Syndicate Bank (CMP: ` 95, TP : ` 145, Buy)
Syndicate Bank’s management plans to expand credit book faster than the industry, in the range of
18-19% and retail credit book would grow at even faster pace of 22%. Key focus area for credit
growth would be retail, MSME and mid-corporate. We expect credit book to grow 17.4% CAGR in
FY12-14. Faster expansion in retail and MSME books would aid asset yield and margin
The bank plans to increase its CASA share by 100-125 bps to 32% mark. Also, re-pricing of bulk
deposits and CD at lesser rated would aid margin erosion in declining interest rate scenario.
The bank’s management expects 15bps decline in margin to 3.25% from 3.4% in FY12. We factor in
10 bps decline in margin to 2.96% (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 alignment of processing charges with peers, fee income is
expected to revive. We expect the bank’s other income to grow by 13% YoY in FY13
As on June’12, the bank’s asset quality improved on sequential basis; further higher PCR provides
comfort for future NPL provisioning. The bank’s management expects to do a substantial recoveries
in FY13
At current price, the stock quotes at 0.65x and 0.56x adjusted book value (ABV) FY13 and FY14
respectively. Based on our price target of ` 145, the stock will trade at 1.0x and 0.9x ABV FY13 and
FY14 respectively
No comments:
Post a Comment