This PSB can rally another 28% after healthy gains of 62% in last six months

Stock market today: ICICI Direct is bullish on Bank of India amid healthy business growth, improvements in asset quality, and a focus on maintaining steady margins. The brokerage has set the target at Rs 165 per share, which implies a potential upside of 28 per cent from the last close.

The brokerage maintained that the lender’s focus on improving the granularity of advances has led to a rise in the proportion of non-corporate loans from 51.6 per cent in FY21 to nearly 55.5 per cent in Q2 FY24.

“Bank targets advance the growth of 12–14% in FY24–25E with continued focus on retail/ MSME segments, while opening new mid-corporate branches and a pipeline of Rs 40,000 crore in corporate sanctions, noted the brokerage.

Further, the brokerage added that the improvement in asset quality will serve as a catalyst. Steady slippages (Rs 8,000 crore in FY24E) and healthy upgrades/recoveries (Rs 12,000 crore in FY24E) coupled with write-offs are expected to result in further decline in GNPA and keep credit costs benign at 60–90 bps. 

Additionally, the brokerage believes that the transfer of NPAs amounting to Rs 50 lakh and more to asset recovery branches (ARBs) will likely boost earnings.

The moderation in slippages as well as the increase in interest rates have led to an improvement in the net interest margin (NIM) from 2.55 per cent in Q1 FY22 to 3.08 per cent in Q2 FY24. 

"Recovery from stressed exposure, anticipated marginal treasury income (driven by declining yields) and efficiency improvement are expected to limit the impact of wage provision, thus aiding earnings and return ratios," the brokerage added.

Besides, ICICI Direct noted that many positives, including a reduction in credit costs, will aid RoA at 0.8 per cent or 0.9 per cent in FY25E and 26E. Recovery from stressed and written-off exposure could also serve as a re-rating catalyst.

"Given the gradual improvement in both business momentum and RoA, the current multiple of 0.8x FY26E ABV looks attractive. The recent QIP brings GoI's stake within regulatory requirements, thus eliminating the risk of further dilution. Thus, we assign a multiple of ~1x FY26E ABV and ascribe a revised higher target of Rs165 per share,” said the brokerage.

The consensus recommendation for the stock from six analysts is ‘Buy’, Trendlyne data shows.

Further, the stock is trading at a low trailing twelve-month (TTM) PE of 10.9.

Bank of India in the last 6 months has delivered a 62 per cent return, while over 1 year, the returns are to the tune of 32 per cent.

Avdhut Bagkar, Derivatives & Technical Analyst, StoxBox said that the stock has broken from the obstacle of 120, with a resilient gap, triggering next upward wave. The next hurdle stays at Rs 150 and Rs 170, where the price action appears to be headed. From a medium-term perspective, support of 50-simple moving average (SMA) placed at 110 will keep the trend upbeat.The “Higher High, Higher Low” formation on the weekly chart suggests a gradual upside until the recent swing low of 105 is shielded.

Bank of India is a mid-cap banking company with a market capitalisation of Rs 58,744. The lender’s segments include Treasury operations, wholesale banking, and retail banking.