With a market capitalisation of Rs. 61,780 crores, the shares of the company started Tuesday’s trading session on a flatter note at Rs. 130.90. The shares hit a high of 136.90, gaining around 3 percent, also recorded as the company’s fresh 52-week high and currently trading at Rs. 134.70 apiece.
Having a look at the latest financial statements published by Bank of India, the revenues and profits have shown a positive movement.
The net interest income(NII) zoomed by around 45 percent from Rs. 14,063 crores during FY21-22 to Rs. 20,275 crores during FY22-23. In addition, during the same period, the net profits increased by 10 percent from Rs. 3,487 crores to Rs. 3,839 crores.
Due to consistent operating revenue and profits on a YoY basis, the profitability metrics of the company improved with the return on equity (RoE) increasing from 1.40 percent during FY 21-22 to 1.68 percent in FY 22-23, and, the return on capital employed (RoCE) zoomed from 7.06 percent to 7.72 percent during the same timeframe. On a contrasting note, the CASA ratios of the bank decreased marginally from 40.08 percent during FY21-22 to 38.41 percent in FY22-23.
ICICI Direct one of the well-known brokerage firms, has given a ‘Buy’ target on the company’s stock with a target of Rs. 165 indicating a potential upside movement of around 23 percent compared to its current market price.
The investment rationale for providing such a recommendation pertains to healthy business growth. Bank of India has reported a healthy revival in credit growth in FY22-23 in line with industry and keeping the focus on improving the granularity of advances has led to a rise in the proportion of non-corporate loans from 51.6 percent in FY21 to 55.5 percent in Q2FY24.
Moreover, the bank targets advance growth of 12 to 14 percent in FY24-25E with a continued focus on the retail and MSME segment, while opening new mid-corporate branches and a pipeline of Rs.40,000 crore in corporate sanctions.
Furthermore, the broker mentioned that the GNPA(Gross Net Performing Asset) to decline further and recovery from the stressed pool could act as a catalyst. The banks’s asset quality has been on improving trend with GNPA declining from 14.8 percent in FY20 to 5.8 percent in Q2FY24.
On the other hand, the brokerage firm stated that the bank has recovered from stressed assets through opening of 18 ARBs and the shifting of NPA accounts (Rs.50 lakh and above) to these ARBs remains a catalyst that could aid earnings.
The broker mentioned that the moderation in credit cost to aid RoA, moderation in slippages and increase in interest rates have led to improvement in NIM from 2.55 percent in Q1FY22 to 3.08 percent in Q2FY24.
The bank’s focus on the retail and MSME segment, repricing of MCLR-based advances is expected to aid yields, while healthy liabilities with 88 percent from retail deposits and a huge customer base of 11 crore is seen to enable accretion of liabilities at competitive cost thereby keeping NIM steady at 3 percent.
With continued healthy business growth, steady margins and moderation in credit cost, recovery from stressed and written-off exposure, the broker maintained a buy rating and has revised the target to Rs.165.
Headquartered in Mumbai, Bank of India (BOI) is one of the leading public sector banks in India with over 5,100 branches spread across all states and union territories, including specialized branches. The bank provides a range of retail and corporate banking services, including cash management, trade and project finance, syndication services, and mutual fund products.
Written By Vaibhav Patil
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