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SYNOPSIS
Allahabad Bank is oldest nationalised Bank
with rich experience in extending various
banking solutions to its valued clients since
1865.
Allahabad Bank’s Net profit stood at Rs
4025.65 million from Rs 3335.91 million with
a rise of 20.68%.
The provision coverage ratio for the quarter
stood at 81.02%. The return on Asset stood at
1.28% during the quarter.
The Bank’s Gross NPA at 1.77% and Net NPA
at 0.56 % as on 30.9.2010.
NIM of the bank stood at 3.34% against 2.84%
for Sep 30, 2009.
Allahabad Bank plans to raise Rs 2,600 crore
in the current fiscal year and expects a 25%
credit growth in the year.
Bank has planned to achieve Rs 2, 20,000
crore Business within March’2011 and
convert all its branches into CBS system.
Net Income and PAT of the bank are expected to
grow at CAGR of 25% & 15% over FY09 to
FY12E.
Investment Highlights
Q2 FY11 Results Update
Allahabad Bank has announced the Sept quarter results which showed consistent all
the way. The stand alone net interest income stood at Rs. 26369.21 millions from Rs
20466.91 million with a rise of 28.84%. The net interest income stood at Rs 13139.39
millions from Rs 10080.82 million with a rise of 30.34%. The operating profit for the
quarter stood at Rs 7815.31 million from Rs 6498.40 million showing a rise of 20.27%.
The Net profit stood at Rs 4025.65 million from Rs 3335.91 million with a rise of
20.68%. The EPS for the quarter stood at Rs 9.01 against Rs 7.47 with face value of
Rs. 10.00 each. The provision coverage ratio for the quarter stood at 81.02%. The
return on Asset stood at 1.28% during the quarter. The book value per share has
increased from Rs 145.19 to Rs 167.90.
Asset Quality
The Bank’s Gross NPA at 1.77% and Net NPA at 0.56 % as on 30.9.2010 against
1.78% and 0.35%. The capital adquacy ratio stood at 13.49% as per stipulated norm
of 9%.
Exponential Growth of Advances & Deposits
Total business of the bank stood at Rs 196816 crore as on Sept 30, 2010 against Rs
148103 crore showing a rise of 32.89%. Deposits of the Bank went up to Rs
113633.00 crore against RS 87309 crore with a growth of 30.15%. Gross Credit was
Rs 83183 crore for Sept 30, 2010 against Rs 60794 crore with a growth of 36.83%.
The credit deposit ratio stood at 73.49% for Sept 30, 2010.
Net Interest Income Growth
Net interest income has increased by 30.34% from Rs 10080.82 crore to Rs 13139.39
crore. NIM of the bank stood at 3.34% against 2.84% for Sep 30, 2009.
Initiatives during the Quarter
The bank has opened 48 new branches during the quarter and 78 new
branches of the half year making a total of 2364 branches.
Bank has initiated 3 new structured loan products for the half year are
Financing doctors for nursing homes/clinics, construction of go down under
lease, Financing seed processing units.
During the quarter there is a launch of Financial Inclusion Plan under the pilot
project.
Improvement in Social Banking
Priority sector grew to Rs 26138 crore on Sept 30, 2010 from Rs 20707 crore of
the same quarter showing a growth of 26.23%.
Outstanding Agriculture Credit has increased from Rs 9628 crore to Rs 12079
crore during the Sept quarter showing a year of year growth of 25.46%
Credit to Micro & Small Enterprises (MSE) grew from Rs 6001 crore to Rs 9358
crore showing a growth of 55.94%.
Plans for capital infusion
Allahabad Bank plans to raise Rs 2,600 crore in the current fiscal year and expects a
25% credit growth in the year. The bank is expecting to raise this amount, either
through preferential allotment of shares or through tier-I capital from the government.
Future Plans
Bank has planned to achieve Rs 2, 20,000 crore Business within March’2011
and convert all its branches into CBS system.
Bank has taken steps to open Foreign Branches in Dhaka (Bangladesh),
Shanghai (China) and Kowloon (Hong Kong).
Bank is planning to arrange to issue a 12 digit Unique Identification Number
(UID) for its 24 million plus Customers pan India based on Demographic and
Biometric data through Unique Identification Authority of India.
Bank has also planned to install 25 Biometric ATMs within 2010-11 and 175
Biometric ATMs within 2011-12 in villages having population over 2000 under
its Financial Inclusion Plan.
Company Profile
The Oldest Joint Stock Bank of the Country, Allahabad Bank was founded on April
24, 1865 by a group of Europeans at Allahabad. At that juncture Organized Industry,
Trade and Banking started taking shape in India.
Allahabad Bank is oldest nationalised Bank with rich experience in extending various
banking solutions to its valued clients since 1865. Their consistent track record of
growth with profit provides the confidence of meeting all your Banking requirements.
