Bank of India up 3% on heavy volumes; nears 52-week high on healthy outlook

Shares of Bank of India hit a nine-month high at Rs 101.65, up 3 per cent on the BSE in Tuesday’s intra-day trade on the back of heavy volumes. The stock of state-owned lender was trading close to 52-week high of Rs 103.50 touched on December 15, 2022.  Thus far in the month of September, the stock has rallied 18 per cent on healthy business outlook.

The average trading volumes at the counter jumped 1.7 times today. Till 10:18 AM; a combined 22.8 million equity shares had changed hands on the NSE and BSE. In comparison, the S&P BSE Sensex was down 0.02 per cent at 67,116.

Bank of India is a public sector bank with government’s ownership at 81.4 per cent, engaged in lending across segments with focus on improving financial inclusion. As of June 2023, banks gross advances stood at around Rs 5.2 trillion, with international exposure at ~16 per cent. Domestic book remains diversified with Corp/ MSME/ retail segment contributing 45 per cent/ 16 per cent/ 22 per cent of domestic advances.

The rating agency Infomerics Valuation & Rating on Friday said the reaffirmation of ratings assigned to the Basel III Compliant Tier II Bonds of Bank of India takes into consideration the sovereign ownership with continued support, BOI’s established and well spread market reach, adequate capitalisation, and its healthy resource profile.

The Government of India is expected to continue to provide significant support to large public sector banks like the Bank of India as it plays an important role in penetration of economic and social development. Further, the rating also considers a healthy provision coverage ratio of the Bank. However, the ratings are constrained by a moderate albeit improving asset quality, Infomerics Valuation & Rating said.

Meanwhile, going ahead, bank targets advance growth of 11- 12 per cent in FY24-25E with continued focus on retail/ MSME segment, while opening of new mid-corporate branches & pipeline of Rs 40,000 crore in corporate sanctions is seen to aid traction in corporate segment.

Asset quality has been on improving trend with GNPA declining from 14.8 per cent in FY20 to 6.7 per cent in Q1FY24. Steady slippages (Rs 8,000 crore in FY24E) & healthy upgrades/recoveries (Rs 12,000 crore in FY24E) coupled with write-offs is expected to result in further decline in GNPA and keep credit cost benign at 60-70 bps, according to analysts at ICICI Securities.

Continued healthy business growth, steady margins and moderation in credit cost is seen to aid gradual improvement in RoA at 0.8 per cent in FY25E. Recovery from stressed and written off exposure to provide boost to earnings and thus act as re-rating catalyst, the brokerage firm said.