Shares of Bank of India rose 5% intraday on Thursday to hit a 17-month high of Rs 83.25 on the BSE on the upbeat outlook. Shares of the state-owned lender hit their highest level since June 2021. It has gained 80% in the past six weeks from the Rs 46.30 level touched on October 13, 2021.

Rating agency Acuite Ratings & Research reaffirmed its AA rating, the Reserve Bank of India said on November 23, raising its outlook on the bank’s additional tier-one bonds to positive from stable.

Acuite said the ratings continue to factor in profitability metrics, capital position and credit growth improvements. The bank’s net interest margin (NIM) improved from 2.42% in H1FY22 to 3.04% in H1FY23.

Profit after tax (PAT) stood at Rs 1,521 crore in 1H FY23, backed by healthy operating performance and lower provisions.

The rating further considers the bank’s strong pedigree and evidence of government funding. This is well reflected in the bank’s healthy capital level of 15.51% as of September 30, 2022 (Tier-1 CAR: 13.38%). The rating agency said the rating also considered the improving financial performance of banks, mainly due to the downturn and lower overall credit costs.

The rating also considers the bank’s healthy debt profile, characterised by a CASA portfolio of 44.12% as of September 30 2022. Moreover, it added that the bank’s high reserve coverage ratio of 88.96% as of September 30, 2022, is close to asset quality risks in the medium term.

These strengths are offset by the bank’s modest but improving asset quality. As of September 30, 2022, the bank’s GNPA and NNPA are 8.51% and 1.92%, respectively. While the bank continues to maintain a healthy provision coverage ratio, the performance of the restructured portfolio and assets remains critical, the report said.

Going forward, the agency said that banks’ ability to maintain an upward trajectory of overall financial performance and manage asset quality risks will be key monitorable indicators.