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India Equity Research Reports, IPO and Stock News
India Equity Research Reports, IPO and Stock News
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TP : Rs1,380
Investment Rationale
§ Declining CASA proportion to hit margins in rising rate scenario: CASA mix has fallen from ~47% in FY10
to ~41% in FY11. With ~150-200bps increase in deposit rates across all major buckets, we expect the CASA
share to fall by ~200bps over FY12/13 as more people (particularly retail deposits) shift to term deposits in rising
rate scenario.
§ Earnings growth to moderate; margin compression evident: We expect earnings growth to moderate to 19%
CAGR over FY11-13 led by steep 50bps compression in margins and relatively lower advance growth of 23%
over the same period.
§ Exposure to retail and SME could pose risk: The bank slippage rate has moderated to 0.9% in FY11 from
1.5% in FY10. The GNPA stood at 1.0% while NNPA were at 0.3% of advances as on 31st March 2011.
However, with ~34% of loan portfolio being towards vulnerable segment of retail and SME, this could pose risk to
our NPA assumptions .
Valuations
§ At CMP, the stock trades at 2x FY12 ABV of Rs514 and 1.7x FY13ABV of Rs602 with RoE of >20% and RoA of
~1.4-1.5%
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