Maintain 'HOLD' on Bank of India - Geojit BNP Paribas

- Bank of India's (BoI) PAT came in at Rs.300 crores and was significantly below consensus estimates, due to a sharp jump in provisions.

- Asset quality remains volatile with GNPAs at 3.4% vs. 2.6% in Q1 and annualized slippages was at 4.4%.

- Due to the deteriorating asset quality, slippage assumptions have been increased from 2% to 3% for FY13 and from 1.8% to 3.25% for FY14. Provision coverage has been normalized to 75%.

- NIMs at 2.4%, was up 15 bps due to improvement in domestic margins, as domestic deposit costs fell 33 bps, QoQ.

- The CASA ratio at 31.8% was up 60 bps.

- Earnings forecasts have been cut and we maintain Hold recommendation on the stock at current levels, over a period of one year.

- With the additional risk of a top management change, it is unlikely that BOI will show a significant turnaround in the near term. With FY13-14e RoEs at 11-13% and a Tier-I ratio at 8.3% investors could even look to exit BoI at slightly higher levels from the current price of Rs.279.

- Upside/downside risks: Lower/higher slippages and higher/lower recoveries.

Source : Equity Bulls

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