PSU bank stock tanks 8% in 2 days as Q3 provisions soar

Shares of state-owned lender Bank of India fell nearly 8% to Rs 89 in the last two trading sessions even as the PSU bank reported a 12% rise in net profit for the December quarter at Rs 1,151 crore against Rs 1,027 crore in the year-ago period.

The net interest income came in at Rs 5,596 crore for the period under review, higher by 64% year-on-year (YoY). Meanwhile, the net interest margin (NIM) during the quarter improved to 3.28%.

At 10 am, the scrip was trading 3% lower at Rs 90.55 over its last day's closing price of Rs 93.35 apiece on BSE. Bank of India in the last six months has rallied nearly 93%. The stock has, meanwhile, risen about 70% in the last one year.

Operating profit during the quarter increased by 74% YoY to Rs 3,652 crore as against Rs 2,096 crore in the same quarter last year. On a sequential basis, operating profit was up 8%.

On the asset quality front, gross non-performing assets (GNPAs) declined by 7% quarter-on-quarter to Rs 38,885 crore, while the gross NPA ratio improved marginally to 7.66% during the December quarter.

Meanwhile, the net NPA ratio stood at 1.61% for the quarter under review. The provision coverage ratio (PCR) came in at 90.27% at the end of the December quarter against 88.96% in the September quarter.

The bank has made provisions (other than tax) and contingencies to the tune of Rs 1,878 crore, an increase of 462% over Rs 334 crore provisioned during the same period last year.

Domestic brokerage firm Sharekhan maintained its hold rating on Bank of India with a target price of Rs 102, which signals an upside potential of 13% from the current market prices.

"BoI currently trades at 0.8x/0.7x /0.6x its FY2023E/ 24E/ 25E ABV estimates. The bank has been improving its core operating profitability led by strong sector tailwinds along with improvement in the credit cycle, resulting into lower credit costs which should augur well for earnings trajectory and return ratios going ahead. The overall outlook remains strong going forward however we await a better price entry point, factoring in margin of safety," the brokerage said.

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