Mumbai: Bank of India is expected to report an 11% on year fall in net profit for Jan-Mar at 6.74 bln rupees due to a rise in provisions for non-performing loans and employee wages, an average of estimates of 12 brokerages showed.
The bottomline is seen 15% higher sequentially. “We expect a weak quarter for Bank of India as they will have to ramp up on mark-to-market provisions and wage-related provisioning and management guidance on asset quality remains muted,” Prabhudas Lilladher said in a pre-earnings report.
The report said it had factored in around 1.7 bln rupees of mark-to-market provisions for the reporting quarter. In the Oct-Dec quarter, the state-owned bank had reported a 27.1% fall in net profit due to higher provisioning on account of deteriorating asset
quality and for the proposed hike in wages and pensions of employees.
Bank of India’s gross non-performing assets stood at 2.81% as on Dec 31, and the net non-performing assets ratio was 1.75%.
Fresh slippages for the Oct-Dec quarter were around 17.47 bln rupees in Oct-Dec.
Asit C. Mehta Investment Intermediates Ltd felt that provision expenses for the quarter will be substantially lower due to lower fresh slippages and expected write back in provision made during the Oct-Dec quarter.
The bank’s provisions and contingency costs jumped by 53.3% to 14.04 bln rupees in the quarter ending Dec 31.
The bank’s provision coverage ratio was 63.77% for the Oct-Dec quarter.
The average of brokerages’ estimates showed that Bank of India’s net interest income for the reporting quarter is expected to rise 16% year-on-year to 28.79 bln rupees. On a sequential basis, net interest income is seen up by 6%.
The bank’s net interest income for Oct-Dec had exceeded market expectations with a 17.81% on year rise to 27.19 bln rupees.
The bank’s non-interest income grew by 17.08% in Oct-Dec. Domestic net interest margin for the bank was 2.89% in Oct-Dec. Its global net interest margin was 2.37% in Oct-Dec.
IDFC Securities Research said the bank’s earnings are likely to witness the fastest pace of growth among public sector banks, with 19% on-year growth aided by slightly better net interest margins and lower credit costs.
Asit C. Mehta Investment Intermediates expects Bank of India to post a 7.2% rise in net interest income due to lower yields on assets along with other income growth of 6.3% on year mainly due to a drop in treasury income.
The brokerage expects the bank’s deposits to grow 23.1% on-year and credit to grow at 25.8% on-year.
Brokerages said the management’s guidance on non-performing assets and restructuring will be key areas to watch out for.
Prabhudas Lilladher recommends an “accumulate” on the bank’s shares for a target price of 225 rupees and Nirmal Bang recommends a “hold” at a target price of 250 rupees.
Bank of India shares ended up 4.2% at 242.80 rupees on National Stock Exchange.