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IDBI Bank, Profitability leads to improving returns…
Consolidation continued with advances growing at 14% YoY (17% QoQ)
to | 157098 crore and deposits rising only 8% YoY (20% QoQ) to |
180486 crore. Profitability improved in FY11 with NII jumping 92% YoY,
margins maintained over 2% and fee income rising 23% YoY leading to
PAT surging 60% YoY to | 1650 crore. IDBI reported Q4FY11 profit of |
516 crore (up 62% YoY) which was ahead of Street and our estimate (|
447 crore). Even though NII declined sequentially in Q4FY11, 51% QoQ
spurt in fee based income and lower provisioning pushed up profits.
Sequential asset quality improvement and a 583 bps spike in CASA
remained the highlight of the quarter. As per the management guidance
of below industry growth, we expect calibrated business growth of 17%
YoY to lead to PAT growth of 21% YoY in FY12E.
CASA jumps to 21%, NIM of 2.1% for full year FY11…
CASA shot up from 15% in Q3FY11 to 21% in Q4FY11 with current
account bloating by 115% QoQ. We perceive this is due to firms
parking funds with the bank at fiscal year end. The bank has targeted
a CASA ratio of 25% by FY12E. NII declined by 8% QoQ to | 1109
crore with cost of funds rising 34 bps to 7.45%. However, IDBI was
able to maintain its NIM, which has stayed over 2% since Q2FY11 at
2.1%. We expect margins to be maintained at 2.1% in FY12E.
Sequential improvement in asset quality…
GNPA declined by 7.8% QoQ to | 2785 crore (GNPA ratio down 46
bps to 1.76%) with the bank writing off advances worth | 884 crore
in FY11 (| 449 crore in Q4FY11). However, NNPA that rose 4.2%
QoQ to |1678 crore declined in ratio terms by 14 bps to 1.06%. PCR
is healthy at 74.7% (40% excl. tech w/offs). We expect the asset
quality to be stable with GNPA ratio at 1.7% and NNPA ratio at 0.8%
by FY12E, respectively.
Valuation
Higher profitability with calibrated growth has led to RoA and RoE
improving from 0.5% and 13.1% in FY10 to 0.7% and 14.9%,
respectively, in FY11. We believe profitability is sustainable with the
bank’s strategic focus on CASA build-up and improving margins. We
continue to be cautious on the asset quality front despite its sequential
improvement. We value the bank’s core business at 1.25x FY12E ABV and
ascribe | 26 to its investment book arriving at a target price of | 165.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IDBI Bank, Profitability leads to improving returns…
Consolidation continued with advances growing at 14% YoY (17% QoQ)
to | 157098 crore and deposits rising only 8% YoY (20% QoQ) to |
180486 crore. Profitability improved in FY11 with NII jumping 92% YoY,
margins maintained over 2% and fee income rising 23% YoY leading to
PAT surging 60% YoY to | 1650 crore. IDBI reported Q4FY11 profit of |
516 crore (up 62% YoY) which was ahead of Street and our estimate (|
447 crore). Even though NII declined sequentially in Q4FY11, 51% QoQ
spurt in fee based income and lower provisioning pushed up profits.
Sequential asset quality improvement and a 583 bps spike in CASA
remained the highlight of the quarter. As per the management guidance
of below industry growth, we expect calibrated business growth of 17%
YoY to lead to PAT growth of 21% YoY in FY12E.
CASA jumps to 21%, NIM of 2.1% for full year FY11…
CASA shot up from 15% in Q3FY11 to 21% in Q4FY11 with current
account bloating by 115% QoQ. We perceive this is due to firms
parking funds with the bank at fiscal year end. The bank has targeted
a CASA ratio of 25% by FY12E. NII declined by 8% QoQ to | 1109
crore with cost of funds rising 34 bps to 7.45%. However, IDBI was
able to maintain its NIM, which has stayed over 2% since Q2FY11 at
2.1%. We expect margins to be maintained at 2.1% in FY12E.
Sequential improvement in asset quality…
GNPA declined by 7.8% QoQ to | 2785 crore (GNPA ratio down 46
bps to 1.76%) with the bank writing off advances worth | 884 crore
in FY11 (| 449 crore in Q4FY11). However, NNPA that rose 4.2%
QoQ to |1678 crore declined in ratio terms by 14 bps to 1.06%. PCR
is healthy at 74.7% (40% excl. tech w/offs). We expect the asset
quality to be stable with GNPA ratio at 1.7% and NNPA ratio at 0.8%
by FY12E, respectively.
Valuation
Higher profitability with calibrated growth has led to RoA and RoE
improving from 0.5% and 13.1% in FY10 to 0.7% and 14.9%,
respectively, in FY11. We believe profitability is sustainable with the
bank’s strategic focus on CASA build-up and improving margins. We
continue to be cautious on the asset quality front despite its sequential
improvement. We value the bank’s core business at 1.25x FY12E ABV and
ascribe | 26 to its investment book arriving at a target price of | 165.
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