Bank of India doubled its profits for the year ended March 2002 on the back of a sharp improvement in operating margins. However, the bank's interest income witnessed a single digit growth during the year, due to slowdown in the industrial activity.
Income from operations
Net interest income
Operating Profit Margin (%)
Provisions and contingencies
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Diluted Earnings per share*
The bank's operating margins increased to 5.5% during the year from a negative 1.7% in the previous year. (In FY01, operating margin stood at 4.5% excluding VRS write off of Rs 3.3 bn). The bank's VRS initiative launched last year, is reflected positively in FY02's financial performance, as its cost to income ratio declined to 52% from 69% in FY01. BOI wrote off Rs 1.4 bn in FY02 towards VRS expenses. which is included in operating expense. BOI's operating margins are expected to improve further by 100 basis points in the next two years.
After having recorded a double digit growth in interest income, the bank's income from both advances and investments slowed down in FY02. Stiff competition from private banks coupled with a downturn in economy impacted the bank's income growth. The growth in fee based income was also lower compared to its peers in the sector. Other income accounted for 16% of total income of the bank.
Interest on advances
Income from investments
Interest on balance with RBI
During the year, BOI reduced its capital base by returning equity of Rs 1.5 bn to the government of India in cash. The bank also paid Rs 36 m interest to the government after adjusting for dividend payable. At the current market price of Rs 27, the stock is trading at an adjusted price to book value ratio of 1.3x and P/E of 3x FY02 earnings. In FY02, the bank increased provisions for non-performing assets substantially, which is likely to bring down its net NPA ratio to below 6.5%. Valuations of the bank will be re-rated once its asset quality is improved.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407