In 1991 the bank commenced its wholly-owned subsidiary All Bank Finance for
merchant banking. In June 2006 the bank opened its first representative office at
Shenzen, China and same year it rolled out first branch under CBS.
Currently the bank serves customers across 110 cities with a network 6 zonal offices,
2227 branches (including one in Hong Kong) and 221 ATMs.
Allahabad Bank is well spread out in India and recently opened first International
Branch at Hong Kong. Bank has also arrangements with correspondents at various
important overseas locations, which will ensure extending to all our NRI customers
rich banking experience.
Products and services offered by the company:
Products
Deposit Products
• Flexi-fix Deposit
• Rs.5 Banking
• All Bank Tax Benefit Term Deposit Scheme
• All Bank Premium SB Account
• All Bank Mahila Sanchay Account
• All Bank Vikash SB Account
• All Bank Premium Current Account
• Current Plus Deposit Scheme
• Sishu Mangal Deposit Scheme
Retail Credit Products
• All Bank Housing Finance Scheme
• All Bank Educational Loan Scheme
• All Bank Car Finance Scheme
• All Bank Saral Loan Scheme
• Personal Loan Scheme for Pensioners
• Personal Loan Scheme for Doctors/ Medical Practitioners
• Loan against NSC/ KVP
• All Bank Property Loan
• All Bank Furnishing Loan
• All Bank Gold Loan Scheme
• All Bank Mobike Scheme
• Overdraft Facility in Savings Bank Account
• All Bank Abhusan Scheme
• All Bank Trade Scheme
• AllBank Gyan Dipika Scheme
• Allabnk Reverse Mortgage Scheme
Other Credit Products
• Kisan Credit Card
• Kisan Shakti Yojana
• AllBank-Expo
Services:
• All Ayushman Bima Yojana
• Cash Management Services
• Depository Services
• Visa Debit Cum ATM Card
• Real Time Gross Settlement (RTGS)
• National Electronic Funds Transfer (NEFT)
• Gold Card Scheme for Exporters
• Charter for MSMEs
• Government Business
• Regional MSME Care Centres
Valuation
At the market price of Rs.209.25, the stock trades at 7.93 x and 7.30 x for the
earnings of FY11E and FY12E respectively.
Price to Book Value of the stock is expected to be at 1.77 x and 1.43 x respectively
for FY11E and FY12E.
Earning per share (EPS) of the bank for the earnings of FY11E and FY12E is seen
at Rs.33.15 and Rs.36.01 respectively for equity share of Rs.10.00 each.
Net Profit for the Sept quarter stood at Rs. 4025.65 millions with an increase of
20.68 %.
Net Income and PAT of the bank are expected to grow at CAGR of 25 % & 15% over
FY09 to FY12E.
Bank has planned to achieve Rs 2, 20,000 crore Business within March’2011 and
convert all its branches into CBS system.
Bank has taken steps to open Foreign Branches in Dhaka (Bangladesh), Shanghai
(China) and Kowloon (Hong Kong).
The bank has opened 48 new branches during the quarter and 78 new branches of
the half year making a total of 2364 branches.
The book value per share has increased from Rs 145.19 to Rs 167.90.
So we recommend ‘BUY’ in this particular scrip with a target price of Rs.240.00 for
Medium to Long term investment
Industry Overview
The Indian banking system is financially stable and resilient to the shocks that may
arise due to higher non-performing assets (NPAs) and the global economic crisis,
according to a stress test done by the Reserve Bank of India (RBI).
Significantly, the RBI has the tenth largest gold reserves in the world after spending
US$ 6.7 billion towards the purchase of 200 metric tonnes of gold from the
International Monetary Fund (IMF) in November 2009. The purchase has increased the
country's share of gold holdings in its foreign exchange reserves from approximately 4
per cent to about 6 per cent.
In the annual international ranking conducted by UK-based Brand Finance Plc, 20
Indian banks have been included in the Brand Finance® Global Banking 500. In fact,
the State Bank of India (SBI) has become the first Indian bank to be ranked among the
Top 50 banks in the world, capturing the 36th rank, as per the Brand Finance study.
The brand value of SBI increased from US$ 1.5 billion in 2009 to US$ 4.6 billion in
2010. ICICI Bank also made it to the Top 100 list with a brand value of US$ 2.2
billion. The total brand value of the 20 Indian banks featured in the list stood at US$
13 billion.
Meanwhile, loan disbursement from scheduled commercial banks which included
regional rural banks as well posted a growth of 16.04 per cent by March 12, 2010, on
a year-on-year basis, as per the latest data released by RBI. The RBI had earlier
predicted that the credit growth during 2009-10 would be around 16 per cent.
Following the financial crisis, new deposits have gravitated towards public sector
banks. According to RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled
Commercial Banks: September 2009', nationalised banks, as a group, accounted for
50.5 per cent of the aggregate deposits, while State Bank of India (SBI) and its
associates accounted for 23.8 per cent. The share of other scheduled commercial
banks, foreign banks and regional rural banks in aggregate deposits were 17.8 per
cent, 5.6 per cent and 3.0 per cent, respectively.
