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Margins expand but return ratios remain subdued
„ 4QFY11 net profit at `112mn: Dhanlaxmi Bank (DHLBK) almost doubled its
4Q11 net profit to `112mn (c.16% ahead of `96mn JMFe) on a sequential
improvement in margins and higher non–interest income growth. Margin
expanded 30bps YoY and 40bps QoQ to 3.0%. Loan growth remained strong
at 81% YoY while asset quality improved with 13% YoY decline (18% QoQ) in
absolute gross NPLs. Cost ratios remained at elevated levels while return
ratios were subdued with 4Q11 (annualised) ROA of 0.33%.
„ Retail segment drives healthy 81% YoY loan growth: DHLBK reported
strong 81% YoY loan growth (17% QoQ; c.4x of system growth) at `90.7bn,
driven mainly by retail segment. The bank is focusing on retail segment since
the last one year due to which the proportion of retail loans went up to 41% in
4Q11 vs 16% in 4Q10. Proportion of corporate banking group declined to 39%
(64% in 4Q10) while SME/TAG remained stable at 15%. Retail loan growth (up
4.6x YoY and 26% QoQ) was driven by gold loans (constitutes c.34% of retail
loan book), mortgages/LAP (c.21%) and vehicle financing (c.30%). LDR
remained stable at 72% vs 71% in 4Q10 and 74% in 3Q11. CASA mix was
stable at 23% vs 22% in 4Q10 and 20% in 3Q11. The bank expects SME and
retail segment to drive c.75% loan growth in FY12E.
„ Sequential margin expansion of 40bps (30bps YoY) drives 106% YoY NII
growth: NII grew 106% YoY (23% QoQ) driven by loan growth and margin
expansion. Reported margin expanded 40bps sequentially (30bps YoY) to
3.0% in 4Q11 driven by a) increased proportion of retail loans, b) 270bps
sequential increase in CASA, c) asset re-pricing. Management aims to
maintain margins in FY12E.
„ Opex up 68% YoY (21% QoQ): Costs increased 69% YoY and 21% QoQ in
4Q11 led by 70% YoY (42% QoQ) jump in other opex. Employee expenses
grew 68% YoY (8% QoQ) while employee count declined by 90 sequentially to
4,260. During the year, the bank provided `51.1mn for additional pension
and gratuity liability and `15.3mn for AS15. It did not add any branch during
the quarter - branch count stands at 275.
„ Asset quality improves sequentially: Asset quality improved as gross NPLs
in absolute terms declined by 13% YoY and 18% sequentially. Delinquencies
during FY11 declined to 81bps vs 165bps in FY10. 4Q11 gross NPLs declined
to 0.74% (4Q10:1.54% and 3Q11:1.05%) and net NPLs to 0.30% (4Q10: 0.84%
and 3Q11: 0.52%). Coverage ratio improved to 59% vs 46% in 4Q10 and 51%
in 3Q11. RBI has extended deadline for increasing the PCR to 70% till 30
Sept’11.
„ 4Q11 CAR at 11.8%; to raise `5.0bn equity capital: DHLBK had CAR of
11.8%, with tier I of 9.4% as of 4Q11. It intends to raise `5.0bn equity capital
over next 3-4 months to support its growth objectives.
„ Return ratios remain subdued: Return ratios remained subdued with 4Q11
ROA of 0.33%. For FY11, ROA was at 0.23% with ROE of 4.1%. The stock
trades at 1.3x FY11 book.
„ Estimates and TP under review: Our earning estimates and TP for DHLBK are
under review.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Margins expand but return ratios remain subdued
„ 4QFY11 net profit at `112mn: Dhanlaxmi Bank (DHLBK) almost doubled its
4Q11 net profit to `112mn (c.16% ahead of `96mn JMFe) on a sequential
improvement in margins and higher non–interest income growth. Margin
expanded 30bps YoY and 40bps QoQ to 3.0%. Loan growth remained strong
at 81% YoY while asset quality improved with 13% YoY decline (18% QoQ) in
absolute gross NPLs. Cost ratios remained at elevated levels while return
ratios were subdued with 4Q11 (annualised) ROA of 0.33%.
„ Retail segment drives healthy 81% YoY loan growth: DHLBK reported
strong 81% YoY loan growth (17% QoQ; c.4x of system growth) at `90.7bn,
driven mainly by retail segment. The bank is focusing on retail segment since
the last one year due to which the proportion of retail loans went up to 41% in
4Q11 vs 16% in 4Q10. Proportion of corporate banking group declined to 39%
(64% in 4Q10) while SME/TAG remained stable at 15%. Retail loan growth (up
4.6x YoY and 26% QoQ) was driven by gold loans (constitutes c.34% of retail
loan book), mortgages/LAP (c.21%) and vehicle financing (c.30%). LDR
remained stable at 72% vs 71% in 4Q10 and 74% in 3Q11. CASA mix was
stable at 23% vs 22% in 4Q10 and 20% in 3Q11. The bank expects SME and
retail segment to drive c.75% loan growth in FY12E.
„ Sequential margin expansion of 40bps (30bps YoY) drives 106% YoY NII
growth: NII grew 106% YoY (23% QoQ) driven by loan growth and margin
expansion. Reported margin expanded 40bps sequentially (30bps YoY) to
3.0% in 4Q11 driven by a) increased proportion of retail loans, b) 270bps
sequential increase in CASA, c) asset re-pricing. Management aims to
maintain margins in FY12E.
„ Opex up 68% YoY (21% QoQ): Costs increased 69% YoY and 21% QoQ in
4Q11 led by 70% YoY (42% QoQ) jump in other opex. Employee expenses
grew 68% YoY (8% QoQ) while employee count declined by 90 sequentially to
4,260. During the year, the bank provided `51.1mn for additional pension
and gratuity liability and `15.3mn for AS15. It did not add any branch during
the quarter - branch count stands at 275.
„ Asset quality improves sequentially: Asset quality improved as gross NPLs
in absolute terms declined by 13% YoY and 18% sequentially. Delinquencies
during FY11 declined to 81bps vs 165bps in FY10. 4Q11 gross NPLs declined
to 0.74% (4Q10:1.54% and 3Q11:1.05%) and net NPLs to 0.30% (4Q10: 0.84%
and 3Q11: 0.52%). Coverage ratio improved to 59% vs 46% in 4Q10 and 51%
in 3Q11. RBI has extended deadline for increasing the PCR to 70% till 30
Sept’11.
„ 4Q11 CAR at 11.8%; to raise `5.0bn equity capital: DHLBK had CAR of
11.8%, with tier I of 9.4% as of 4Q11. It intends to raise `5.0bn equity capital
over next 3-4 months to support its growth objectives.
„ Return ratios remain subdued: Return ratios remained subdued with 4Q11
ROA of 0.33%. For FY11, ROA was at 0.23% with ROE of 4.1%. The stock
trades at 1.3x FY11 book.
„ Estimates and TP under review: Our earning estimates and TP for DHLBK are
under review.
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