Release Date: May 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of India (BOM:532149, Financial) reported a net profit of INR 6,318 crores for FY24, a 57% year-over-year increase.
- Global business increased by 11.65% year-over-year, reaching INR 13.23 trillion in March 2024.
- Domestic advances grew by 14.08% year-over-year, with significant growth in the retail, agriculture, and MSME segments.
- The bank has launched several new initiatives, including the BOI Star family savings account and BOI Star Rooftop Solar Panel Finance, to enhance customer experience and promote green energy.
- Asset quality improved with a reduction in gross NPA ratio to 4.98% and net NPA ratio to 1.22% for FY24.
Negative Points
- Higher provisioning in Q4 FY24, amounting to INR 2,043 crores, significantly impacted the quarterly profit.
- Slippages in Q4 FY24 were higher than expected, particularly in the agriculture and MSME sectors.
- The bank's cost-to-income ratio increased to 51.73% in FY24 due to higher employee costs from wage revisions.
- Non-interest income saw a quarter-on-quarter reduction, primarily due to a one-time income in the previous year.
- The new RBI guidelines on investment classification and valuations may reduce volatility but could impact capital gains booking.
Q & A Highlights
Highlights of Bank of India (BOM:532149) Q4 FY24 Earnings Call
Q: What is the reason for the higher provisioning of INR2,043 crore in this quarter?
A: Rajneesh Karnatak, CEO: The provisioning includes additional provisions due to ageing (INR800 crore), reversal of provision in PWO accounts (INR312 crore), reversal of SR (INR125 crore), and corrections in Sarai accounting (INR55 crore). This quarter's high provision is an aberration and not expected to continue.
Q: Do we have any additional provisions over and above the IRAC norms?
A: Rajneesh Karnatak, CEO: No, all provisions are as per IRAC norms.
Q: What is the impact of the recent RBI guidelines on higher provisioning for project loans?
A: Subrat Kumar, Executive Director: The impact is around 20% of our infrastructure portfolio. The estimated increase in credit cost is 10 basis points by March 2027, and the CET-1 impact is 20-22 basis points.
Q: What is the reason for the higher slippages this quarter?
A: Rajneesh Karnatak, CEO: Slippages were higher due to stress in agriculture and MSME sectors, particularly in small ticket accounts. However, SMA numbers have improved significantly, and we expect lower slippages in the coming quarters.
Q: Can you provide guidance on FY25 loan growth, NIMs, credit cost, and ROA?
A: Rajneesh Karnatak, CEO: We project a credit growth of 13-14%, global NIMs at 2.95%, domestic NIMs at 3.30%, and an ROA of around 0.90%.
Q: What is the total PWO book and expected recovery in FY25?
A: Rajneesh Karnatak, CEO: The total PWO book is around INR43,000 crore. We plan to recover more than the INR6,305 crore recovered in FY24.
Q: What are the benefits of the technology upgrades and the budget spent?
A: Rajneesh Karnatak, CEO: We spent 75% of the INR2,000 crore budget on technology upgrades, leading to operational efficiencies and better profitability. Key initiatives include data lake projects, digital lending platforms, and new digital products.
Q: What is the co-lending portfolio and its returns?
A: Rajneesh Karnatak, CEO: The co-lending and full purchase portfolio is around INR4,000 crore, with better IRR due to lower operational costs.
Q: What is the guidance on the cost-to-income ratio?
A: Rajneesh Karnatak, CEO: The cost-to-income ratio is expected to be around 51% for FY25.
Q: What will be the tax rate in FY25?
A: Subrat Kumar, Executive Director: The tax rate will be 25%, as we have migrated to the new tax regime.
Q: What is the impact of the new guidelines on investment classification and valuations?
A: Rajneesh Karnatak, CEO: The new guidelines will reduce volatility in the GSEC portfolio and focus more on interest income and medium-term trading opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
