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For 2QFY2012, Vijaya Bank reported a decent set of numbers, which were
considerably higher than our expectations partly on account of lower effective tax rate
of 16.5%. Overall, results surprised positively with the absolute amount of gross and
net NPAs declining sequentially. We maintain our Neutral stance on the stock.
Business growth momentum sustained; slippages elevated but more than offset by
recoveries and upgrades: For 2QFY2012, the bank’s advances growth was
healthy on a yoy basis at 36.4% and deposits growth was also ahead of peers at
24.1% yoy. CASA ratio as of 2QFY2012 dipped by 105bp qoq and 275bp yoy to
23.0%. Reported NIM for the quarter improved by 40bp qoq on the back of a
51bp qoq expansion in yield on advances. Considering the bank’s weak deposit
franchise, cost of deposits increased by 36bp qoq to 7.6%. Non-interest income
declined by 10.2% yoy, primarily on account of a 75% yoy dip in treasury income.
On the asset-quality front, though the annualized slippage ratio came off from
5.0% witnessed in 1QFY2012, it remained elevated at 3.7%. However, aggressive
recoveries and stronger upgrades led to a 4.7% and 8.6% qoq decline in gross
and net NPAs, respectively. Consequently, gross and net NPA ratios improved to
2.5% (from 2.8% in 1QFY2012) and 1.4% (from 1.7% in 1QFY2012),
respectively. Provision coverage ratio (including technical write-offs) improved by
266bp qoq to 66.1%.
Outlook and valuation: During 2QFY2012, Vijaya Bank’s asset-quality concerns
persisted with slippages remaining elevated. However, in line with the
management’s guidance, the bank did witness a rise in recoveries and upgrades
leading to a sequential decline in gross and net NPAs. Despite this, RoA is likely to
remain at low levels of ~0.4-0.5% for FY2012 and FY2013. Currently, the stock
is trading at 0.7x FY2013E ABV, which is slightly expensive compared to its peers
which have better return ratios. Hence, we remain Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, Vijaya Bank reported a decent set of numbers, which were
considerably higher than our expectations partly on account of lower effective tax rate
of 16.5%. Overall, results surprised positively with the absolute amount of gross and
net NPAs declining sequentially. We maintain our Neutral stance on the stock.
Business growth momentum sustained; slippages elevated but more than offset by
recoveries and upgrades: For 2QFY2012, the bank’s advances growth was
healthy on a yoy basis at 36.4% and deposits growth was also ahead of peers at
24.1% yoy. CASA ratio as of 2QFY2012 dipped by 105bp qoq and 275bp yoy to
23.0%. Reported NIM for the quarter improved by 40bp qoq on the back of a
51bp qoq expansion in yield on advances. Considering the bank’s weak deposit
franchise, cost of deposits increased by 36bp qoq to 7.6%. Non-interest income
declined by 10.2% yoy, primarily on account of a 75% yoy dip in treasury income.
On the asset-quality front, though the annualized slippage ratio came off from
5.0% witnessed in 1QFY2012, it remained elevated at 3.7%. However, aggressive
recoveries and stronger upgrades led to a 4.7% and 8.6% qoq decline in gross
and net NPAs, respectively. Consequently, gross and net NPA ratios improved to
2.5% (from 2.8% in 1QFY2012) and 1.4% (from 1.7% in 1QFY2012),
respectively. Provision coverage ratio (including technical write-offs) improved by
266bp qoq to 66.1%.
Outlook and valuation: During 2QFY2012, Vijaya Bank’s asset-quality concerns
persisted with slippages remaining elevated. However, in line with the
management’s guidance, the bank did witness a rise in recoveries and upgrades
leading to a sequential decline in gross and net NPAs. Despite this, RoA is likely to
remain at low levels of ~0.4-0.5% for FY2012 and FY2013. Currently, the stock
is trading at 0.7x FY2013E ABV, which is slightly expensive compared to its peers
which have better return ratios. Hence, we remain Neutral on the stock.
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