Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
INDIAN OVERSEAS BANK (IOB)
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.160
FY12E P/E: 6.6X; P/ABV: 1.0X
Q1FY12: NII rose 31% led by strong loan growth (43.6% YoY) despite
marginal dip in NIM (9 bps YoY); slippage came at 1.7%,
lower than 2.7% witnessed during FY11. We tweak our earnings
estimate and retain ACCUMULATE rating on the stock.
q IOB has delivered strong NII grew at 31.0% to Rs.11.88 bn in Q1FY12 on
back of strong loan growth (43.6% YoY) despite of decline in NIM (9 bps
YoY). However, net profit growth was marginal on back of higher provisions
(Rs.5.45 bn during Q1FY12 as compared to Rs.0.77 bn during
Q1FY11) despite strong growth in non-interest income (57.9% YoY) as
well as NII (31.0% YoY).
q IOB has to provide ~Rs.2.9 bn to meet the regulatory requirement of 70%
provision coverage ratio (as on September 2010) along with ~Rs.0.8 bn
(last tranch of amortization arising from the acquisition of Suvarna
Sahakari Bank in FY10) during next three quarters, which will moderate
the earnings growth during FY12E.
q Strong loan growth (43.6% YoY; 4.7% QoQ) on back of robust growth in
corporate and agriculture segments; deposit growth has come on back of
strong growth in term deposits which grew at 49.6% YoY (8.0% QoQ);
however, CASA deposits grew at moderate pace (14.9% YoY; -5.0%
QoQ), which led to decline in the CASA mix from 30.2% at the end of
Q4FY11 to 27.6% at the end of Q1FY12.
q Asset quality has stabilized; since Q4FY10, net NPA are on the downward
trajectory, positive in our view. In absolute terms, gross NPA declined
7.8% YoY (however, it increased by 6.5% QoQ). However, net NPA declined
both YoY as well as QoQ by 29.9% and 5.3%, respectively.
q During Q1FY12, slippage came at Rs.4.85 bn (1.7% on annualized basis).
Although it is on the higher side, it came below the average run-rate witnessed
during last 4 quarters (2.7% during FY11). We believe IOB has to
provide ~Rs.1.9 bn on account of meeting the RBI guidelines (to reach
70% coverage ratio based on September 2010 book)
q We have slightly tweaked our earnings estimate for FY12E; we We maintain
ACCUMULATE rating on the stock with TP of Rs.160 (Rs.162 earlier)
based on 1.25x its FY12E ABV.
NII came at 31.0%, mainly on back of strong loan growth (43.6%);
earnings likely to be muted on back of higher provisions during
next three quarters.
IOB has delivered strong NII grew at 31.0% to Rs.11.88 bn in Q1FY12 on back of
strong loan growth (43.6% YoY) despite of decline in NIM (9 bps YoY).
However, net profit growth was marginal on back of higher provisions (Rs.5.45 bn
during Q1FY12 as compared to Rs.0.77 bn during Q1FY11) despite strong growth in
non-interest income (57.9% YoY) as well as NII (31.0% YoY).
IOB has to provide ~Rs.2.9 bn to meet the regulatory requirement of 70% provision
coverage ratio (as on September 2010) along with ~Rs.0.8 bn (last tranch of amortization
arising from the acquisition of Suvarna Sahakari Bank in FY10) during next
three quarters, which will moderate the earnings growth during FY12E.
Strong loan growth (43.6% YoY; 4.7% QoQ); CASA mix declined
264 bps QoQ to 27.6% at the end of Q1FY12
The bank witnessed strong business growth of 40.5% YoY (4.4% QoQ) to Rs.2703.2
bn at the end of Q1FY12; both loan book as well as deposits grew 43.6% and
38.1%, respectively.
Strong loan growth came on the back of robust growth in corporate book. Other
segments like agriculture, retail and SMEs grew 42.1%, 32.2% and 30.9%, respectively.
Deposit growth has come on back of strong growth in term deposits which grew at
49.6% YoY (8.0% QoQ); however, CASA deposits grew at moderate pace (14.9%
YoY; -5.0% QoQ), which led to decline in the CASA mix from 30.2% at the end of
Q4FY11 to 27.6% at the end of Q1FY12.
Faster loan growth as compared to deposit growth led to improvement in the C/D
ratio from 75.8% at the end of Q4FY11 to 78.8% at the end of Q1FY12.
