MOSL: BANK OF INDIA (Neutral)-Operating performance disappoints on all fronts

Bank of India: Operating performance disappoints on all fronts

(BOI IN, Mkt Cap USD2.5b, CMP INR158, TP INR149, 6% Downside, Neutral)

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• BOI’s reported PAT of INR877m was 71% below estimate, even as PPoP exceeded estimate by 12% (helped by strong treasury gains and one-off opex benefits), as provisions at INR22.45b were 36% above estimates. Provisions included INR132.3m toward stressed sectors. The bank has to provide additional INR9.15b toward IBC-related accounts over the next three quarters.
• Key highlights for the quarter: a) NIM (multi-quarter low of 1.99%) was impacted by INR1.97b of interest reversals on SDR/S4A accounts, and bulk of the loan book shifting to MCLR-based pricing. b) Treasury gains of INR6.5b (27% of PPoP) led to 23% beat in other income. c) Loan growth remained muted at -1%/0% QoQ/YoY; however, retail loans grew 13% YoY.
• Slippages declined sharply to INR40.4b (4.4% slippage ratio annualized) from INR69.2b in 4Q, while recoveries and upgrades were stable at INR27.4b (v/s INR26.7b in 4Q). Slippages from the restructured book were at INR300m. Write-off of INR23.2b was the second highest (after 4QFY17) in nine quarters. Absolute GNPLs/NNPLs declined 2%/4% sequentially, but in % terms, GNPA/NNPA stood at 13.05%/6.7%. OSRL book increased 8bp QoQ to INR116.8b (2.99% of advances).
• CET1 increased marginally to 7.28% from 7.17% in 4Q, helped by INR2.22b capital infusion by LIC during the quarter, partly offset by INR1.4b debited to revenue reserve for payment of interest on AT1 bonds.