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EARNINGS REVIEW
Bank of India (BOI.BO)
Sell Equity Research
Below expectations: Results continue to disappoint; maintain Sell
Core weak – NII up just 6% yoy, slippages high at 3.9%
Bank of India (BOI) reported 1QFY12 PAT of Rs5.17bn (down 29% yoy), 38% below
GSe and 27% below Bloomberg consensus, primarily on lower-than-expected net
interest income and higher provisions. Key highlights: (1) NII came in at Rs18.4 bn,
16% below GSe, as calculated NIMs declined 76bps qoq to 2.2% (adjusted for oneitems,
NIMs declined 55bp qoq) due to a 70 bp rise in deposit costs; (2) Noninterest
income was up 13% yoy driven by higher investment income of Rs1bn
(4X above GSe), while fee income growth remained lackluster (up only 10% yoy),
despite loans growing 22% yoy (2% below GSe); (3) Operating expenses
increased 21% yoy on both higher salary and other costs, but was 6% below GSe;
(4) Total provisions were 68% above GSe, as NPL provisions came in 43% higher
at Rs3.8 bn (0.7% of loans), due to bank’s migration from manual to system-driven
NPL recognition. The annualized 1Q slippage ratio was higher qoq at 3.9% (vs.
2.4% in 4Q) and restructured loans grew 4% qoq to Rs 111bn (5.2% of loans).
Gross NPLs grew 20% qoq to 2.7% of gross loans.
Remain Sell on weaker fundamentals and higher risks
Given the disappointing performance, margin pressure, and higher NPLs,
we reduce our FY12E/FY13E/FY14E EPS by 7.6-12.4%. Reflecting our
estimate revisions, our 12-m CAMELOT-based TP reduces to Rs360 (from
Rs395) despite rolling over BV to June 2012. We maintain our Sell rating as
we believe risk-reward is more favourable in other PSU banks. BOI is
currently trading at 1.2X FY12E P/B, 7.6X FY12E P/E. (vs. PSU banks average
of 1.5X P/B, 7.7X P/E). Upside risks: Higher NIMs, lower slippages.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Click here for Equity Research Reports by Broker
EARNINGS REVIEW
Bank of India (BOI.BO)
Sell Equity Research
Below expectations: Results continue to disappoint; maintain Sell
Core weak – NII up just 6% yoy, slippages high at 3.9%
Bank of India (BOI) reported 1QFY12 PAT of Rs5.17bn (down 29% yoy), 38% below
GSe and 27% below Bloomberg consensus, primarily on lower-than-expected net
interest income and higher provisions. Key highlights: (1) NII came in at Rs18.4 bn,
16% below GSe, as calculated NIMs declined 76bps qoq to 2.2% (adjusted for oneitems,
NIMs declined 55bp qoq) due to a 70 bp rise in deposit costs; (2) Noninterest
income was up 13% yoy driven by higher investment income of Rs1bn
(4X above GSe), while fee income growth remained lackluster (up only 10% yoy),
despite loans growing 22% yoy (2% below GSe); (3) Operating expenses
increased 21% yoy on both higher salary and other costs, but was 6% below GSe;
(4) Total provisions were 68% above GSe, as NPL provisions came in 43% higher
at Rs3.8 bn (0.7% of loans), due to bank’s migration from manual to system-driven
NPL recognition. The annualized 1Q slippage ratio was higher qoq at 3.9% (vs.
2.4% in 4Q) and restructured loans grew 4% qoq to Rs 111bn (5.2% of loans).
Gross NPLs grew 20% qoq to 2.7% of gross loans.
Remain Sell on weaker fundamentals and higher risks
Given the disappointing performance, margin pressure, and higher NPLs,
we reduce our FY12E/FY13E/FY14E EPS by 7.6-12.4%. Reflecting our
estimate revisions, our 12-m CAMELOT-based TP reduces to Rs360 (from
Rs395) despite rolling over BV to June 2012. We maintain our Sell rating as
we believe risk-reward is more favourable in other PSU banks. BOI is
currently trading at 1.2X FY12E P/B, 7.6X FY12E P/E. (vs. PSU banks average
of 1.5X P/B, 7.7X P/E). Upside risks: Higher NIMs, lower slippages.
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