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Bank of India 4QFY2014 performance highlights and results update

May 28, 2014, Wednesday, 11:00 GMT | 06:00 EST | 14:30 IST | 17:00 SGT
Contributed by Angel Broking

For 4QFY2014, Bank of India (BOI) reported asset quality pressures, with annualised slippage rate at 5.0% (vs 2.4% in 3QFY2014). On the operating front, the NII for the bank grew healthy by 23.1% yoy (12.1% growth qoq) on back of 28.1% yoy growth in advances. The other income excluding treasury de-grew by 11.3% yoy. Continuing the trend of last three quarters, the opex grew higher by 31.4% yoy. Overall the earnings for the bank de-grew by 26.3% yoy.

Strong business growth; Global NIM declines 4bp qoq: During 4QFY2014, the bank registered a strong 28.1% yoy growth in its overall advances, aided by a robust growth in its international loan book (at 24.8% yoy partly on back of INR depreciation). Even overall deposits for the bank grew at a strong pace of 24.9% yoy. The CASA ratio for bank dipped sequentially by 34bp to 22.1%. Domestic NIM declined by 4bp sequentially to 2.9%. Overall global NIMs declined 4bp qoq to 2.3%. The bank’s performance on the non-interest income (excluding treasury) front was weak, as it witnessed de-growth of 11.3% yoy to Rs.831cr. On the asset quality front, the bank witnessed pressure as absolute Gross and Net NPA levels increased 16.5% and 20.7% yoy sequentially. Slippages for the bank came at Rs.3,600cr (annualised slippage ratio at 5.0% compared to 2.4% in 3QFY2014 and 2.0% in 2QFY2013). The bank’s recoveries/upgrades for the quarter were at Rs.1,300cr as compared to Rs.1,104cr in 3QFY2014 and Rs.889cr in 2QFY2014. The PCR decreased sequentially by 509bp to 58.7%; as a result, absolute Net NPA levels increased 20.7% sequentially. During the quarter, the bank sold off Rs.1,071cr worth of assets to ARCs. During the quarter, the bank restructured advances worth Rs.2,400cr (compared to Rs.1,146cr restructured in 3QFY2014), thereby taking its total standard restructured book to ~Rs.13,557cr (~4.4% of its loan book). Going ahead, as per the Management, the restructuring pipeline stands at ~Rs.1,100cr.

Outlook and valuation: BOI’s asset quality performance over the last two quarters has been reasonable (aided by healthy recoveries/upgrades largely on back of asset sale to ARCs, while slippages and incremental restructuring still remain elevated). Going ahead, the Management has guided for a stable to improving outlook on its asset quality. Inspite of the recent run up in the stock price, the bank is trading at relatively cheap valuations of 0.7x FY2016E ABV. We recommend a Buy rating on the stock with a target price of Rs.413.