Financials - TOP PICKS
Syndicate Bank (TP : ` 149, Buy)
We observe a change in bank’s stance with the new senior management. It now intends to grow
faster than industry, in the range of 22-24%. We believe given the cushion of high PCR and lower
slippages, it is achievable subject to overall environment. We expect credit book to grow 19% CAGR
in FY12-14
During FY11 and FY12, due to moderate balance-sheet growth and widespread branch, the bank
has been maintaining high composition of low-cost deposits at ~30% level which aided margin.
Going forward, in FY13, we factor in 14 bps decline in margin to 2.92% (on yearly average basis)
primarily due to decline in interest rates and re-pricing lag of liabilities
On the back of higher loan growth and levying processing charges, fee income growth is expected
to enhance further from current levels. We expect the bank’s other income to grow by 12% YoY in
FY13
As on Mar’12, the bank’s asset quality deteriorated; however, higher PCR gave a buffer to
provisioning in case of increase in bad debts. We expect the bank to do substantial recoveries in
Q1FY13, given the aggressive focus
At current price, the stock quotes at 0.7x and 0.6x adjusted book value (ABV) FY13 and FY14
respectively. Based on our price target of ` 149, the stock will trade at 1.0x and 0.9x ABV FY13 and
FY14 respectively
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