With respect to gross bank credit also, nationalised banks hold the highest share of
50.5 per cent in the total bank credit, with SBI and its associates at 23.7 per cent and
other scheduled commercial banks at 17.8 per cent. Foreign banks and regional rural
banks had a share of 5.5 per cent and 2.5 per cent respectively in the total bank
credit.
The report also found that scheduled commercial banks served 34,709 banked
centres. Of these centres, 28,095 were single office centres and 64 centres had 100 or
more bank offices.
The confidence of non-resident Indians (NRIs) in the Indian economy is reviving again.
NRI fund inflows increased since April 2009 and touched US$ 47.8 billion on March
2010, as per the RBI's June 2010 bulletin. Most of this has come through Foreign
Currency Non-resident (FCNR) accounts and Non-resident External Rupee Accounts.
Foreign exchange reserves were up by US$ 1.69 billion to US$ 272.783 billion, for the
week ending June 11, on account of revaluation gains. June 21, 2010.
Major Developments
The Monetary Authority of Singapore (MAS) has provided qualified full banking (QFB)
privileges to ICICI Bank for its branch operations in Singapore. Currently, only SBI
had QFB privileges in country.
The Indian operations of Standard Chartered reported a profit of above US$ 1 billion
for the first time. The bank posted a profit before tax (PAT) of US$ 1.06 billion in the
calendar year 2009, as compared to US$ 891 million in 2008.
Punjab National Bank (PNB) plans to expand its international operations by foraying
into Indonesia and South Africa. The bank is also planning to increase its share in the
international business operations to 7 per cent in the next three years.
The State Bank of India (SBI) has posted a net profit of US$ 1.56 billion for the nine
months ended December 2009, up 14.43 per cent from US$ 175.4 million posted in
the nine months ended December 2008.
Amongst the private banks, Axis Bank's net profit surged by 32 per cent to US$ 115.4
million on 21.2 per cent rise in total income to US$ 852.16 million in the second
quarter of 2009-10, over the corresponding period last year. HDFC Bank has posted a
32 per cent rise in its net profit at US$ 175.4 million for the quarter ended December
31, 2009 over the figure of US$ 128.05 million for the same quarter in the previous
year.
Government Initiatives
The government plans to invest US$ 3.63 billion into public sector banks to aid them
for maintaining their capital adequacy ratio (CAR), as per the Union Budget presented
by the Union Finance Minister in February 2010. Out of the total allocation, US$ 2.1
billion would be used for recapitalisation of the public sector banks during April-June
2010 and US$ 1.5 billion will be invested during the rest of 2010-11.
The RBI has allowed banks to make changes in the repayment schedules or drawdown
without prior approval from the central bank. However, such a change could be made
on the condition that the average maturity of the loan should remain the same. The
move is expected to make external commercial borrowing (ECB) transactions easier.
Transactions both through automatic and approval routes can take advantage of this
change. Now, without the prior approval of RBI, Indian companies may borrow up to
US$ 500 million in a year.
Further, RBI also allowed domestic scheduled commercial banks to open up their
branches in Tier III to Tier VI regions that have population of up to 49,999 without the
prior permission of the central bank. Banks such as PNB and UCO Bank are planning
to take advantage of this initiative and would open around 440 and 89 branches,
respectively, in such regions.
In its platinum jubilee year, the RBI, the central bank of the country, in a notification
issued on June 25, 2009, said that banks should link more branches to the National
Electronic Clearing Service (NECS). Ideally, all core-banking-enabled branches should
be part of NECS. NECS was introduced in September 2008 for centralised processing
of repetitive and bulk payment instructions. Currently, a little over 26,000 branches of
114 banks are enabled to participate in NECS.
The Monetary Policy Statement 2010-11, dated April 20, 2010, specifies the following
monetary measures:
i. The repo rate has been raised by 75 basis points from 5.25 per cent to 6.00 per
cent with immediate effect.
ii. The reverse repo rate has been raised by 50 basis points from 5.50 per cent to
6.00 per cent with immediate effect.
iii. The cash reserve ratio (CRR) of scheduled banks has been raised by 25 basis
points from 5.75 per cent to 6.0 per cent of their net demand and time liabilities
(NDTL) effective the fortnight beginning April 24, 2010.
Meanwhile, outstanding bank credit in the 15 days up to January 29, 2010 rose by
US$ 4.32 billion, pointing to a revival in credit growth. This is the highest year-on-year
growth recorded since August 14, 2009. Furthermore, the outstanding bank credit in
the 15 days up to February 12, 2010, rose by US$ 4.87 billion to US$ 658.24 billion,
according to data from the Reserve of Bank of India (RBI), marking a 15.07 per cent
year-on-year growth in credit.
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