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Allahabad Bank
For 1QFY2012, Allahabad Bank reported 20.4% yoy growth in its net profit to `418cr,
ahead of our and street’s estimates. Healthy business momentum with relatively lower
compression in reported NIM and stable asset quality were the key highlights of the result.
The bank managed to buck the trend of a sequential decline in advances, displayed so far
by its peers. The bank’s advances grew healthily by 5.5% qoq and 30.4% yoy. With the
widening differential between fixed deposit interest rates and savings account rate, the
pace of growth in CASA deposits moderated further to 15.6% yoy from 20.7% in
4QFY2011. CASA ratio came off by ~150bp qoq to 32.0% as the bank had lower flows
from government-related businesses. Considering the relatively lower share of CASA
deposits base, the bank surprised positively by reporting just ~9bp sequential compression
in reported NIM to 3.4% despite a 10bp qoq uptick in 4QFY2011. Faster growth in the
high-yielding SME segment’s advances and lending rate hikes aided in increasing the
overall yield on advances by 87bp qoq. Slippages for the quarter normalised, with the
annualised slippage ratio declining to 0.6% from the peak levels of 4.5% in 4QFY2011
(0.7% in 1QFY2011). Overall asset quality improved in 1QFY2012 with gross and net
NPAs declining by 2.6% qoq and 20.1% qoq, respectively. Provision coverage ratio,
including technical write-offs, improved ~400bp qoq to comfortable 79.9%.
Taking into account the bank’s stable CASA deposits base, healthy capital adequacy and
strong advances growth, at 1.0x FY2013E ABV, the stock looks reasonably priced.
The pending switchover to system-based NPA recognition for agricultural loans (~14%
exposure) and small loan accounts is likely to remain a near-term overhang on the stock.
Hence, we recommend Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Allahabad Bank
For 1QFY2012, Allahabad Bank reported 20.4% yoy growth in its net profit to `418cr,
ahead of our and street’s estimates. Healthy business momentum with relatively lower
compression in reported NIM and stable asset quality were the key highlights of the result.
The bank managed to buck the trend of a sequential decline in advances, displayed so far
by its peers. The bank’s advances grew healthily by 5.5% qoq and 30.4% yoy. With the
widening differential between fixed deposit interest rates and savings account rate, the
pace of growth in CASA deposits moderated further to 15.6% yoy from 20.7% in
4QFY2011. CASA ratio came off by ~150bp qoq to 32.0% as the bank had lower flows
from government-related businesses. Considering the relatively lower share of CASA
deposits base, the bank surprised positively by reporting just ~9bp sequential compression
in reported NIM to 3.4% despite a 10bp qoq uptick in 4QFY2011. Faster growth in the
high-yielding SME segment’s advances and lending rate hikes aided in increasing the
overall yield on advances by 87bp qoq. Slippages for the quarter normalised, with the
annualised slippage ratio declining to 0.6% from the peak levels of 4.5% in 4QFY2011
(0.7% in 1QFY2011). Overall asset quality improved in 1QFY2012 with gross and net
NPAs declining by 2.6% qoq and 20.1% qoq, respectively. Provision coverage ratio,
including technical write-offs, improved ~400bp qoq to comfortable 79.9%.
Taking into account the bank’s stable CASA deposits base, healthy capital adequacy and
strong advances growth, at 1.0x FY2013E ABV, the stock looks reasonably priced.
The pending switchover to system-based NPA recognition for agricultural loans (~14%
exposure) and small loan accounts is likely to remain a near-term overhang on the stock.
Hence, we recommend Neutral on the stock.
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