Reduce Bank of India - Emkay

Reco: REDUCE
CMP: Rs 353
Target Price: Rs 320

Valuations running ahead of fundamentals

- BOI's Q3FY12 PAT at Rs7.2bn ahead of estimates driven by higher than expected NII at Rs20.7bn and higher than expected recoveries (3x yoy and 2x qoq)

- Loans grew aggressively 6.2% qoq led by foreign (weak INR) and sharp growth in retail+agri (7.6% qoq), CRE (11% qoq) and infrastructure (20% qoq).

- Though reported slippages came off sharply to Rs5.2bn, it is net of some recoveries. Actual gross slippages ~Rs8-9bn. Sharp rise in restructuring ex-GTL at Rs17.6bn.

- Net NPL/networth still stands at 21%, RoAs may still not look beyond 1% in FY13E due to elevated credit costs. Downgrade to REDUCE with TP of Rs320.

Source : Equity Bulls

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