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RATING....................................................................................... Changed from Buy to Hold
M o u n t i n g p r o v i s i on s t a k e a t o l l …
IOB registered disappointing PAT of | 108.3 crore, thereby recording 53.3%
YoY and 47.8% QoQ de-growth. PAT fell by | 276 crore due to restructuring
provisions; of which | 214 crore was due to sacrifice in NPV while | 76
crore was due to interest income reversal, which affected NII. NII grew 8.1%
YoY to | 1222 crore while NIM dipped by 25 bps QoQ to 2.6%. Though
credit growth was strong and in line with estimates at 32.4% YoY, the
management has guided for modest 21% credit growth by FY12E. Noninterest income was healthy at 17% YoY growth to | 411 crore while the C/I
ratio jumped 318 bps QoQ to 49.6%. Gross NPA increased marginally by
1.9% QoQ to | 3972 crore while restructured assets grew 40.4% QoQ to
| 10082 crore. Provisions increased sharply by 86.3% YoY to | 667.4 crore.
In light of rising restructuring provisioning, we have increased FY12E and
FY13E provisions, thereby cutting our PAT estimate by 11.7% to | 818.9
crore and 8% to | 1101.7 crore, respectively.
ƒ Telecom, power and media restructuring cause provisioning to rise…
Total restructured assets in Q3FY12 stood at | 10082 crore (7.6% of
advances) with | 2903 crore assets restructured during the quarter.
Provisions worth | 214 crore were made for this restructuring. The
bank had to make provisions worth | 180 crore for sacrifice in NPV for
restructuring of telecom infra players (exposure of | 1250 crore).
Power and media sector restructuring accounted for | 1000 crore and
| 295 crore, respectively. Small scale accounts of the textile and steel
sector also witnessed stress, thereby constituting 9% and 8.3%,
respectively, of the amount restructured during the quarter. The
management has guided that fresh restructuring during Q4FY12E shall
not exceed | 800 crore, excluding the Air India exposure.
ƒ NIM takes a hit, dips 66 bps YoY and 25 bps QoQ to 2.6%…
NIM took a hit as YoA dipped 10 bps QoQ to 10.8% on account of
interest income reversal worth | 76 crore due to restructuring. Even
the CASA ratio has plunged by 482 bps YoY to 26.12%, thereby
causing CoF to rise by 172 bps YoY and 14 bps QoQ to 7.3%.
V a l u a t i o n
In spite of high credit growth, NIM has consistently been under pressure
while restructured asset (forming 7.6% of advances) is denting profitability.
PAT is expected to remain volatile on account of provisions for couple of
quarters. We have valued the bank at 0.8xFY13E ABV with a target price of
| 94 and HOLD rating with a negative bias
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RATING....................................................................................... Changed from Buy to Hold
M o u n t i n g p r o v i s i on s t a k e a t o l l …
IOB registered disappointing PAT of | 108.3 crore, thereby recording 53.3%
YoY and 47.8% QoQ de-growth. PAT fell by | 276 crore due to restructuring
provisions; of which | 214 crore was due to sacrifice in NPV while | 76
crore was due to interest income reversal, which affected NII. NII grew 8.1%
YoY to | 1222 crore while NIM dipped by 25 bps QoQ to 2.6%. Though
credit growth was strong and in line with estimates at 32.4% YoY, the
management has guided for modest 21% credit growth by FY12E. Noninterest income was healthy at 17% YoY growth to | 411 crore while the C/I
ratio jumped 318 bps QoQ to 49.6%. Gross NPA increased marginally by
1.9% QoQ to | 3972 crore while restructured assets grew 40.4% QoQ to
| 10082 crore. Provisions increased sharply by 86.3% YoY to | 667.4 crore.
In light of rising restructuring provisioning, we have increased FY12E and
FY13E provisions, thereby cutting our PAT estimate by 11.7% to | 818.9
crore and 8% to | 1101.7 crore, respectively.
ƒ Telecom, power and media restructuring cause provisioning to rise…
Total restructured assets in Q3FY12 stood at | 10082 crore (7.6% of
advances) with | 2903 crore assets restructured during the quarter.
Provisions worth | 214 crore were made for this restructuring. The
bank had to make provisions worth | 180 crore for sacrifice in NPV for
restructuring of telecom infra players (exposure of | 1250 crore).
Power and media sector restructuring accounted for | 1000 crore and
| 295 crore, respectively. Small scale accounts of the textile and steel
sector also witnessed stress, thereby constituting 9% and 8.3%,
respectively, of the amount restructured during the quarter. The
management has guided that fresh restructuring during Q4FY12E shall
not exceed | 800 crore, excluding the Air India exposure.
ƒ NIM takes a hit, dips 66 bps YoY and 25 bps QoQ to 2.6%…
NIM took a hit as YoA dipped 10 bps QoQ to 10.8% on account of
interest income reversal worth | 76 crore due to restructuring. Even
the CASA ratio has plunged by 482 bps YoY to 26.12%, thereby
causing CoF to rise by 172 bps YoY and 14 bps QoQ to 7.3%.
V a l u a t i o n
In spite of high credit growth, NIM has consistently been under pressure
while restructured asset (forming 7.6% of advances) is denting profitability.
PAT is expected to remain volatile on account of provisions for couple of
quarters. We have valued the bank at 0.8xFY13E ABV with a target price of
| 94 and HOLD rating with a negative bias
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