 0.9%, respectively, for Q3FY11. PCR improved further to 74.5%.
Higher reductions to GNPA of | 2141 crore and lower slippages of | 1912
crore for the quarter led to an improvement in asset quality. We expect
GNPA@ 2% and NNPA of 1% for FY12E.
The thrust for higher PAT of | 653 crore, up 61% YoY ahead of our
expectation, came from lower provisioning requirement for NPA. NPA
stood at | 124 crore against | 286 crore in Q2FY11 and | 447 crore in
Q3FY10. We see stabilising asset quality helping bottomline growth and
expect 46% CAGR in PAT over FY10-12E.
Valuation
At the CMP of | 467, the bank is trading at 1.6x FY12E ABV. Considering
RoA of 1.1%, RoE of 20%, improving NIM and changing scenario for
asset quality leaves little scope for outperformance. We have valued the
bank at 1.7x FY12E ABV and arrived at a fair value of | 490.
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