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IDBI Bank
For 2QFY2012, IDBI Bank reported 20.2% yoy growth in its net profit to
`516cr, which was above our as well as street estimates, primarily on account
of lower-than-estimated provisioning and operating expenses and a lower
effective tax rate. A marginal qoq compression in NIM in spite of strong
traction in CASA balances and continuation of the deteriorating asset-quality
trend was the key highlights of the result.
Healthy CASA traction; asset quality continues to deteriorate: For 2QFY2012,
the bank’s advances grew marginally by 0.6% qoq (up 19.7% yoy). Deposits
declined marginally by 1.0% qoq (up 13.0% yoy). CASA deposits growth
continued to be healthy at 42.2% yoy (9.9% qoq), leading to a 393bp yoy
improvement in CASA ratio to 19.2%. The surge in CASA deposits was led by
robust 67.2% yoy growth in saving account deposits. In spite of the increase in
share of CASA in the funding mix, reported NIM of the bank contracted, albeit
marginally by 7bp, to 2.0%. On the asset-quality front, the deteriorating trend
continued with the annualized gross slippage ratio rising to 2.4% from 1.6% in
1QFY2012. Slippages in 1HFY2012 have been on the higher side,
considering the fact that the bank had already switched over to system-based
NPA recognition platform. Consequently, gross and net NPA ratios rose to
2.5% and 1.6%, respectively, and provision coverage ratio including technical
write-offs fell to 70.1% (74.0% in 1QFY2012). Profitability in 2QFY2012 was
aided by a lower effective tax rate (at 24.8%) as against management’s
guidance of 30-32%.
Outlook and valuation: We believe the bank is set to improve its credit and
deposit mix going forward, on the back of its strong branch expansion plans.
The bank has been amongst the fastest-growing banks in terms of CASA
deposits over the past few years even when compared to private banks and
now has a market share of ~2.1%. At the CMP, the stock is trading at 0.9x
FY2013E P/ABV, adjusting for SASF (0.7x without adjusting). However, in our
view, there are near-term cyclical headwinds to asset quality. Hence,
we remain Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IDBI Bank
For 2QFY2012, IDBI Bank reported 20.2% yoy growth in its net profit to
`516cr, which was above our as well as street estimates, primarily on account
of lower-than-estimated provisioning and operating expenses and a lower
effective tax rate. A marginal qoq compression in NIM in spite of strong
traction in CASA balances and continuation of the deteriorating asset-quality
trend was the key highlights of the result.
Healthy CASA traction; asset quality continues to deteriorate: For 2QFY2012,
the bank’s advances grew marginally by 0.6% qoq (up 19.7% yoy). Deposits
declined marginally by 1.0% qoq (up 13.0% yoy). CASA deposits growth
continued to be healthy at 42.2% yoy (9.9% qoq), leading to a 393bp yoy
improvement in CASA ratio to 19.2%. The surge in CASA deposits was led by
robust 67.2% yoy growth in saving account deposits. In spite of the increase in
share of CASA in the funding mix, reported NIM of the bank contracted, albeit
marginally by 7bp, to 2.0%. On the asset-quality front, the deteriorating trend
continued with the annualized gross slippage ratio rising to 2.4% from 1.6% in
1QFY2012. Slippages in 1HFY2012 have been on the higher side,
considering the fact that the bank had already switched over to system-based
NPA recognition platform. Consequently, gross and net NPA ratios rose to
2.5% and 1.6%, respectively, and provision coverage ratio including technical
write-offs fell to 70.1% (74.0% in 1QFY2012). Profitability in 2QFY2012 was
aided by a lower effective tax rate (at 24.8%) as against management’s
guidance of 30-32%.
Outlook and valuation: We believe the bank is set to improve its credit and
deposit mix going forward, on the back of its strong branch expansion plans.
The bank has been amongst the fastest-growing banks in terms of CASA
deposits over the past few years even when compared to private banks and
now has a market share of ~2.1%. At the CMP, the stock is trading at 0.9x
FY2013E P/ABV, adjusting for SASF (0.7x without adjusting). However, in our
view, there are near-term cyclical headwinds to asset quality. Hence,
we remain Neutral on the stock.
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