Analysts' Picks: BoB
INDIABULLS Securities has reiterated its ‘hold’ rating on BoB.
By ET Bureau |
INDIABULLS Securities reiterates ���hold��� rating on BoB
RESEARCH: INDIABULLS SECURITIES
RATING: HOLD
CMP: Rs 268
INDIABULLS Securities has reiterated its ���hold��� rating on BoB. The bank reported an average performance in Q209, even as its asset quality improved. It expects interest income to grow by 16% in FY09, against 31% in FY08, as the growth rate of advances is likely to fall to 23% in FY09 vis-��-vis 28% in FY08. In addition, the expected fall in yield on investments will affect interest income. Advances may be under pressure due to the global financial crisis and slowdown in the domestic economy. Over 20% of the loan book is accounted for by real estate and SMEs, which are prone to default in the current domestic scenario. BoB���s net interest margin (NIM) increased by a mere 4 bps sequentially to 2.8%. NIM is likely to be under pressure in the coming quarters due to increased cost of deposits, though RBI has lowered its key policy rates. With increased risk-aversion , BoB may shift the mix of interest earning assets from high-yield , risky advances to safer, low-return investments . This is likely to reduce the average yield, further pressurising NIM.
RESEARCH: INDIABULLS SECURITIES
RATING: HOLD
CMP: Rs 268
INDIABULLS Securities has reiterated its ���hold��� rating on BoB. The bank reported an average performance in Q209, even as its asset quality improved. It expects interest income to grow by 16% in FY09, against 31% in FY08, as the growth rate of advances is likely to fall to 23% in FY09 vis-��-vis 28% in FY08. In addition, the expected fall in yield on investments will affect interest income. Advances may be under pressure due to the global financial crisis and slowdown in the domestic economy. Over 20% of the loan book is accounted for by real estate and SMEs, which are prone to default in the current domestic scenario. BoB���s net interest margin (NIM) increased by a mere 4 bps sequentially to 2.8%. NIM is likely to be under pressure in the coming quarters due to increased cost of deposits, though RBI has lowered its key policy rates. With increased risk-aversion , BoB may shift the mix of interest earning assets from high-yield , risky advances to safer, low-return investments . This is likely to reduce the average yield, further pressurising NIM.
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