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India Equity Research Reports, IPO and Stock News
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ALLAHABAD BANK
PRICE: RS.169 RECOMMENDATION: BUY
TARGET PRICE: RS.225 FY13 P/E: 4.0X, P/ABV: 0.8X
Overall Q2FY12 numbers better than our expectations
q Net interest income (NII) grew 36.0% in Q2FY12 on back of 34 bps expansion
in NIM (YoY), despite moderate loan growth (16.4% YoY). NIM came
at 3.68% during Q2FY12, ahead of our expectations on back of sharper
rise in blended yield on assets (182 bps YoY) vis-à-vis 133 bps rise in cost
of funds.
q However, muted non-interest income (decline of 10.3%) and Rs.824 mn
investment depreciation during Q2FY12 (as against Rs.36 mn in Q2FY11),
somewhat moderated the net profit growth which came at 21.2% YoY
(Rs.4.88 bn).
q Loan book grew at moderate pace (16.4% YoY) due to 7.0% QoQ decline
in agri portfolio; while MSME and retail segments grew at 73.0% and
20.4%, respectively. Deposit mobilization has been strong at 25.0% YoY
with some decline in CASA share (~400 bps YoY); C/D ratio is also down
to 68.2% at the end of Q2FY12.
q Asset quality saw marginal spike as the bank has completely migrated to
system based NPA recognition system. Slippage came at 2.2% (annualized)
during Q2FY12 as against 0.6% witnessed during Q1FY12. In percentage
terms, asset quality is comfortable - gross NPA and net NPA
stand at 1.77% and 0.69%, respectively.
q We are modeling earnings to grow 19.5% CAGR during FY11-13E, while
return ratios are also expected to be healthy (RoE: ~21% during FY12-
13E). At the CMP of Rs.169, the stock is trading reasonable at 4.0x its
FY13E earnings and 0.8x its FY13E ABV. We are maintaining BUY rating
on the stock with revised TP of Rs.225 (Rs.248 earlier) based on 1.0x of its
FY13E adjusted book value.
Core earnings came better than our expectations; NIM also came
ahead of expectations
Net interest income (NII) grew 36.0% to Rs.13.18 bn in Q2FY12 on back of 34 bps
expansion in NIM (YoY), despite moderate loan growth (16.4% YoY). NIM came at
3.68% during Q2FY12, ahead of our expectations on back of sharper rise in blended
yield on assets (182 bps YoY) vis-à-vis 133 bps rise in cost of funds.
However, muted non-interest income (decline of 10.3%) and Rs.824 mn investment
depreciation during Q2FY12 (as against Rs.36 mn in Q2FY11), somewhat moderated
the net profit growth which came at 21.2% YoY (Rs.4.88 bn).
Moderate growth in loan book as agri portfolio declined 7.0%
QoQ; CASA mix declined by ~400 bps YoY as rise in spread between
FD rates and SB rates is showing its effect.
The bank's gross loan book grew at moderate pace (16.4% YoY) due to 7.0% QoQ
decline in agri portfolio; while MSME and retail segments grew at 73.0% and
20.4%, respectively.
During the same period, deposit mobilization has been strong at 25.0% YoY with
some decline in CASA share (30.6%; ~400 bps YoY). Strong growth in deposits visà-
vis advances led to decline in the C/D ratio from 73.2% at the end of Q2FY11 to
68.2% at the end of Q2FY12.
The decline in CASA share is mainly due to rise in spread between FD rates and SB
rates which is showing its effect. We are forecasting CASA share to remain in the
range of 31-32% levels during FY12-13E and this is likely to help the bank in sustaining
healthy NIM, going forward.
Valuations and recommendations
We are modeling earnings to grow 19.5% CAGR during FY11-13E, while return ratios
are also expected to be healthy (RoE: ~21% during FY12-13E).
