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Result Reviews
Punjab National Bank
For 2QFY2012, Punjab National Bank posted modest 12.1% yoy growth in its net
profit to `1,205cr, well ahead of our estimates of `1,033cr on account of
considerably better-than-expected NII and lower-than-expected provisioning
expenses. Sequential improvement in NIM coupled with slippages remaining under
check in spite of completion of migration to system-based NPA recognition
platform were the key positive takeaways from the results. However, restructuring
of advances was considerably higher.
Sequential expansion in NIM; lower slippages but considerably higher
restructuring: For 2QFY2012, the bank’s business momentum remained
moderate, with advances growing by 19.3% yoy (up 2.5% qoq) and deposits
increasing by 25.0% yoy (5.5% qoq). With the persistence of higher interest rates
on fixed deposits, growth in CASA deposits moderated further to 11.7% yoy, as
has been witnessed across almost all banks. Consequently, reported CASA ratio
declined by 100bp qoq and sharply by 420bp yoy to 37.1%. In spite of the decline
in CASA balances, reported NIM of the bank improved by 11bp qoq to 4.0%, on
the back of a 54bp increase in yield on advances. Consequently, the bank
registered reasonable 16.0% growth in NII, 9% above our estimates. Fee income
growth was muted as fresh loans declined considerably on a yoy basis. On the
asset-quality front, the bank surprised positively with slippages rate declining
further to 1.6% from 1.9% witnessed in 1QFY2012, in spite of the completion of
migration to system-based NPA recognition platform. However, the bank
restructured loans of ~`4,000cr during the quarter (`4,563cr in 1HFY2012),
which were considerably higher than the run-rate witnessed over the past few
quarters. More than half of the restructured loans pertained to the power sector,
including `1,750cr restructuring done for loan to Tamil Nadu State Electricity
Board. Gross and net NPA ratios remained largely flat sequentially at 2.1% and
0.8%, respectively. Provision coverage ratio (including technical write-offs) was at
healthy 75.1% levels. The bank made `110cr higher than required provisions for
investment depreciation considering the sharp spike in G-Sec yields post
September 30, 2011.
At the CMP, the stock is trading at 1.2x FY2013E ABV vs. its five-year range of
1.1–1.6x and median of 1.4x. We maintain our Accumulate recommendation on
the stock with a target price of `1,085.
Central Bank of India
For 2QFY2012, Central Bank of India reported a 36.6% yoy decline in its net profit
to `244cr, above our estimate due to higher non-interest income and lower
provisioning expenses than estimated by us. The bank’s other income grew by an
impressive 32.2% yoy to `324cr. However, the asset quality deteriorated during
2QFY2012, with gross NPA ratio at 2.9% (2.3% in 1QFY2012) and net NPA ratio
at 1.4% (0.9% in 1QFY2012). The bank due to its huge branch network got
delayed in converting all its branches to the CBS platform and, hence, started with
the switchover to NPA-based recognition system only post 1QFY2012. The bank
has switched over all accounts worth `10lakhs and above, while the rest
(`26,000cr comprising 20% of loan book) will be switched over in 2HFY2012. At
the CMP, the stock is trading at 0.7x FY2013 ABV. We remain Neutral on the
stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result Reviews
Punjab National Bank
For 2QFY2012, Punjab National Bank posted modest 12.1% yoy growth in its net
profit to `1,205cr, well ahead of our estimates of `1,033cr on account of
considerably better-than-expected NII and lower-than-expected provisioning
expenses. Sequential improvement in NIM coupled with slippages remaining under
check in spite of completion of migration to system-based NPA recognition
platform were the key positive takeaways from the results. However, restructuring
of advances was considerably higher.
Sequential expansion in NIM; lower slippages but considerably higher
restructuring: For 2QFY2012, the bank’s business momentum remained
moderate, with advances growing by 19.3% yoy (up 2.5% qoq) and deposits
increasing by 25.0% yoy (5.5% qoq). With the persistence of higher interest rates
on fixed deposits, growth in CASA deposits moderated further to 11.7% yoy, as
has been witnessed across almost all banks. Consequently, reported CASA ratio
declined by 100bp qoq and sharply by 420bp yoy to 37.1%. In spite of the decline
in CASA balances, reported NIM of the bank improved by 11bp qoq to 4.0%, on
the back of a 54bp increase in yield on advances. Consequently, the bank
registered reasonable 16.0% growth in NII, 9% above our estimates. Fee income
growth was muted as fresh loans declined considerably on a yoy basis. On the
asset-quality front, the bank surprised positively with slippages rate declining
further to 1.6% from 1.9% witnessed in 1QFY2012, in spite of the completion of
migration to system-based NPA recognition platform. However, the bank
restructured loans of ~`4,000cr during the quarter (`4,563cr in 1HFY2012),
which were considerably higher than the run-rate witnessed over the past few
quarters. More than half of the restructured loans pertained to the power sector,
including `1,750cr restructuring done for loan to Tamil Nadu State Electricity
Board. Gross and net NPA ratios remained largely flat sequentially at 2.1% and
0.8%, respectively. Provision coverage ratio (including technical write-offs) was at
healthy 75.1% levels. The bank made `110cr higher than required provisions for
investment depreciation considering the sharp spike in G-Sec yields post
September 30, 2011.
At the CMP, the stock is trading at 1.2x FY2013E ABV vs. its five-year range of
1.1–1.6x and median of 1.4x. We maintain our Accumulate recommendation on
the stock with a target price of `1,085.
Central Bank of India
For 2QFY2012, Central Bank of India reported a 36.6% yoy decline in its net profit
to `244cr, above our estimate due to higher non-interest income and lower
provisioning expenses than estimated by us. The bank’s other income grew by an
impressive 32.2% yoy to `324cr. However, the asset quality deteriorated during
2QFY2012, with gross NPA ratio at 2.9% (2.3% in 1QFY2012) and net NPA ratio
at 1.4% (0.9% in 1QFY2012). The bank due to its huge branch network got
delayed in converting all its branches to the CBS platform and, hence, started with
the switchover to NPA-based recognition system only post 1QFY2012. The bank
has switched over all accounts worth `10lakhs and above, while the rest
(`26,000cr comprising 20% of loan book) will be switched over in 2HFY2012. At
the CMP, the stock is trading at 0.7x FY2013 ABV. We remain Neutral on the
stock.
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