Prabhudas Lilladhar suggests buying Bank of India

Bank of India raised tier-I capital of Rs 13.6 billion through qualified institutional placement, which was subscribed 1.8 times in the current weak market scenario. The capital raised will help the bank meet Basel II requirements and maintain the current business growth momentum.The capital raised will also support its life insurance venture with Dai-Ichi Mutual Life Insurance and Union Bank of India, mutual fund business, and credit card ventures.

Bank of India’s total income for quarter ended Dec 31, 2007 rose 43.66 per cent year on year to Rs 3,705.21 crore. The bank’s NPA stood at 0.6 per cent as on Dec 31, 2007 compared with 0.95 per cent in Dec 2006.

BoI is one of the best performing PSU banks with strong expected earnings at CAGR of 37 per cent for the period FY07-10. The third quarter of FY07-08 has shown an increase in total income by 5.76 per cent vis-a-vis the second quarter. RONW for the year ended March 31, 2007 was 21.25 per cent, which was 38 per cent higher than the last year.

Prabhudas Lilladhar estimates net interest income for FY10 at Rs 6,444.4 crore and operating profit Rs 5,480 crore, and EPS of Rs 54.3. BoI currently trades at 6.5X of FY10 expected EPS.

Prabhudas Lilladhar has maintained ‘buy’ on Bank of India for a fifteen-month target price of Rs 520. At the current market price of Rs 355, the stock is quoting at 6.5 times FY10E EPS and 1.5 times FY10E BV.

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Author: Austin Comments: 0 comments Date: 17 Feb 2008
Categories: Stock Calls Tags: , ,
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