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Allahabad Bank has reported PAT of Rs 4002.2mn, up 55.4%YoY below our
estimates of Rs 4597.2mn mainly due to decline in other income by 24.4% to Rs
3551.4mn and lower interest income. NII for the quarter grew by 11.9% YoY below
our estimates while NIM for the quarter contracted by 40bps to 3.1% mainly due to
reversal of interest, higher interest cost, lower credit offtake. ALBK reported
highest slippages during the quarter to the tune of Rs 9.7bn while restructured
assets stood at Rs 26bn. GNPA and NNPA of the bank stood at 1.9% and 1%
respectively.
The stock is currently trading at 0.6x of its FY14E ABV. We value the standalone
business at 0.8x of its FY13E ABV at Rs 245.0 and maintain our buy rating on the
stock with Target Price of Rs 196.
Key Highlights
Advances grew sequentially; NIM declined: Advances for the quarter grew
18.7%YoY and 10.6% sequentially to Rs 1.1tn due to strong growth in agri
and MSME advances while deposits for the quarter grew by 21.0%YoY and
9.8% sequentially. In addition, NIMs of the bank declined by 40bps to 3.1%
sequentially mainly due to reversal of interest and higher cost of funds.
Tax rate remains lower: In continuation to its previous two quarter trends ALBK
has provided lower tax rate of 10.4% since it has not availed tax benefits
earlier on certain items like rural advances, priority sector advances, writeoffs
etc. thereby continues to help net profits.
Slippages and restructured assets rise significantly: Asset quality of the bank
remained stable with Gross NPA and NNPA at 1.9% and 1.0% respectively.
Slippages during the quarter stood high at Rs 9.7bn which includes Rs 2.6bn
from agri, Rs 4bn from MSME and one big account of Hydro project of Rs
900mn. Major chunk of slippages continues to remain in priority sector
lending which constituted Rs 13bn during FY12 of the slippages of Rs 22bn.
The rise in agri NPAs was mainly due to late payment release by sugar
factory of Rs 45bn to sugarcane farmers. However, bank has made provisions
upto 84% of net slippages during FY12. On restructuring front, bank has
restructured Rs 26bn during the quarter which includes Air India of Rs 5bn
and SEBs(Uttar Haryana, Rajasthan, Jodhpur) of Rs 11bn. The total
outstanding restructured advances stood at Rs 92.9bn in which Rs 2.3bn have
slipped into the NPL category. ALBK will further restructure UP SEB of Rs
21bn and Bharti Shipyard of Rs 2bn in the coming quarters.
Other income grew sharply: Other income of the bank declined by 24.4%YoY to
Rs 3.6bn mainly due to decline in fee income by 11.3% to Rs 2.4bn and other
non interest income by 87.8% to Rs 191mn. However, Trading gains
increased sharply to Rs 590mn.
CASA remains stable: CASA share remains stable at 30.5% with savings
increased by 5.9% sequentially and current deposits increasing sharply by
26.2% QoQ. Management has guided to open 250branches in FY13 which
will help to maintain its CASA share.
Valuations and Outlook
ALBK has been reporting excellent performance since last three quarters but
failed to deliver in Q4FY12 which was mainly due to significant rise in
slippages and restructured assets. However, bank has made necessary
provisions. Going forward, asset quality will remain stable expecting some
recoveries in the coming quarters while pressure to remain on the
restructured assets. Management will be focusing more on the recovery of
NPAs in agri. On the business growth, credit offtake is expected to moderate
at 18% given the expected slower pace of growth in GDP. The stock is
currently trading at 0.6x of its FY14E ABV. We value the standalone business
at 0.8x of its FY14E ABV at Rs 245 and maintain our Buy rating on the stock
with Target Price of Rs 196.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Allahabad Bank has reported PAT of Rs 4002.2mn, up 55.4%YoY below our
estimates of Rs 4597.2mn mainly due to decline in other income by 24.4% to Rs
3551.4mn and lower interest income. NII for the quarter grew by 11.9% YoY below
our estimates while NIM for the quarter contracted by 40bps to 3.1% mainly due to
reversal of interest, higher interest cost, lower credit offtake. ALBK reported
highest slippages during the quarter to the tune of Rs 9.7bn while restructured
assets stood at Rs 26bn. GNPA and NNPA of the bank stood at 1.9% and 1%
respectively.
The stock is currently trading at 0.6x of its FY14E ABV. We value the standalone
business at 0.8x of its FY13E ABV at Rs 245.0 and maintain our buy rating on the
stock with Target Price of Rs 196.
Key Highlights
Advances grew sequentially; NIM declined: Advances for the quarter grew
18.7%YoY and 10.6% sequentially to Rs 1.1tn due to strong growth in agri
and MSME advances while deposits for the quarter grew by 21.0%YoY and
9.8% sequentially. In addition, NIMs of the bank declined by 40bps to 3.1%
sequentially mainly due to reversal of interest and higher cost of funds.
Tax rate remains lower: In continuation to its previous two quarter trends ALBK
has provided lower tax rate of 10.4% since it has not availed tax benefits
earlier on certain items like rural advances, priority sector advances, writeoffs
etc. thereby continues to help net profits.
Slippages and restructured assets rise significantly: Asset quality of the bank
remained stable with Gross NPA and NNPA at 1.9% and 1.0% respectively.
Slippages during the quarter stood high at Rs 9.7bn which includes Rs 2.6bn
from agri, Rs 4bn from MSME and one big account of Hydro project of Rs
900mn. Major chunk of slippages continues to remain in priority sector
lending which constituted Rs 13bn during FY12 of the slippages of Rs 22bn.
The rise in agri NPAs was mainly due to late payment release by sugar
factory of Rs 45bn to sugarcane farmers. However, bank has made provisions
upto 84% of net slippages during FY12. On restructuring front, bank has
restructured Rs 26bn during the quarter which includes Air India of Rs 5bn
and SEBs(Uttar Haryana, Rajasthan, Jodhpur) of Rs 11bn. The total
outstanding restructured advances stood at Rs 92.9bn in which Rs 2.3bn have
slipped into the NPL category. ALBK will further restructure UP SEB of Rs
21bn and Bharti Shipyard of Rs 2bn in the coming quarters.
Other income grew sharply: Other income of the bank declined by 24.4%YoY to
Rs 3.6bn mainly due to decline in fee income by 11.3% to Rs 2.4bn and other
non interest income by 87.8% to Rs 191mn. However, Trading gains
increased sharply to Rs 590mn.
CASA remains stable: CASA share remains stable at 30.5% with savings
increased by 5.9% sequentially and current deposits increasing sharply by
26.2% QoQ. Management has guided to open 250branches in FY13 which
will help to maintain its CASA share.
Valuations and Outlook
ALBK has been reporting excellent performance since last three quarters but
failed to deliver in Q4FY12 which was mainly due to significant rise in
slippages and restructured assets. However, bank has made necessary
provisions. Going forward, asset quality will remain stable expecting some
recoveries in the coming quarters while pressure to remain on the
restructured assets. Management will be focusing more on the recovery of
NPAs in agri. On the business growth, credit offtake is expected to moderate
at 18% given the expected slower pace of growth in GDP. The stock is
currently trading at 0.6x of its FY14E ABV. We value the standalone business
at 0.8x of its FY14E ABV at Rs 245 and maintain our Buy rating on the stock
with Target Price of Rs 196.
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