BoI: Banking on returns from retail
Brics PCG recommends a “buy” on Bank of India. The report states that the bank has sustained growth prospects.
The government holds a 69.47 per cent stake in the bank, which acts as a cushion towards raising the capital necessary to sustain growth.
The bank is targeting business growth of 20 per cent for FY07. It has moved from low-yielding to high-yielding assets and this, along with its added thrust on retail and SME lending, would help to raise the yield on advances.
Also, a robust CASA deposit base would help stabilise the cost of deposits. The report expects to see an improvement in the net interest margin, which is currently on the lower side.
The increasing coverage of business under CBS (around 73 per cent) would enable the bank to expand its fee and commission income, besides control of operating costs.
Its investment portfolio is fully hedged against the interest rate risk, with 80 per cent of the SLR investments being in the HTM category.