Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We had a meeting with the bank’s management (Mr. Basant Seth, present
CMD and Mr. M G Sanghvi, Chairman Designate); followings are the key
takeaways of the meeting:
The in-coming CMD (Mr. Sanghvi) appeared confident of expanding bank’s
credit book faster than the banking industry; he expects credit growth in a
range of 22-24% in FY13. There is a change in stance as the present
bank’s management continued with moderate credit book expansion
at 16-17% and the in-coming CMD expects credit expansion higher
than industry pace at 22-24% YoY. The latter believes that there is
significant scope to accelerate retail and MSME loan books.
Credit composition could re-balance in favor of retail credit; its composition
could further increase by 200—300 bps to 23-24% by end-March’13 (from
21% as on end-March’11).
Margin is expected to moderate in FY13 in declining interest rate scenario,
but the in-coming CMD indicated that fresh equity capital and containment
of liabilities cost would lead to marginal drift in margin.
Fee income growth would enhance further on the back of strong loan growth
and levying processing charges diligently across the loan book.
The in-coming CMD said there is a scope of improvement on treasury front
as well. He indicated that in declining interest rate scenario and with serious
efforts in place, the bank could make handsome gains.
On gross NPL front, both the people (the current CMD and in-coming CMD)
indicated that net addition to GNPL would be negligible; GNPL would not
rise hereon by the end-FY13.
The bank’s management expects write-back on tax provision due to writeoff
done in agriculture debt waiver & relief schemes, though this matter
requires further clarity.
Overall, the in-coming CMD sounded quite positive on credit growth (particularly
opportunities in retail credit), fee income growth, treasury gains and past overprovisioning
on employee expenses (below the line) & NPLs.
In another development, in the bank’s EGM (extra-ordinary general meeting
to be held on 22nd March’12), the bank’s board of directors (BoD) would
consider and permit, equity shares allotment to GoI and LIC on prefrential
basis to tune of ` 5.4bn and ` 3.3bn respectively at a price of ` 114 per
share, subject to approval.
As on end-December’11, Syndicate Bank’s book value and adjusted value were at
` 134 and ` 116 respectively; the equity share allotments are being done at below
book value and degree of equity dilution would be close to 15.1%. The equity dilution
is book value and RoAE dilutive, though bottomline would increase marginally due
to fresh equity funds availability.
We change our earning estimates to factor in fresh equity capital infusion of `
8.7bn. We increase our FY13 earning estimates by 1.6% to ` 15.9bn; though, we
reduce our target price by 1.8% to ` 120 at 0.93x adjusted book value FY13.
At current price, the stock quotes at 0.8x adjusted book FY13. Our target price of
` 120 factors in 0.9x adjusted book value. Should there be an improvement in RoAA
in FY13 on the back of higher credit growth, traction in fee income, containment in
GNPL and write-back of some NPL provisions, the bank’s profitability would enhance
and its valuation multiple would expand further.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We had a meeting with the bank’s management (Mr. Basant Seth, present
CMD and Mr. M G Sanghvi, Chairman Designate); followings are the key
takeaways of the meeting:
The in-coming CMD (Mr. Sanghvi) appeared confident of expanding bank’s
credit book faster than the banking industry; he expects credit growth in a
range of 22-24% in FY13. There is a change in stance as the present
bank’s management continued with moderate credit book expansion
at 16-17% and the in-coming CMD expects credit expansion higher
than industry pace at 22-24% YoY. The latter believes that there is
significant scope to accelerate retail and MSME loan books.
Credit composition could re-balance in favor of retail credit; its composition
could further increase by 200—300 bps to 23-24% by end-March’13 (from
21% as on end-March’11).
Margin is expected to moderate in FY13 in declining interest rate scenario,
but the in-coming CMD indicated that fresh equity capital and containment
of liabilities cost would lead to marginal drift in margin.
Fee income growth would enhance further on the back of strong loan growth
and levying processing charges diligently across the loan book.
The in-coming CMD said there is a scope of improvement on treasury front
as well. He indicated that in declining interest rate scenario and with serious
efforts in place, the bank could make handsome gains.
On gross NPL front, both the people (the current CMD and in-coming CMD)
indicated that net addition to GNPL would be negligible; GNPL would not
rise hereon by the end-FY13.
The bank’s management expects write-back on tax provision due to writeoff
done in agriculture debt waiver & relief schemes, though this matter
requires further clarity.
Overall, the in-coming CMD sounded quite positive on credit growth (particularly
opportunities in retail credit), fee income growth, treasury gains and past overprovisioning
on employee expenses (below the line) & NPLs.
In another development, in the bank’s EGM (extra-ordinary general meeting
to be held on 22nd March’12), the bank’s board of directors (BoD) would
consider and permit, equity shares allotment to GoI and LIC on prefrential
basis to tune of ` 5.4bn and ` 3.3bn respectively at a price of ` 114 per
share, subject to approval.
As on end-December’11, Syndicate Bank’s book value and adjusted value were at
` 134 and ` 116 respectively; the equity share allotments are being done at below
book value and degree of equity dilution would be close to 15.1%. The equity dilution
is book value and RoAE dilutive, though bottomline would increase marginally due
to fresh equity funds availability.
We change our earning estimates to factor in fresh equity capital infusion of `
8.7bn. We increase our FY13 earning estimates by 1.6% to ` 15.9bn; though, we
reduce our target price by 1.8% to ` 120 at 0.93x adjusted book value FY13.
At current price, the stock quotes at 0.8x adjusted book FY13. Our target price of
` 120 factors in 0.9x adjusted book value. Should there be an improvement in RoAA
in FY13 on the back of higher credit growth, traction in fee income, containment in
GNPL and write-back of some NPL provisions, the bank’s profitability would enhance
and its valuation multiple would expand further.
No comments:
Post a Comment