Friday, May 1, 2009

>Bank Of India (ICICI Direct)

Muted quarter but in line…

Bank of India’s (BOI) Q4FY09 results were in line with our estimates with PAT growth of 7% YoY to Rs 757 crore. Total global business of the bank grew 26% YoY to Rs 334440 crore, contributed by global deposit growth of 26% to Rs 189708 (domestic deposit growth of 27% to Rs 159487 crore) and global advance growth of 26% to Rs 144732 crore (domestic advance growth of 26% to Rs 115354 crore). GNPA rose by 28% YoY to Rs 2471 crore (1.71%) while NNPA was well controlled up 6% to Rs 628 crore (0.4%) with provision coverage slipping by 667 bps to 74.6%.

Highlight of the quarter
Total income grew by 19% YoY to Rs 2219 crore backed by NII growth of 18% to Rs 1433 crore and non interest income by 20% to 785 crore. Operating profit grew by 16% to Rs 1408 crore because of rise in operating expense by 23% to Rs 811 crore. The bank restructured assets worth Rs 5049 crore (1.8% of domestic loan book) during the year.

We have revised estimates for FY10E PAT downwards by 8% on the back of moderation in loan growth with downward bias on NIM’s, moderation in fee income and inch up in slippages. We expect the BOI to register PAT CAGR of 14% over FY09-FY10E. Going forward we believe that asset quality will face pressure and hence we have built in higher provisions for the same. We expect the GNPA to be at 2.2% and 2.3% in FY10E and FY11E respectively. The ability of the bank to generate higher than industry average ROE’s will fetch it premium valuations over its peers and hence we value the bank at 1.1x its FY10E ABV to arrive at a target of Rs. 269.

To see full report: BANK OF INDIA