Buoyant non-interest income on back of healthy fee income as
well as robust recovery from W/O accounts.
Non-interest income was buoyant during Q1FY12 and grew at 57.8% YoY on back
of healthy fee income growth which grew 29.9% YoY as well as robust recovery
from W/O accounts (Rs.995 mn in Q1FY12 as against Rs.269 mn in Q1FY11). During
the same period trading profit was down by 51.4% YoY.
Asset quality has stabilized; slippage came at 1.7%, lower than
2.7% witnessed during FY11.
Asset quality has stabilized; since Q4FY10, net NPA are on the downward trajectory,
positive in our view. In absolute terms, gross NPA declined 7.8% YoY (however, it
increased by 6.5% QoQ). However, net NPA declined both YoY as well as QoQ by
29.9% and 5.3%, respectively.
Gross NPA and net NPA now stand at 2.76% and 1.08%, respectively, at the end of
Q1FY12. Its coverage ratio has reached to 73.5%, an improvement of 300 bps sequentially.
During Q1FY12, slippage came at Rs.4.85 bn (1.7% on annualized basis). Although
it is on the higher side, it came below the average run-rate witnessed during last 4
quarters (2.7% during FY11). We believe IOB has to provide ~Rs.1.9 bn on account
of meeting the RBI guidelines (to reach 70% coverage ratio based on September
2010 book)
Valuation and recommendation
We have slightly tweaked our earnings estimate for FY12E and now expect net
profit for FY12E to be 12.43 bn. This would result into an EPS of Rs.20.1 and ABV of
128.6 for FY12E. They have to provide ~Rs.2.9 bn to meet the regulatory requirement
of 70% provision coverage ratio (as on September 2010) along with ~Rs.0.8
bn (last tranch of amortization arising from the acquisition of Suvarna Sahakari Bank
in FY10) during next three quarters, which will moderate the earnings growth during
FY12E.
At the current market price of Rs.133, the stock is trading at 6.6x its FY12E earnings
and 1.0x its FY12E ABV. We maintain ACCUMULATE rating on the stock with TP of
Rs.160 (Rs.162 earlier) based on 1.25x its FY12E ABV.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
INDIAN OVERSEAS BANK (IOB)
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.160
FY12E P/E: 6.6X; P/ABV: 1.0X
Q1FY12: NII rose 31% led by strong loan growth (43.6% YoY) despite
marginal dip in NIM (9 bps YoY); slippage came at 1.7%,
lower than 2.7% witnessed during FY11. We tweak our earnings
estimate and retain ACCUMULATE rating on the stock.
q IOB has delivered strong NII grew at 31.0% to Rs.11.88 bn in Q1FY12 on
back of strong loan growth (43.6% YoY) despite of decline in NIM (9 bps
YoY). However, net profit growth was marginal on back of higher provisions
(Rs.5.45 bn during Q1FY12 as compared to Rs.0.77 bn during
Q1FY11) despite strong growth in non-interest income (57.9% YoY) as
well as NII (31.0% YoY).
q IOB has to provide ~Rs.2.9 bn to meet the regulatory requirement of 70%
provision coverage ratio (as on September 2010) along with ~Rs.0.8 bn
(last tranch of amortization arising from the acquisition of Suvarna
Sahakari Bank in FY10) during next three quarters, which will moderate
the earnings growth during FY12E.
q Strong loan growth (43.6% YoY; 4.7% QoQ) on back of robust growth in
corporate and agriculture segments; deposit growth has come on back of
strong growth in term deposits which grew at 49.6% YoY (8.0% QoQ);
however, CASA deposits grew at moderate pace (14.9% YoY; -5.0%
QoQ), which led to decline in the CASA mix from 30.2% at the end of
Q4FY11 to 27.6% at the end of Q1FY12.
q Asset quality has stabilized; since Q4FY10, net NPA are on the downward
trajectory, positive in our view. In absolute terms, gross NPA declined
7.8% YoY (however, it increased by 6.5% QoQ). However, net NPA declined
both YoY as well as QoQ by 29.9% and 5.3%, respectively.
q During Q1FY12, slippage came at Rs.4.85 bn (1.7% on annualized basis).
