Neutral on Bank of India - Motilal Oswal

Bank of India (BOI IN; Mkt Cap USD5.3b, CMP Rs461, Neutral)

Domestic NIMs improved sharply by 32bp QoQ to 3.5% led by 4bp QoQ to decline in cost of deposits and improvement in yield on assets.

Loans grew ~5% QoQ and ~23% YoY to Rs1.92t and deposits grew ~5% QoQ and ~23% YoY to Rs2.52t.

Reported CASA ratio declined by 100bp to 32.5% from 33.5%. CA deposit declined 2% QoQ (+8% YoY) and SA deposit grew +3% QoQ and +26% YoY.

Gross NPAs and Net NPAs in absolute amount declined 7% and 20% QoQ to Rs45.4b and Rs16.6b. PCR including technical write offs stood at 74.5%.

The bank has not yet ascertained pension deficit for second pension option and gratuity however, it has started making provision.

We maintain our earning estimates as better than estimated asset quality performance and margins is being compensated by higher provisions and opex. We expect BoI to report EPS of Rs51 in FY11, Rs64 in FY12 and Rs79 in FY13. BV would be Rs284 in FY11, Rs335 in FY12 and Rs398 in FY13. The stock trades at a P/E of 7.2x FY12E EPS, 5.8x FY13E EPS and P/BV of 1.4x FY12E BV and 1.2x FY13E BV. We have a Neutral rating.

Source : Equity Bulls

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