At the CMP of Rs.169, the stock is trading reasonable at 4.0x its FY13E earnings and
0.8x its FY13E ABV. We are maintaining BUY rating on the stock with revised TP of
Rs.225 (Rs.248 earlier) based on 1.0x of its FY13E adjusted book value.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ALLAHABAD BANK
PRICE: RS.169 RECOMMENDATION: BUY
TARGET PRICE: RS.225 FY13 P/E: 4.0X, P/ABV: 0.8X
Overall Q2FY12 numbers better than our expectations
q Net interest income (NII) grew 36.0% in Q2FY12 on back of 34 bps expansion
in NIM (YoY), despite moderate loan growth (16.4% YoY). NIM came
at 3.68% during Q2FY12, ahead of our expectations on back of sharper
rise in blended yield on assets (182 bps YoY) vis-à-vis 133 bps rise in cost
of funds.
q However, muted non-interest income (decline of 10.3%) and Rs.824 mn
investment depreciation during Q2FY12 (as against Rs.36 mn in Q2FY11),
somewhat moderated the net profit growth which came at 21.2% YoY
(Rs.4.88 bn).
q Loan book grew at moderate pace (16.4% YoY) due to 7.0% QoQ decline
in agri portfolio; while MSME and retail segments grew at 73.0% and
20.4%, respectively. Deposit mobilization has been strong at 25.0% YoY
with some decline in CASA share (~400 bps YoY); C/D ratio is also down
to 68.2% at the end of Q2FY12.
q Asset quality saw marginal spike as the bank has completely migrated to
system based NPA recognition system. Slippage came at 2.2% (annualized)
during Q2FY12 as against 0.6% witnessed during Q1FY12. In percentage
terms, asset quality is comfortable - gross NPA and net NPA
stand at 1.77% and 0.69%, respectively.
q We are modeling earnings to grow 19.5% CAGR during FY11-13E, while
return ratios are also expected to be healthy (RoE: ~21% during FY12-
13E). At the CMP of Rs.169, the stock is trading reasonable at 4.0x its
FY13E earnings and 0.8x its FY13E ABV. We are maintaining BUY rating
on the stock with revised TP of Rs.225 (Rs.248 earlier) based on 1.0x of its
FY13E adjusted book value.
Core earnings came better than our expectations; NIM also came
ahead of expectations
Net interest income (NII) grew 36.0% to Rs.13.18 bn in Q2FY12 on back of 34 bps
expansion in NIM (YoY), despite moderate loan growth (16.4% YoY). NIM came at
3.68% during Q2FY12, ahead of our expectations on back of sharper rise in blended
yield on assets (182 bps YoY) vis-à-vis 133 bps rise in cost of funds.
However, muted non-interest income (decline of 10.3%) and Rs.824 mn investment
depreciation during Q2FY12 (as against Rs.36 mn in Q2FY11), somewhat moderated
the net profit growth which came at 21.2% YoY (Rs.4.88 bn).
Moderate growth in loan book as agri portfolio declined 7.0%
QoQ; CASA mix declined by ~400 bps YoY as rise in spread between
FD rates and SB rates is showing its effect.
The bank's gross loan book grew at moderate pace (16.4% YoY) due to 7.0% QoQ
decline in agri portfolio; while MSME and retail segments grew at 73.0% and
20.4%, respectively.
During the same period, deposit mobilization has been strong at 25.0% YoY with
some decline in CASA share (30.6%; ~400 bps YoY). Strong growth in deposits visà-
vis advances led to decline in the C/D ratio from 73.2% at the end of Q2FY11 to
68.2% at the end of Q2FY12.
The decline in CASA share is mainly due to rise in spread between FD rates and SB
rates which is showing its effect. We are forecasting CASA share to remain in the
range of 31-32% levels during FY12-13E and this is likely to help the bank in sustaining
healthy NIM, going forward.
Valuations and recommendations
We are modeling earnings to grow 19.5% CAGR during FY11-13E, while return ratios
are also expected to be healthy (RoE: ~21% during FY12-13E).
At the CMP of Rs.169, the stock is trading reasonable at 4.0x its FY13E earnings and
0.8x its FY13E ABV. We are maintaining BUY rating on the stock with revised TP of
Rs.225 (Rs.248 earlier) based on 1.0x of its FY13E adjusted book value.
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