Bank Of India Q2 Review: Morgan Stanley Raises Price Target But Flags One Key Concern — Details Inside
Bank of India's profit after tax was 47% above its estimates - a trend that was led by asset quality improvement as well as other factors such as strong fee income, recoveries and low credit cos
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Morgan Stanley has raised the target price for Bank of India after the lender reported its September quarter earnings for the financial year ending March 2026, where it reported a 7.6% increase in net profit on a year-on-year basis.
In its latest report, Morgan Stanley has highlighted the bank's improving asset quality metrics and issued a target price hike, which goes from Rs 110 to Rs 120, though it maintained an underweight rating on the counter.
During the September quarter, Bank of India reported a net non-performing asset ratio of 0.65%, which is a significant improvement from 0.96% in the last quarter.
Bank of India believes the improving asset quality has gone a long way in offsetting the decline in net interest margins, which fell 14 basis points compared to the last quarter.
Bank of India Q2 Highlights (YoY)
Net Profit up 7.6% at Rs 2,555 crore versus Rs 2,374 crore
Net NPA at 0.65% versus 0.94% (QoQ)
Gross NPA at 2.54% versus 2.92% (QoQ)
NII down 1% at Rs 5,914 crore versus Rs 5,985 crore
Operating Profit down 7.9% at Rs 3,821 crore versus Rs 4,147 crore
Provisions down 57.83% at Rs 441 crore versus Rs 1,043 crore
The firm also highlighted that the lender's profit after tax was 47% above its estimates - a trend that was also led by asset quality improvement as well as other factors such as strong fee income, recoveries and low credit cost, with provisions for bad loans falling nearly 58% year-on-year to Rs 441 crore.
Despite all the green flags, Morgan Stanley retained the underweight rating.
The firm's main concern is around future earnings. Morgan Stanley believes Bank of India's profitability has likely peaked and that once credit costs normalise, the lender's return on asset metrics are going to face increased pressure.
Keeping all these factors in mind, Morgan Stanley suggests that the stock's valuation, despite trading at 0.6x FY27 price to book, does not offer an attractive risk-reward profile.
