Bank of India’s net interest income in the last quarter of FY07 grew slowest at 15.5 per cent to Rs 968 crore compared with the previous three quarters of the year.

Interest expenses rose much faster at 41.5 per cent compared with 30.6 per cent in interest income thanks to lower income on investments and other interest.

As a result, BoI’s Q4 FY07 domestic net interest margin declined by 17 basis points y-o-y at 3.96 per cent and global net interest margin fell by 20 basis points to 3.34 per cent. This was because its cost of funds rose faster than its overall yield.

But if BoIs core banking operations were not up to the mark, the bank has compensated by improving its non-interest income, which grew 78 per cent y-o-y at Rs 577 crore.

This helped it maintain operating profit growth at over 40 per cent. Net profit also got a boost with 76 per cent growth despite a doubling of provision for taxes. The bank managed to halve its net NPAs in Q4 FY07 compared with a y-o-y basis.

Analysts say the fourth quarter results have been in line with expectations, and remain enthused by the bank’s growth prospects. For FY07, its net advances improved by 31 per cent, and deposits went up 28 per cent.

Its low-cost deposits remained stable at 40 per cent of total deposits. With the rally in banking stocks, BoI too has rallied 18 per cent in the past four sessions. It trades at 1.4 times its estimated FY08 book value, and may have some steam left.