Analyst Research Report Snapshot

Title:

Spark Capital: Q3FY13 Result Reviews of Bank of India

Price:

$58.00

Provider:

Spark Capital Advisors(India) Private Limited

Date:

30 Jan 2013

Pages:

6

Type:

AcrobatPDF

Companies referenced:

BOI.NS

Available for Immediate Download
Summary:

Bank of India - Asset quality deterioration continues, no turnaround in sight : Maintain SELL Bank of India’s (BOI) 3QFY13 result continued to witness asset quality deterioration, with a moderation in slippages to 2% (annualized) being nullified by incremental restructuring of Rs. 22bn; effectively slippages inclusive of incremental restructuring works out to 5.2% annualized – the same as 2QFY13. BOI’s quantum of restructuring implies a 10% hit to FY14E PAT if the Mahapatra committee’s recommendations are implemented- a key risk in our view. With core T1 capital below 8%, a further infusion of capital is on the cards; although infusion at current market prices would mean no negative impact to current ABV estimates, an estimated infusion of Rs. 10bn would only improve tier 1 capital to 8.6%, thereby requiring periodic infusions of capital. (refer our note “Heads I win; Tails, you lose” dated Sep 07, 2012). We also remain wary of the SEB book of Rs. 65bn, of which only 50% has been restructured, on which we believe a NPV hit is likely. BOI’s YTD credit growth has been led by sectors such as infrastructure, metals and jewellery (which together accounted for 62% of YTD industrial advances) while exposure to risky sectors currently stands at 24% up from 21.5% a year ago - with infrastructure alone rising to 11.4% of advances (9.6% in 1QFY12). We also note that BOI’s slippages from restructuring on the FY11 book is 39%, amongst the highest in our coverage universe while 50% of the restructuring stock has been created in the last 15 months, a potential red flag for FY14 slippages. In addition, further headwinds in the form of a wage revision and higher pension liabilities lurk. Given the above, we retain our SELL rating with a target price of Rs. 227 valuing the bank at 1x stress case FY14E ABV.

Why buy analyst research?

  • Institutional quality research
  • Available for Immediate Download
  • Detailed company or industry insight
  • Print or save
  • 24 hour customer support
Return to previous page without adding this item to your cart.
Email Customer Support.

About Analyst Research

Analyst research reports are available for immediate download after purchase. You will have unlimited access to the report for 24 hours after purchase, to download, print or save it as many times as you wish. Analyst Research provided by Reuters does not constitute investment advice, and is not endorsed by Reuters Research. This information is protected by copyright and intellectual property laws. More information on Analyst Research.