Brokerage house Prabhudas Lilladher is bullish on Bank of India and has recommended buy rating on the stock with a target price of Rs 285 in its research report dated April 01, 2015.
Prabhudas Lilladher's report on Bank of India
"BOI's loan growth remains muted at ~7% during FY15 YTD (8.6% during 9MFY15) as bank remains cautious on lending to large corporates. BOI maintains a cautious stance on lending to large corporates and is focusing more on retail and SME segment. Following 15% wage hike settlement reached in tenth bi‐partite settlement, BOI is likely to provide for the gap in wage provisioning (BOI has provided for 13% wage hike vs 15% settlement) during 4QFY15 and the amount would be close to ~Rs1bn. However the bank still continues to rely on existing mortality tables and the shift to new mortality table, if required, will impact earnings by ~Rs6bn – 13% of FY16E PBT."
"BOI has restructured Rs39.8bn worth of loans during 9MFY15 and is looking to restructure another Rs25‐30bn (infra, metals, textiles) during 4QFY15. Fresh slippages is also likely to remain elevated at Rs25bn (Rs101bn in 9MFY15) however will likely improve on sequential basis. We believe that bank will miss its guidance of <4% GNPA by end of FY15. BOI has raised capital worth Rs6.42bn from LIC and New India assurance however the increase in coretier I from this capital infusion stands at tiny 18bp. The core‐Tier1 now stands at 6.86% while overall Tier‐I including AT‐1 stands at 7.95%. We believe that FY16 will be a difficult year for PSUs as earnings remain volatile. Earnings normalization will only occur from FY17 as opex moderates while loan growth recovers from FY17. We maintain BUY rating over one year perspective", says Prabhudas Lilladher's research report.
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