Why Bank of India Share Price is Falling

Public sector banks have been the stars of the banking sector in 2022.

State-owned banks reported their highest profits in the September 2022 quarter, in the last ten years, on the back of favorable lending and development prospects.

As a result, some of these state-run lenders achieved multibagger returns in less than six months from their 52-week lows.

Amid banking stocks emerging as one of the biggest gainers in the Indian market, shares of Bank of India have declined over 12% in a week.

So, what led to the sudden fall in the stock?

Profit booking

In the past six months, shares of Bank of India have gained 118%.

This strong performance is due to the bank's improved financial performance. Due to general economic growth and low non-performing assets, the bank's credit costs have stayed low.

This has been followed by a sharp improvement in margins, helped by a rising rate cycle, coupled with retail-funded balance sheets and higher share of repo-linked loans.

These factors have led to a higher valuation than normal of the stock. The company is currently trading at a PE (Price to Earnings) multiple of 11.4x, higher than its 5 Year average PE ratio of 3.2x.

Therefore, the recent correction could be due to profit booking in the stock.

Positive outlook

For the September 2022 quarter, the bank registered a sharp uptick of 44% YoY in net interest income to Rs 50.8 bn.

Its net interest margin of rose marginally to 3% from 2.4% in the year-ago period. Its gross NPAs declined sharply to 8.5% from 12% in the year ago period and from 9.3% in June 2022 quarter.

However, it reported a 10% YoY decline in net profit to Rs 9.6 bn for September 2022 quarter on higher provisioning, which more than doubled to Rs 19.1 bn in the September 2022quarter .

These upticks are expected to be sustainable for another quarter as the rising deposit rate may be passed with a lag.

How shares of Bank of India have performed

Over the last week, the Bank of India's shares are trading lower by 12%.

So far, in 2022, the stock is trading higher by 69.3%. Over the last year, shares of the company have soared by 75.5%.

The company touched its 52-week high of Rs 103.5 on 15 December 2022 and its 52-week low of Rs 40.4 on 20 June 2022.

About Bank of India

Bank of India is a state-owned commercial bank. It provides a wide range of banking products and financial services to corporate and retail customers.

The bank provides specialized services for businesses NRIs, merchant banking etc. They also have specialized branches that deal in asset recovery, hi-tech agricultural finance, lease finance and treasury, and small-scale industries.

It offers products such as, mutual funds, venture capital, depository services, bullion trading, and credit cards.

The bank operates in three business segments, namely, treasury operations, wholesale banking operations, and retail banking operations.

Treasury Operations include the entire investment portfolio, including dealing in government and other securities, money market operations, and foreign exchange (Forex) operations.

The bank had a strong network of 5,083 domestic branches, 5,690 ATMs, and 23 overseas branches.

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