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Bank of Maharashtra
For 2QFY2012, Bank of Maharashtra posted strong net profit growth of 52.0% yoy
to `100cr, above our estimates, due to higher-than-expected growth in net interest
income and non-interest income and significantly lower provisioning expenses than
built in by us. Sequential improvement in NIM, healthy growth in fee income and
sharp improvement in asset quality were the key positive takeaways from the
results.
Remarkable quarter in terms of earnings quality: During 2QFY2012, advances
grew strongly by 24.0% yoy to `50,043cr, while deposits grew moderately by
12.5% yoy to `63,976cr. Consequently, the bank’s incremental CD ratio for
2QFY2012 stood at 227.6%, leading to overall CD ratio improving from 69.1% in
1QFY2012 to 72.1% in 2QFY2012. CASA deposits growth was comparable to
deposit growth of 12.4% yoy, with saving account deposits rising by 13.3% yoy.
On the back of reasonable growth in CASA deposits, the bank was able to
improve its CASA ratio albeit marginally to 40.7%. During 2QFY2012, yield on
advances increased by 62bp to 11.5%, while cost of deposits increased by a lower
36bp, leading to a sequential expansion in reported NIM. The bank surprised on
the asset-quality front, with slippages declining by 50.3% qoq to `93cr (average
`226cr since 1QFY2010). Slippages, which have been on a declining trend since
1QFY2011, improved sharply in 2QFY2012 to 0.8% compared to 1.6% in
1QFY2012 and 4.0% in 1QFY2011. Gross NPA ratio improved to 2.2% compared
to 2.4% in 1QFY2012, while net NPA ratio halved from 1.2% in 1QFY2012 to
0.6%. Provision coverage ratio (including technical write-offs), which was as low as
54.7% in 1QFY2011, increased from 73.2% in 1QFY2012 to 86.0%.
We expect the bank to deliver healthy 38.1% earnings CAGR over FY2011-13E on
the back of largely stable NIM, pick-up in fee income and improving asset quality.
At the CMP, in our view, the stock is trading at attractive valuations of 0.6x
FY2013E ABV vs. its five-year range of 0.6-1.2x and median of 0.9x. We
recommend Buy on the stock with a target price of `57, implying an upside of
19.5% from current levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bank of Maharashtra
For 2QFY2012, Bank of Maharashtra posted strong net profit growth of 52.0% yoy
to `100cr, above our estimates, due to higher-than-expected growth in net interest
income and non-interest income and significantly lower provisioning expenses than
built in by us. Sequential improvement in NIM, healthy growth in fee income and
sharp improvement in asset quality were the key positive takeaways from the
results.
Remarkable quarter in terms of earnings quality: During 2QFY2012, advances
grew strongly by 24.0% yoy to `50,043cr, while deposits grew moderately by
12.5% yoy to `63,976cr. Consequently, the bank’s incremental CD ratio for
2QFY2012 stood at 227.6%, leading to overall CD ratio improving from 69.1% in
1QFY2012 to 72.1% in 2QFY2012. CASA deposits growth was comparable to
deposit growth of 12.4% yoy, with saving account deposits rising by 13.3% yoy.
On the back of reasonable growth in CASA deposits, the bank was able to
improve its CASA ratio albeit marginally to 40.7%. During 2QFY2012, yield on
advances increased by 62bp to 11.5%, while cost of deposits increased by a lower
36bp, leading to a sequential expansion in reported NIM. The bank surprised on
the asset-quality front, with slippages declining by 50.3% qoq to `93cr (average
`226cr since 1QFY2010). Slippages, which have been on a declining trend since
1QFY2011, improved sharply in 2QFY2012 to 0.8% compared to 1.6% in
1QFY2012 and 4.0% in 1QFY2011. Gross NPA ratio improved to 2.2% compared
to 2.4% in 1QFY2012, while net NPA ratio halved from 1.2% in 1QFY2012 to
0.6%. Provision coverage ratio (including technical write-offs), which was as low as
54.7% in 1QFY2011, increased from 73.2% in 1QFY2012 to 86.0%.
We expect the bank to deliver healthy 38.1% earnings CAGR over FY2011-13E on
the back of largely stable NIM, pick-up in fee income and improving asset quality.
At the CMP, in our view, the stock is trading at attractive valuations of 0.6x
FY2013E ABV vs. its five-year range of 0.6-1.2x and median of 0.9x. We
recommend Buy on the stock with a target price of `57, implying an upside of
19.5% from current levels.
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