MOSL: BANK OF INDIA (Neutral)-Asset quality pressures remain-elevated provisions lead to pre-tax loss

​Bank of India: Asset quality pressures remain; elevated provisions lead to pre-tax loss

(BOI IN, Mkt Cap USD2.5b, CMP INR158, TP INR147, 6% Downside, Neutral)

• BOI reported net loss of INR10.5b (est. of loss of INR863m), led by continued elevated stress addition. Despite 46% beat in PPoP, elevated credit costs (4.6% annualized) led to the PAT miss.
  
• Key highlights for the quarter: a) Global NIM expanded 18bp QoQ to 2.4%, driving 21% QoQ NII growth (19% beat). b) Stronger-than-expected trading gains of INR8.5b (27% of PPoP) led to 14% beat in other income. c) Loan growth continued to remain muted at 2% QoQ/YoY; however, retail loans grew 10.6% YoY.
  
• Slippages spiked up sharply to INR69.1b (7.7% slippage ratio annualized) from INR32.1b in 3Q, while recoveries and up-gradations were muted at INR26.b (v/s average of INR27.4b in previous three quarters), despite 4Q being the seasonally strongest quarter for recoveries. However, high write-offs of INR39.8b (greater than sum of previous four quarters: ~INR36.8b) led to sequentially stable absolute GNPLs/NNPLs. OSRL book declined 40bp QoQ, largely led by relapse to NPA, and stood at 2.9% of loans.
  
• CET1 declined ~INR16b QoQ, despite ~INR17.2b capital infusion by GoI and LIC. This was owing to a) loss of INR10.5b in 4Q, b) write-back of deferred tax assets, c) accounting of changes in revaluation reserve and foreign currency translation reserve and d) certain expenses charged to net worth directly.