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For 2QFY2012, Bank of Maharashtra posted a robust net profit growth of 92.0%
yoy (primarily due to a low-base effect) to `100cr, above our estimates, due to
higher than expected growth in net interest income as well as non-interest income
and significantly lower provisioning expenses than built in by us. Sequential
improvement in NIMs, healthy growth in fee income and sharp improvement in
asset quality were the key positive takeaways from the results. We maintain our
Buy recommendation on the stock.
Remarkable quarter in terms of earning quality: During 2QFY2012, advances
grew by a strong 24.0% yoy, while deposit grew by a moderate 12.5% yoy.
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 the deposit growth at
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, the yield on advances for the
bank increased by 62bp to 11.5%, while the cost of deposits increased by a lower
36bp, leading to a 16bp qoq expansion in calculated NIMs. The bank surprised
on the asset quality front with slippages declining by 50.3% qoq to `93cr
(average quarterly slippages of `226cr since 1QFY2010). The slippages which
have been on a declining trend since 1QFY2011 onwards, improved sharply in
2QFY2012 to 0.8%, compared to 1.6% in 1QFY2012 and 4.0% in 1QFY2011.
The gross NPA ratio improved to 2.2% compared to 2.4% in 1QFY2012, while
the net NPA ratio halved from 1.2% in 1QFY2012 to 0.6%. The provision
coverage ratio (including technical write-offs) improved further to 86.0%.
Outlook and valuation: We expect the bank to deliver a healthy 38.1% earnings
CAGR over FY2011–13E on the back of relatively better NIM, pick-up in fee
income and improving asset quality. At the CMP, the stock is trading at attractive
valuations, in our view, of 0.6x FY2013E ABV vs. its five-year range of 0.6–1.2x
and median of 0.9x. We maintain a Buy on the stock with a target price of `57.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, Bank of Maharashtra posted a robust net profit growth of 92.0%
yoy (primarily due to a low-base effect) to `100cr, above our estimates, due to
higher than expected growth in net interest income as well as non-interest income
and significantly lower provisioning expenses than built in by us. Sequential
improvement in NIMs, healthy growth in fee income and sharp improvement in
asset quality were the key positive takeaways from the results. We maintain our
Buy recommendation on the stock.
Remarkable quarter in terms of earning quality: During 2QFY2012, advances
grew by a strong 24.0% yoy, while deposit grew by a moderate 12.5% yoy.
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 the deposit growth at
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, the yield on advances for the
bank increased by 62bp to 11.5%, while the cost of deposits increased by a lower
36bp, leading to a 16bp qoq expansion in calculated NIMs. The bank surprised
on the asset quality front with slippages declining by 50.3% qoq to `93cr
(average quarterly slippages of `226cr since 1QFY2010). The slippages which
have been on a declining trend since 1QFY2011 onwards, improved sharply in
2QFY2012 to 0.8%, compared to 1.6% in 1QFY2012 and 4.0% in 1QFY2011.
The gross NPA ratio improved to 2.2% compared to 2.4% in 1QFY2012, while
the net NPA ratio halved from 1.2% in 1QFY2012 to 0.6%. The provision
coverage ratio (including technical write-offs) improved further to 86.0%.
Outlook and valuation: We expect the bank to deliver a healthy 38.1% earnings
CAGR over FY2011–13E on the back of relatively better NIM, pick-up in fee
income and improving asset quality. At the CMP, the stock is trading at attractive
valuations, in our view, of 0.6x FY2013E ABV vs. its five-year range of 0.6–1.2x
and median of 0.9x. We maintain a Buy on the stock with a target price of `57.
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