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Syndicate Bank -So far, so good…
Syndicate Bank (SBL) reported a healthy growth of 18% YoY in
business mix as deposits grew 15% to | 124603 crore and advances
by 22% to | 101307 crore. CD ratio is stretched at 81%. NII growth
was healthy backed by better liability management. Non interest
income growth was sluggish, down 4% QoQ, 8% YoY to | 214 crore,
lower than estimates. Provisions were high at | 427 crore, resulting in
PAT of | 256 crore little ahead of our estimate of | 234 crore. Going
ahead, we expect 16% CAGR in balance sheet and 17% in business
mix to support PAT CAGR of 29% over FY10-12E to | 13544 crore.
NIM above 3% on the back of liability re-engineering
NII of | 1150 crore was ahead of our expectations on account of lower
interest outgo. The bank is reducing its dependence on bulk deposits
while CASA proportion is on the rise (33% for Q3FY11 against 30% in
Q3FY10). Cost of funds, which stood at 6.3% in Q3FY10 and 6.1% in
FY10, is now down to 5.3% for Q3FY11, providing a push to NII and
NIM. The bank has strategically stopped incremental business growth
where spreads (difference of YoA and CoF) are negative. NIM spiked to
3.4% from 2.2% in Q3FY10 (though down 15 bps QoQ). We expect
stable CASA at 34% and NIM of 3% for FY12E.
Asset quality stable, concerns seem to be overdone
GNPA @2.3% and NNPA @0.95% was flat QoQ. We expected the asset
quality concerns to remain high in FY11E due to further slippages
expected in the restructured assets (| 4,070 crore in Q3FY11 lower than
| 4500 crore in Q1FY11). Of the total restructured assets, the bank
witnessed |470 crore of slippages and expects some more pressure in
the coming quarter. Our earlier case of ~20% slippage from these
accounts seems higher. Hence, we expect NNPA of 0.9% in FY12E
against our earlier expectation of 1%. PCR is comfortable at 73%. We
have lowered our provisioning cost for FY12E to our earlier estimate,
resulting in EPS upgradation by 2%.
Valuation
We expect an improvement in RoA to 0.8% and RoE to 20% in FY12E
from 0.7% and 17% currently. We have valued SBL at 1.2x FY12E ABV
(slight discount to Dena Bank that we valued at 1.25x on account of
lower RoA) and have arrived at fair value of | 125. We recommend BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Syndicate Bank -So far, so good…
Syndicate Bank (SBL) reported a healthy growth of 18% YoY in
business mix as deposits grew 15% to | 124603 crore and advances
by 22% to | 101307 crore. CD ratio is stretched at 81%. NII growth
was healthy backed by better liability management. Non interest
income growth was sluggish, down 4% QoQ, 8% YoY to | 214 crore,
lower than estimates. Provisions were high at | 427 crore, resulting in
PAT of | 256 crore little ahead of our estimate of | 234 crore. Going
ahead, we expect 16% CAGR in balance sheet and 17% in business
mix to support PAT CAGR of 29% over FY10-12E to | 13544 crore.
NIM above 3% on the back of liability re-engineering
NII of | 1150 crore was ahead of our expectations on account of lower
interest outgo. The bank is reducing its dependence on bulk deposits
while CASA proportion is on the rise (33% for Q3FY11 against 30% in
Q3FY10). Cost of funds, which stood at 6.3% in Q3FY10 and 6.1% in
FY10, is now down to 5.3% for Q3FY11, providing a push to NII and
NIM. The bank has strategically stopped incremental business growth
where spreads (difference of YoA and CoF) are negative. NIM spiked to
3.4% from 2.2% in Q3FY10 (though down 15 bps QoQ). We expect
stable CASA at 34% and NIM of 3% for FY12E.
Asset quality stable, concerns seem to be overdone
GNPA @2.3% and NNPA @0.95% was flat QoQ. We expected the asset
quality concerns to remain high in FY11E due to further slippages
expected in the restructured assets (| 4,070 crore in Q3FY11 lower than
| 4500 crore in Q1FY11). Of the total restructured assets, the bank
witnessed |470 crore of slippages and expects some more pressure in
the coming quarter. Our earlier case of ~20% slippage from these
accounts seems higher. Hence, we expect NNPA of 0.9% in FY12E
against our earlier expectation of 1%. PCR is comfortable at 73%. We
have lowered our provisioning cost for FY12E to our earlier estimate,
resulting in EPS upgradation by 2%.
Valuation
We expect an improvement in RoA to 0.8% and RoE to 20% in FY12E
from 0.7% and 17% currently. We have valued SBL at 1.2x FY12E ABV
(slight discount to Dena Bank that we valued at 1.25x on account of
lower RoA) and have arrived at fair value of | 125. We recommend BUY.
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