30 October, 2008

Bank of India

Current market price: Rs 227.85

Target price: Rs 365

Upside: 60.2%

Brokerage: Sharekhan

Bank of India (BoI) has reported a net profit growth of 79.9 per cent y-o-y to Rs 762.9 crore during Q2 FY09. The net interest margin for the quarter stood at 3.2 per cent on the back of an increase in its lending rates, although the cost of funds remained stable. The gross advances witnessed a robust growth of 35 per cent y-o-y and stood at Rs 1,29,314 crore driven by strong growth in the corporate, agricultural and SME segments.

The net interest income grew by 38.3 per cent y-o-y to Rs 1,363.1 crore due to a robust growth in the advances coupled with a healthy expansion in the margins. The non-interest income rose by 23 per cent y-o-y to Rs 649.5 crore as there was a significant jump in the recoveries, foreign exchange income and ‘commissions, exchanges and brokerage’ segments. The cost to income ratio also improved to 39.6 per cent from 44.6 per cent y-o-y as the bank was able to contain its operating expenses in the quarter. The gross NPAs remained flat with a 0.3 per cent decline y-o-y to Rs 1,978.1 crore, due to the debt waiver implementation. At Rs 270, BoI trades at 5.5x FY09E earnings and 1.3x its FY09E book value.