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N e a r t e r m h a z y , l o n g- t e r m * p r o m i s i n g …
Dhanlaxmi Bank reported disappointing Q1FY12 results led by a 29.5%
QoQ fall in NII from | 90.4 crore to | 63.8 crore (lower than our
expectation of | 82 crore). The bank avoided growth in the loan book due
to uncertain market conditions while a rise in cost of funds resulted in a
poor NII show in Q1FY12. NIM was at 2% vs. 2.6% in Q4FY11. An MTM
hit of | 7 crore (total provisions | 9.6 crore in quarter) was an overhang.
PAT was at | 3.4 crore vs. estimated | 7.5 crore, down 44% YoY.
The management has strongly articulated the need to concentrate on
bottomline growth and, thereby, improve return ratios. Phase I of the
story rounding around change of management and processes seems to
be in the last leg. This will show the way for lower cost to income ratio
and higher PAT.
ƒ Growth slowing down, PCR @66% with asset quality improving…
The CAR of the bank stands at 11.4% while Tier I capital is at 9.3%. The
bank is capitalised to support business growth only for a couple of
quarters. The management has guided that fund raising is on track.
Also, the provision coverage ratio is 65.8%. The bank requires another |
2.7 crore of provision in Q2FY12 to reach 70% PCR, which is mandated.
The asset quality of the bank is improving steadily with GNPA declining
from | 76 crore in Q1FY11 to | 67 crore in Q4FY11 and now at | 61
crore in Q1FY11. Simultaneously, NNPA has also improved to | 21
crore. The bank is witnessing higher recoveries compared to fresh
slippages, which has enabled it to improve the NPA situation.
ƒ Cost to income ratio to stay high…
The bank added 484 employees in Q1FY12 (core employee only 70, rest
sales employee), which has resulted in higher staff cost QoQ at | 61
crore. The cost to income ratio was as high as 87.6% in Q1FY12 on the
back of poor NII show and increasing staff cost. We expect the C/I ratio
to remain at elevated levels of 80% for FY12 and 78% for FY13 as the
bank was unable to show an improvement in its performance.
V a l u a t i o n
The bank is in an investment phase and equity dilution will impact return
ratios. We see 59% CAGR in PAT over FY11-13E. We have revised our
target from |122 to |118 due to lower than estimated PAT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
N e a r t e r m h a z y , l o n g- t e r m * p r o m i s i n g …
Dhanlaxmi Bank reported disappointing Q1FY12 results led by a 29.5%
QoQ fall in NII from | 90.4 crore to | 63.8 crore (lower than our
expectation of | 82 crore). The bank avoided growth in the loan book due
to uncertain market conditions while a rise in cost of funds resulted in a
poor NII show in Q1FY12. NIM was at 2% vs. 2.6% in Q4FY11. An MTM
hit of | 7 crore (total provisions | 9.6 crore in quarter) was an overhang.
PAT was at | 3.4 crore vs. estimated | 7.5 crore, down 44% YoY.
The management has strongly articulated the need to concentrate on
bottomline growth and, thereby, improve return ratios. Phase I of the
story rounding around change of management and processes seems to
be in the last leg. This will show the way for lower cost to income ratio
and higher PAT.
ƒ Growth slowing down, PCR @66% with asset quality improving…
The CAR of the bank stands at 11.4% while Tier I capital is at 9.3%. The
bank is capitalised to support business growth only for a couple of
quarters. The management has guided that fund raising is on track.
Also, the provision coverage ratio is 65.8%. The bank requires another |
2.7 crore of provision in Q2FY12 to reach 70% PCR, which is mandated.
The asset quality of the bank is improving steadily with GNPA declining
from | 76 crore in Q1FY11 to | 67 crore in Q4FY11 and now at | 61
crore in Q1FY11. Simultaneously, NNPA has also improved to | 21
crore. The bank is witnessing higher recoveries compared to fresh
slippages, which has enabled it to improve the NPA situation.
ƒ Cost to income ratio to stay high…
The bank added 484 employees in Q1FY12 (core employee only 70, rest
sales employee), which has resulted in higher staff cost QoQ at | 61
crore. The cost to income ratio was as high as 87.6% in Q1FY12 on the
back of poor NII show and increasing staff cost. We expect the C/I ratio
to remain at elevated levels of 80% for FY12 and 78% for FY13 as the
bank was unable to show an improvement in its performance.
V a l u a t i o n
The bank is in an investment phase and equity dilution will impact return
ratios. We see 59% CAGR in PAT over FY11-13E. We have revised our
target from |122 to |118 due to lower than estimated PAT.
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