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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 : Rs1,200
Investment Rationale
§ NIMs may improve in H2FY12 led by favourable asset liability repricing: The bank has increased its base
rate by 200bps over last two quarters; however yield on advances has increased by just 70bps during the period.
As all advances get fully reprised by December 2011 only, we may see margin improvement from Q3FY12
onwards.
§ Slippage rate to remain stable @ 1.2%: The bank expect it’s slippage rate to stablise at FY11 levels of 1.2%.
The bank draws comfort from the fact that it has only ~5% of its exposure to SME and less than 3% exposure to
unsecured retail portfolio, which normally throw concern in a rising rate scenario. Moreover its infra exposure is
also relatively lower at 10%, as against 14-17% for other peers. Of the total infra exposure, power exposure is
4.5% with very small exposure to SEB’s.
§ Limited exposure to troubled nations: Over the last three years the bank has reduced its banks/ Financial
institutions bonds exposure significantly from USD2.2bn to USD600mn only. Even of this exposure they have a
very miniscule exposure towards UK, Germany, and France and no exposure to PIIGS countries. Moreover its
non India linked credit derivatives exposure also stands at just USD600mn.
§ Valuations and view: Valuations at 1.7x/1.6x FY12E/FY13E standalone ABV does not look unreasonable with
improving operating matrix. Maintain ACCUMULATE rating with TP of Rs1200
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