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Indian Overseas Bank
For 2QFY2012, Indian Overseas Bank (IOB) reported a weak set of results with net
profit growing by muted 0.6% yoy, well below ours as well as street’s expectation,
due to higher provisioning charges. Profit growth was also aided by a lower
effective tax rate (of 23.3%).
During 2QFY2012, the business momentum for the bank was stronger than the
industry’s, with sequential advances and deposits growth of 4.5% (up 44.2% yoy)
and 8.2% (up 38.5% yoy), respectively. Calculated NIM in 2QFY2012 was flat
compared to 1QFY2012, while CASA ratio witnessed a 10bp qoq decline to
27.5% in 2QFY2012. The bank’s asset quality deteriorated significantly during
2QFY2012, with provisioning charges increasing by 108.6% yoy to `636cr. For
2QFY2012, gross NPA ratio stood at 3.1% (2.8% in 1QFY2012) and net NPA ratio
stood at 1.2% (1.1% in 1QFY2012). The bank had migrated only accounts worth
`50lakhs to system-based NPA recognition system till 1QFY2012 and, hence, a
decline in asset quality was always on cards. Provision coverage ratio (including
technical write-offs) weakened by ~173bp qoq to 71.8%. At the CMP, the stock is
trading at 0.6x FY2013E ABV. We maintain our Neutral recommendation on the
stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian Overseas Bank
For 2QFY2012, Indian Overseas Bank (IOB) reported a weak set of results with net
profit growing by muted 0.6% yoy, well below ours as well as street’s expectation,
due to higher provisioning charges. Profit growth was also aided by a lower
effective tax rate (of 23.3%).
During 2QFY2012, the business momentum for the bank was stronger than the
industry’s, with sequential advances and deposits growth of 4.5% (up 44.2% yoy)
and 8.2% (up 38.5% yoy), respectively. Calculated NIM in 2QFY2012 was flat
compared to 1QFY2012, while CASA ratio witnessed a 10bp qoq decline to
27.5% in 2QFY2012. The bank’s asset quality deteriorated significantly during
2QFY2012, with provisioning charges increasing by 108.6% yoy to `636cr. For
2QFY2012, gross NPA ratio stood at 3.1% (2.8% in 1QFY2012) and net NPA ratio
stood at 1.2% (1.1% in 1QFY2012). The bank had migrated only accounts worth
`50lakhs to system-based NPA recognition system till 1QFY2012 and, hence, a
decline in asset quality was always on cards. Provision coverage ratio (including
technical write-offs) weakened by ~173bp qoq to 71.8%. At the CMP, the stock is
trading at 0.6x FY2013E ABV. We maintain our Neutral recommendation on the
stock.
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