Oriental Bank of Commerce's (OBC) TP: INR355 Buy:: Motilal oswal,

Oriental Bank of Commerce's (OBC) reported PAT for 4QFY13 grew 16% YoY
(declined 6% QoQ) to INR3.1b (7% below our estimate). Key highlights:
 NII grew 14% YoY (flat QoQ) to INR12.1b (5% below our estimate). Reported
NIM was flat QoQ at 2.8% v/s our expectation of 10bp QoQ improvement.
 Slippages were INR10.4b (v/s INR8.1b in 3QFY13). These included one large
account of INR4.6b, which was earlier expected to be restructured. Adjusted
for this, gross slippages were ~INR6b, better than the guidance of INR7b-8b.
 Incremental restructuring in 4QFY13 was at INR8b (v/s guidance of INR13b).
 Other highlights: (1) Loans grew 5% QoQ and 15% YoY, (2) CASA ratio and
proportion of bulk deposits was stable QoQ at 23.9% and 20%, respectively,
(3) Provision on employee expense increased to INR200m per month
(factored 20% wage hike) v/s INR150m per month in 3QFY13, (4) While PBT
was 58% below estimate, Nil tax rate v/s expectation of 26.9% helped PAT.
 Management guidance for FY14: (1) NIM of 2.9% v/s 2.8% in FY13, (2) GNPA
and NNPA to be contained at 2.9% and 2%, respectively v/s 3.2% and 2.3% in
FY13 and (3) PCR (including technical write-off) of 68%+ v/s 63% in FY13.
Valuation and view: Reduction in high cost deposits and easing interest rate in
the system are likely to be beneficial for OBC in perspective of NIM. During the
quarter, though accretion of fresh slippages was higher QoQ, adjusted for one
large account, which was expected to be restructured, it was lower than
management guidance. OBC is likely to report RoA of ~0.8% and RoE improvement
from ~11% in FY12 to 14% in FY15. Maintain Buy.

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