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● UBI’s 1Q operating performance was in line but net profit (Rs1.3
bn; + 23% YoY; 0.6% RoA) was lower than estimates on higher
loan loss provisions.
● NIMs held up well at 3.0% (down 11 bp QoQ due to higher
savings deposit rate) and CASA share remained robust at 40%.
Loan growth was muted in 1Q (-2% QoQ; 18% YoY) and LDR
continued to be low at 68% (lowest among peers). Management
expects to grow at ~20% in FY12 and maintain 3% margin.
● Slippages were high in 1Q (similar to peers) at 3.2% (2.8% in 4Q),
leading to 1.1% credit costs, and the bank has also restructured
0.5% of loans. NPL cover was broadly stable at 70%.
Management indicates that near-term asset quality pressures are
likely to persist but is confident of maintaining gross NPLs at less
than 3% levels.
● Our FY12–13E EPS reduces 7–5% on higher provisions (target
price reduces by 2% to Rs134—1.0x FY12bv). We believe asset
quality concerns for the bank are similar to peers, but it is trading
at a 15–35% discount (0.7xFY12bv). We maintain
OUTPERFORM, given the strong deposit franchise (40% CASA)
and healthy Tier 1 (9.1%).
Operating performance in-line
Loan growth was muted during the quarter (-2% QoQ; 18% YoY) and
management expects loan growth of ~20% in FY12. Deposit was kept
in pace with loan growth at 16% YoY and loan-deposit ratio remained
low at 68% (lowest among peers). Margins were down only 11 bp
QoQ to 3.0%, in line with our estimates (drop in NIMs was mainly
driven by higher savings deposit rate). The bank is confident of
maintaining margins of ~3.0% levels in the future (the bank has room
to improve LDRs). The share of CASA deposits continued to be robust
at 40%. Trading gains were at Rs0.65 bn during the quarter (15% of
pre-provision profits). The bank has not made any pension/gratuity
provisions during the quarter (has to make Rs0.9 bn provisions in
FY12). Tier 1 is comfortable at 9.1%.
Asset quality pressures persist
Gross slippages during the quarter were high at 3.2% of the loans
(Rs3.9 bn) annualised (versus 2.8% in 4Q). 20% of the slippages are
from the restructured loans. The bank has also restructured ~Rs2.8 bn
(0.5% of loans) during the quarter. This led to credit costs of 1.1%
during the quarter (versus 0.9% in 4Q11). Gross NPLs were up 38 bp
QoQ to 2.9% and coverage continued to be stable at 70% (including
write-offs). The restructured assets outstanding are at 3.9% of loans
and cumulative slippages from the restructured assets are at 15%.
Management expects slippages to be higher in the near term (yet to
move to system-based NPL recognition for loans
confident of maintaining gross NPLs at less than 3% levels. We
forecast FY12-13 credit costs to be 1.1–1.0%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● UBI’s 1Q operating performance was in line but net profit (Rs1.3
bn; + 23% YoY; 0.6% RoA) was lower than estimates on higher
loan loss provisions.
● NIMs held up well at 3.0% (down 11 bp QoQ due to higher
savings deposit rate) and CASA share remained robust at 40%.
Loan growth was muted in 1Q (-2% QoQ; 18% YoY) and LDR
continued to be low at 68% (lowest among peers). Management
expects to grow at ~20% in FY12 and maintain 3% margin.
● Slippages were high in 1Q (similar to peers) at 3.2% (2.8% in 4Q),
leading to 1.1% credit costs, and the bank has also restructured
0.5% of loans. NPL cover was broadly stable at 70%.
Management indicates that near-term asset quality pressures are
likely to persist but is confident of maintaining gross NPLs at less
than 3% levels.
● Our FY12–13E EPS reduces 7–5% on higher provisions (target
price reduces by 2% to Rs134—1.0x FY12bv). We believe asset
quality concerns for the bank are similar to peers, but it is trading
at a 15–35% discount (0.7xFY12bv). We maintain
OUTPERFORM, given the strong deposit franchise (40% CASA)
and healthy Tier 1 (9.1%).
Operating performance in-line
Loan growth was muted during the quarter (-2% QoQ; 18% YoY) and
management expects loan growth of ~20% in FY12. Deposit was kept
in pace with loan growth at 16% YoY and loan-deposit ratio remained
low at 68% (lowest among peers). Margins were down only 11 bp
QoQ to 3.0%, in line with our estimates (drop in NIMs was mainly
driven by higher savings deposit rate). The bank is confident of
maintaining margins of ~3.0% levels in the future (the bank has room
to improve LDRs). The share of CASA deposits continued to be robust
at 40%. Trading gains were at Rs0.65 bn during the quarter (15% of
pre-provision profits). The bank has not made any pension/gratuity
provisions during the quarter (has to make Rs0.9 bn provisions in
FY12). Tier 1 is comfortable at 9.1%.
Asset quality pressures persist
Gross slippages during the quarter were high at 3.2% of the loans
(Rs3.9 bn) annualised (versus 2.8% in 4Q). 20% of the slippages are
from the restructured loans. The bank has also restructured ~Rs2.8 bn
(0.5% of loans) during the quarter. This led to credit costs of 1.1%
during the quarter (versus 0.9% in 4Q11). Gross NPLs were up 38 bp
QoQ to 2.9% and coverage continued to be stable at 70% (including
write-offs). The restructured assets outstanding are at 3.9% of loans
and cumulative slippages from the restructured assets are at 15%.
Management expects slippages to be higher in the near term (yet to
move to system-based NPL recognition for loans
confident of maintaining gross NPLs at less than 3% levels. We
forecast FY12-13 credit costs to be 1.1–1.0%.
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