Bank of India’s Posts Muted Q1FY14 Results

Bank of India, a mid-sized public sector bank, recently announced its result for the first quarter of FY14. The net interest income (NII) of the bank grew by 24.12% on a yearly basis and stood at Rs 2537 crore. The net profit, however, grew by a mere 8.6% in the same period.

The reason for a muted profit growth is attributed to the higher employee expenses and increase in provisions. The employee expense of the bank increased by the 30% on a yearly basis to stand at Rs 962 crore for Q1FY14. Provisions (other than tax) and contingencies of the bank too have increased by 47% on a yearly basis to Rs 694.56 crore. Nonetheless, on a sequential basis, provision declined by 54%. The provision coverage ratio of the bank remained at 60.9% for Q1FY14.

The asset quality of the bank continued to show signs of stress both in absolute terms and percentage terms. The Gross NPA and Net NPA have increased on both sequential and yearly basis. For Q1FY14, the GNPA stood at 3.04% against 2.99% in the last quarter. Similarly, the NNPA of the bank increased by 4 basis points and 41 basis points on a sequential and yearly basis respectively to stand at 2.1% for Q1FY14.

This bad set of results has led to a decline in the return on asset (annualised) of the bank to 0.8% from 0.86% a year ago. The stock of the bank is currently trading at a price to book value of 0.45x, which looks attractive but looking at a poor performance of the bank, rising NPAs and a stern action by the RBI, we would advise readers to stay away from the scrip.