Although it is on the higher side, it came below the average run-rate witnessed
during last 4 quarters (2.7% during FY11). We believe IOB has to
provide ~Rs.1.9 bn on account of meeting the RBI guidelines (to reach
70% coverage ratio based on September 2010 book)
q We have slightly tweaked our earnings estimate for FY12E; we We maintain
ACCUMULATE rating on the stock with TP of Rs.160 (Rs.162 earlier)
based on 1.25x its FY12E ABV.
NII came at 31.0%, mainly on back of strong loan growth (43.6%);
earnings likely to be muted on back of higher provisions during
next three quarters.
IOB has delivered strong NII grew at 31.0% to Rs.11.88 bn in Q1FY12 on back of
strong loan growth (43.6% YoY) despite of decline in NIM (9 bps YoY).
However, net profit growth was marginal on back of higher provisions (Rs.5.45 bn
during Q1FY12 as compared to Rs.0.77 bn during Q1FY11) despite strong growth in
non-interest income (57.9% YoY) as well as NII (31.0% YoY).
IOB has to provide ~Rs.2.9 bn to meet the regulatory requirement of 70% provision
coverage ratio (as on September 2010) along with ~Rs.0.8 bn (last tranch of amortization
arising from the acquisition of Suvarna Sahakari Bank in FY10) during next
three quarters, which will moderate the earnings growth during FY12E.
Strong loan growth (43.6% YoY; 4.7% QoQ); CASA mix declined
264 bps QoQ to 27.6% at the end of Q1FY12
The bank witnessed strong business growth of 40.5% YoY (4.4% QoQ) to Rs.2703.2
bn at the end of Q1FY12; both loan book as well as deposits grew 43.6% and
38.1%, respectively.
Strong loan growth came on the back of robust growth in corporate book. Other
segments like agriculture, retail and SMEs grew 42.1%, 32.2% and 30.9%, respectively.
Deposit growth has come on back of strong growth in term deposits which grew at
49.6% YoY (8.0% QoQ); however, CASA deposits grew at moderate pace (14.9%
YoY; -5.0% QoQ), which led to decline in the CASA mix from 30.2% at the end of
Q4FY11 to 27.6% at the end of Q1FY12.
Faster loan growth as compared to deposit growth led to improvement in the C/D
ratio from 75.8% at the end of Q4FY11 to 78.8% at the end of Q1FY12.
Buoyant non-interest income on back of healthy fee income as
well as robust recovery from W/O accounts.
Non-interest income was buoyant during Q1FY12 and grew at 57.8% YoY on back
of healthy fee income growth which grew 29.9% YoY as well as robust recovery
from W/O accounts (Rs.995 mn in Q1FY12 as against Rs.269 mn in Q1FY11). During
the same period trading profit was down by 51.4% YoY.
Asset quality has stabilized; slippage came at 1.7%, lower than
2.7% witnessed during FY11.
Asset quality has stabilized; since Q4FY10, net NPA are on the downward trajectory,
positive in our view. In absolute terms, gross NPA declined 7.8% YoY (however, it
increased by 6.5% QoQ). However, net NPA declined both YoY as well as QoQ by
29.9% and 5.3%, respectively.
Gross NPA and net NPA now stand at 2.76% and 1.08%, respectively, at the end of
Q1FY12. Its coverage ratio has reached to 73.5%, an improvement of 300 bps sequentially.
During Q1FY12, slippage came at Rs.4.85 bn (1.7% on annualized basis). Although
it is on the higher side, it came below the average run-rate witnessed during last 4
quarters (2.7% during FY11). We believe IOB has to provide ~Rs.1.9 bn on account
of meeting the RBI guidelines (to reach 70% coverage ratio based on September
2010 book)
Valuation and recommendation
We have slightly tweaked our earnings estimate for FY12E and now expect net
profit for FY12E to be 12.43 bn. This would result into an EPS of Rs.20.1 and ABV of
128.6 for FY12E. They have to provide ~Rs.2.9 bn to meet the regulatory requirement
of 70% provision coverage ratio (as on September 2010) along with ~Rs.0.8
bn (last tranch of amortization arising from the acquisition of Suvarna Sahakari Bank
in FY10) during next three quarters, which will moderate the earnings growth during
FY12E.
At the current market price of Rs.133, the stock is trading at 6.6x its FY12E earnings
and 1.0x its FY12E ABV. We maintain ACCUMULATE rating on the stock with TP of
Rs.160 (Rs.162 earlier) based on 1.25x its FY12E ABV.
No comments:
Post a Comment