Bank of India likely to see sharp uptick in profit run-rate from Q4, says analyst

Public sector lender Bank of India’s net profit for the October to December 2022 period improved to Rs 1,151 crore, up by 12 percent on a year-on-year basis and 20 percent sequentially, the company said as it released its quarterly earnings report on Tuesday.

The bank’s operating profit improved to Rs 3,652 crore, up by 74 percent compared to the year-ago quarter and 8 percent on a quarter-on-quarter basis. The lender also saw robust growth in its quarterly net income, which rose 64 percent YoY and 10 percent sequentially to Rs 5,596 crore.

Following the results, Morgan Stanley said that it expects a sharp uptick in PAT run-rate starting in the next quarter and Bank of India is its preferred pick among public sector banks.

The brokerage pointed out that Q3 saw one-off interest income on IT refund, which was used to up-front provisions scheduled for Q4. MS has an overweight rating on the company with a target price of Rs 125 per share.

Bank of India’s non-interest income was subdued as it came in at Rs 1,432 crore for Q3FY23 against Rs 1,835 crore in Q3FY22. On a sequential basis, it increased from Rs 1,417 crore in Q2FY23.

The bank's net interest margin (NIM) stood at 3.28 percent, improved by 101 bps YoY and 24 bps sequentially. AK Das, MD & CEO of Bank of India, told CNBC-TV18 that NIMs can moderate but will be in the 3-3.25 percent range. “We are continuing with our guidance of NIMs in the range of 3-3.25 percent. There might be some amount of moderation post-re-pricing of liabilities, but that cycle is yet to get completed.”

 

The bank’s return on assets (RoA) improved to 0.55 percent in Q3FY23 against 0.51 percent in Q3FY22. On a sequential basis, RoA improved by eight basis points from 0.47 percent in Q2FY23, the lender said in a statement.

The current account and savings account (CASA) deposits increased by 3.70 percent annually.

The lender’s gross non-performing asset (NPA) ratio slipped 280 basis points annually to 7.66 percent while the net NPA ratio came in at 1.61 percent, down by 105 bps YoY.

On a sequential basis, the gross NPA ratio at Rs 38,884.6 crore for the quarter hit a 29-quarter low compared to 8.51 percent in the previous quarter. The net NPA has declined 13.5 percent to 31-quarter low of Rs 7,646.2 crore from Rs 8,836.2 crore in the last quarter of the fiscal.

The lender targets to take gross NPA to below 7 percent by March 31, 2023, Das said. “The recovery has been good. We had targeted about Rs 2,500 crore of recovery, and that has happened. So the gross NPA ratio has come down substantially to 7.66 percent,” he noted.

The slippage ratio — the rate at which a good loan becomes stressed — stood at 0.27 percent, declining by 20 bps YoY.