“BANK OF INDIA (BOI) has reported a huge 93% YoY jump in its fourth quarter (Jan-March) net profit at Rs 953 crore, driven by higher interest income and lower operating expenses. Net Interest Income (NII) rose 21% sequentially to Rs 2,501 crore in Q4FY12. However, net profit increased at a slower pace by 7.6% to Rs 2,678 crore for fiscal year ending March 31, 2012. The bank's global loan book expanded more than 16% to Rs 2.49 lakh crore, while deposits grew at a muted pace nearly 6.5% to 3.18 lakh crore.”
“The bank's capital adequacy ratio stood at 11.59% as against 12.17% a year back with Tier I capital at 8.59% and Tier II capital at 3.36%. During the year, the bank has allotted 2.73 cr equity shares to Life Insurance Corporation (LIC) via a preferential allotment, raising Rs 1,037 cr. The capital infusion in BOI is part of the drive of the government to recapitalise the public sector banks. Going forward, BOI will need more capital infusion in order to meet their capital adequacy norms according to Basel III norms and also for increasing their lending activities. Since the Bank is just near the cushion of current Basel III Capital Adequacy norm.”
“Bank of India reported a healthy growth for Q4FY2012. The bank`s balance sheet growth was healthy during FY2012. However management is confident that the asset quality of the bank continues to be robust. Higher cash recovery and improvement in global NIM was a positive surprise. We have raised our estimates by 7% for FY12‐13. We expect RoA to be 0.7% in FY12 and improve to 0.8% in FY13, and RoE to be 15% in FY12 and 17% in FY13. At CMP of Rs 350, the stock is trading at valuation of PE of 5.99x of FY13E EPS and at an adjusted P/BV of 0.98x FY13E BV. We have valued the Bank at P/BV of 1.05x FY13E & maintain our BUY rating on the stock with a revised target price Rs 376 with an upside potential of 7% from current levels,” says Magnum research report.
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