Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BOI: A stunner result - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 7, 2001

    BOI: A stunner result

    Bank of India has clocked an outstanding performance for the year ended March '01, in line with our projections. The bank's profits jumped by 46% with a 380 basis points improvement in operating margins and reduction in effective tax rate.

    (Rs m) FY00 FY01 Change
    Interest Income 47,370 53,169 12.2%
    Other Income 7,855 8,619 9.7%
    Interest Expenditure 34,431 36,630 6.4%
    Operating Profit (EBDIT) 12,939 16,538 27.8%
    Operating Profit Margin (%) 27.3% 31.1%  
    Other Expenditure 13,964 17,437 24.9%
    Profit before Tax 6,830 7,720 13.0%
    Provisions & Contingencies 4,330 4,541 4.9%
    Tax 771 661 -14.4%
    Profit after Tax/(Loss) 1,728 2,519 45.7%
    Net profit margin (%) 3.6% 4.7%  
    No. of Shares (eoy) 638 638  
    Diluted Earnings per share* 2.7 3.9  
    P/E (at current price)   3.8  

    During the year, BOI's advances grew by 21% and deposits were up by 17%. The bank's loan portfolio quality has improved significantly. Share of 'A' rated clients has gone up to 53% from 40% in the previous year. This has helped the bank in reducing its net NPA ratio to 6.7% from 8.6% in the previous year.

    BOI's net profits growth was partly inflated by reduction in the tax payment. The effective tax rate of the bank was down to 9% from 11% in the previous year. Other expenses of the bank were higher due to absorption of VRS expenses of Rs 3.3 bn. During the year 7,768 employees opted for VRS and the total expenses of the scheme stood at Rs 8.9 bn (compensation package of Rs 1 m per employee). The bank plans to absorb the balance amount in the next three to four years to get the tax benefits. This exercise of the bank will result in annual savings of around Rs 1.7 bn (10% of operating expenses) in the wage bill, in turn improving the bottomline growth.

    The bank has made full provision of Rs 1.4 bn for the pay-order scam. However, it is confident of recovering the amount. Remarkably, the bank's total provisions for non performing assets was up by a marginal 5%.

    In a bid to reduce the government equity, BOI has decided to return 25% of its equity capital to the Central government. This move will bring down the government holding in the bank to 51% (from 76%). BOI will return close to Rs 1.5 bn paid up capital in cash which will effectively increase public holding in the bank to 49% (from 24%). Consequently the bank's capital adequacy ratio (CAR) will decline to 11% from the current 12.2%. Nevertheless, the bank is comfortably place in respect of CAR to meet future business growth. This decision of the bank will also improve shareholder value, as it will increase the per share earnings of the bank.

    At the current market price of Rs 15, BOI is trading at a P/E of 4x and Price/Book value ratio of 0.4x. The bank declared a dividend of Rs 1.5 per share, translating into dividend yield ratio of 10%. Further the current book value of Rs 39 is likely to go up to Rs 49 with a reduction in the government's stake in the bank. The bank is likely to maintain high growth in profits in the next few years with employee cost savings and improvement in quality of assets.



    Equitymaster requests your view! Post a comment on "BOI: A stunner result". Click here!


    More Views on News

    SBI: Asset Quality and Slow Credit Remain Achilles' Heel (Quarterly Results Update - Detailed)

    Aug 22, 2017

    State Bank of India (SBI) continues to battle sliding asset quality and sluggish credit growth.

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 22, 2017 (Close)


    • Track your investment in BANK OF INDIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Detailed Quarterly Results With Charts