Bank of India
Strong operating performance
BUY
CMP: Rs245 Target Price: Rs340
Bank of India (BOI) has reported a net profit of Rs8.7bn for Q3FY09, far ahead of our expectations. The 70.4% growth in net profit has been driven by better than expected growth in NII and other income. The NIM's expanded by 28bps to 3.0% driven by high yield on advances and controlled cost of funds.
The business has seen strong expansion with advances growing at 31.3%yoy to Rs1.4tn while deposit growing by 26.4%yoy to Rs1.7tn. However, higher growth in balance sheet has put some stress on bank's assets quality, as GNPA increased 11.9% sequentially to Rs22.1bn and NNPA increased by 14.9% sequentially to Rs7.0bn during the quarter.
The stock currently trades at valuations of 4.3x FY10E EPS and 0.9x FY10E ABV, with an FY10 ROE of 24%. We maintain BUY rating on the stock with a price target of Rs340.
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