Stock watch: Bank of India

The country's sixth largest bank by balance sheet, The Bank of India (BOI) is the best bet amongst all the PSU banks looking at the current scenario of interest rates.

The scrip which was trading at Rs 123.60 has gone up 5 per cent to Rs 129.75. The scrip had earlier appreciated more than 300 per cent from Rs 45.85 in September 2004 to an yearly high of Rs 147.95, in less than an year.

The bank plans to raise Rs 5 billion Tier I/Tier-II capital to raise its CAR to fulfill Basel-II norms. This would give further strength to its credit growth in FY07. The bank has improved efficiency by recording an all time high cash recovery of Rs 8.04 billion for FY05.

It has one of the highest low cost deposit in the industry contributing nearly 40 per cent to its total deposits. According to the valuations made by a domestic brockerage, the Net Profit of the bank is expected to increase by 123.6 per cent in the next financial year.

The ROA and ROE are expected to double to 0.74 per cent and 15.2 per cent in FY06 as compared to last year's 0.38 per cent and 8 per cent respectively. The fair value of the scrip is estimated to be around Rs 149 where as the current market price is Rs129.75.