Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oriental Bank of Commerce
S t e a d y p e r f o r m a n c e i n t o u g h s c e n a r i o…
Oriental Bank of Commerce’s (OBC) business grew 16% YoY (3.3% QoQ)
to | 2,42,770 crore. NII was flat QoQ at | 1018 crore (our estimate: | 1022
crore) with non interest income up 50.8% YoY to | 324 crore due to
healthy treasury income at | 72 crore (in a scenario where most banks are
facing MTM situation). NIM was stable at 2.94% (4 bps QoQ dip) but OBC
aims to improve its NIM to 3% by FY12E. The cost to income ratio (C/I)
jumped from 35.8% in Q4FY11 to 40.3% in Q1FY12 as it provided | 105
crore for second pension option and gratuity. Provisions excluding taxes
declined 44% QoQ easing pressure off profits that grew 6.3% QoQ to |
355 crore. GNPA and NNPA came in at 2.1% and 1.1%, respectively, as
bank migrated loans above | 10 lakh to system based NPA. We expect
GNPA and NNPA at 2% and 1%, respectively, by FY13E.
ƒ Business to grow at 19% CAGR over FY11-13E
Deposits grew 17.5% YoY (4% QoQ) to | 1,44,554 crore while
advances increased 14.1% YoY (2.4% QoQ) to | 9,8216 crore. The
bank is targeting credit growth of 20% YoY with deposit growth low
at 17% as its C/D ratio is relatively low at 68% leaving room for
growth in FY12E. OBC plans to add 20 branches each quarter, which
would improve CASA (currently 23.4%). We estimate 19% CAGR in
total business to boost PAT by 21% CAGR over FY11-13E.
ƒ Slippages to remain high in Q2FY12 as well…
Due to system based NPA recognition, GNPA rose 5.9% QoQ to |
2034 crore while NNPA shot up 13% QoQ to | 1059 crore in
Q1FY12. OBC has already shifted loans above | 10 lakh to system
based NPA recognition and will shift remaining ~12% of its loan
book by the end of Q2FY11 that may lead to incremental slippages.
The bank expects delinquency ratio to be in the range of 1-1.5%.
V a l u a t i o n
OBC is currently trading at an attractive 0.9x its FY13E ABV with
consistent RoA of ~1% and RoE ~15%. We expect RoA of 1.1% and ROE
of 16.3% for FY13E. We are positive on the long-term fundamentals of the
bank and believe it should get a multiple of 1x FY13E ABV. Hence, we
have arrived at a target price of | 410 and recommend a BUY rating on
the stock. Asset quality would be an overhang in the near term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oriental Bank of Commerce
S t e a d y p e r f o r m a n c e i n t o u g h s c e n a r i o…
Oriental Bank of Commerce’s (OBC) business grew 16% YoY (3.3% QoQ)
to | 2,42,770 crore. NII was flat QoQ at | 1018 crore (our estimate: | 1022
crore) with non interest income up 50.8% YoY to | 324 crore due to
healthy treasury income at | 72 crore (in a scenario where most banks are
facing MTM situation). NIM was stable at 2.94% (4 bps QoQ dip) but OBC
aims to improve its NIM to 3% by FY12E. The cost to income ratio (C/I)
jumped from 35.8% in Q4FY11 to 40.3% in Q1FY12 as it provided | 105
crore for second pension option and gratuity. Provisions excluding taxes
declined 44% QoQ easing pressure off profits that grew 6.3% QoQ to |
355 crore. GNPA and NNPA came in at 2.1% and 1.1%, respectively, as
bank migrated loans above | 10 lakh to system based NPA. We expect
GNPA and NNPA at 2% and 1%, respectively, by FY13E.
ƒ Business to grow at 19% CAGR over FY11-13E
Deposits grew 17.5% YoY (4% QoQ) to | 1,44,554 crore while
advances increased 14.1% YoY (2.4% QoQ) to | 9,8216 crore. The
bank is targeting credit growth of 20% YoY with deposit growth low
at 17% as its C/D ratio is relatively low at 68% leaving room for
growth in FY12E. OBC plans to add 20 branches each quarter, which
would improve CASA (currently 23.4%). We estimate 19% CAGR in
total business to boost PAT by 21% CAGR over FY11-13E.
ƒ Slippages to remain high in Q2FY12 as well…
Due to system based NPA recognition, GNPA rose 5.9% QoQ to |
2034 crore while NNPA shot up 13% QoQ to | 1059 crore in
Q1FY12. OBC has already shifted loans above | 10 lakh to system
based NPA recognition and will shift remaining ~12% of its loan
book by the end of Q2FY11 that may lead to incremental slippages.
The bank expects delinquency ratio to be in the range of 1-1.5%.
V a l u a t i o n
OBC is currently trading at an attractive 0.9x its FY13E ABV with
consistent RoA of ~1% and RoE ~15%. We expect RoA of 1.1% and ROE
of 16.3% for FY13E. We are positive on the long-term fundamentals of the
bank and believe it should get a multiple of 1x FY13E ABV. Hence, we
have arrived at a target price of | 410 and recommend a BUY rating on
the stock. Asset quality would be an overhang in the near term.
No comments:
Post a Comment