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Syndicate Bank
For 2QFY2012, Syndicate Bank reported 36.2% yoy growth in its net profit to
`323cr, well ahead of our as well as street estimates. However, earnings growth
was partly driven by a lower effective tax rate than expected. On the PBT front,
numbers were 7.5% ahead of our estimates. Healthy expansion in NIM coupled
with largely stable asset quality (in spite of completion of deadline for switchover to
system-based NPA recognition platform) were the key positive takeaways from the
results.
Healthy business growth with stable asset quality: The bank’s advances grew by
3.3% qoq (up 18.9% yoy), while deposits accretion picked up pace to rise by 6.2%
qoq (up by 21.5% yoy). The bank’s reported NIM for the quarter rebounded by
28bp qoq to 3.4% on the back of a 71bp qoq expansion in loan yields as
compared to a 33bp rise in cost of deposits. Asset quality was largely maintained
despite completion of deadline for switchover to system-based NPA recognition
platform. Gross and net NPA ratios were almost flat sequentially at 2.4% and
0.9%, respectively. Provision coverage ratio including technical write-offs remained
healthy at 78.5%.
At the CMP, the stock is trading at attractive valuations of 0.7x FY2013E ABV
compared to its five-year range of 0.7-1.3x one-year forward ABV with a median
of 0.9x. Keeping in mind the bank’s stable asset quality, moderate growth strategy
over the past couple of years and moderate NIM, its valuation appears cheap
relative to peers. We value the stock at 0.85x FY2013E ABV and maintain a Buy
recommendation with a target price of `125.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Syndicate Bank
For 2QFY2012, Syndicate Bank reported 36.2% yoy growth in its net profit to
`323cr, well ahead of our as well as street estimates. However, earnings growth
was partly driven by a lower effective tax rate than expected. On the PBT front,
numbers were 7.5% ahead of our estimates. Healthy expansion in NIM coupled
with largely stable asset quality (in spite of completion of deadline for switchover to
system-based NPA recognition platform) were the key positive takeaways from the
results.
Healthy business growth with stable asset quality: The bank’s advances grew by
3.3% qoq (up 18.9% yoy), while deposits accretion picked up pace to rise by 6.2%
qoq (up by 21.5% yoy). The bank’s reported NIM for the quarter rebounded by
28bp qoq to 3.4% on the back of a 71bp qoq expansion in loan yields as
compared to a 33bp rise in cost of deposits. Asset quality was largely maintained
despite completion of deadline for switchover to system-based NPA recognition
platform. Gross and net NPA ratios were almost flat sequentially at 2.4% and
0.9%, respectively. Provision coverage ratio including technical write-offs remained
healthy at 78.5%.
At the CMP, the stock is trading at attractive valuations of 0.7x FY2013E ABV
compared to its five-year range of 0.7-1.3x one-year forward ABV with a median
of 0.9x. Keeping in mind the bank’s stable asset quality, moderate growth strategy
over the past couple of years and moderate NIM, its valuation appears cheap
relative to peers. We value the stock at 0.85x FY2013E ABV and maintain a Buy
recommendation with a target price of `125.
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