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BOB--------------------------------------------------------------------------------Maintain OUTPERFORM
Another set of impressive results
● BOB reported another set of robust results and its operating profit
was up a strong 76% YoY, driven by robust NII growth and lower
provisions (net profit was up 28% YoY).
● Loan growth was robust at 33% YoY (7% QoQ) and margins were
better than expected (+18 bp QoQ to 3.2%), similar to the trends
at peer banks. Management expects margin pressure going
forward. Deposit growth kept pace with loan growth (unlike peers).
● Asset quality continued to be strong (gross slippages of only 0.6%
vs 1.5-2.0% for peers in the quarter). Credit cost was only at 0.4%
and coverage was healthy at 85%.
● Pension shortfall was lower than peers at Rs20 bn (Rs4 bn
provision over five years) and with BOB already having provided
for pension for FY11, FY12 cost-income should be unaffected.
● We increase our FY11-12E EPS by 19-13% due to better margins,
lower pension provisions and higher treasury gains. Given BOB’s
strong profitability (FY11-12 RoE of 20-23%), consistent
performance (trading at 7.6x FY12E EPS), we maintain our
OUTPERFORM
Operating performance continued to be strong
Loan growth was healthy at 33% YoY (+7% QoQ) and growth was
broadbased across the segments. Management maintains its FY11
loan growth guidance of 23-24% YoY. Margins were better than
expected at 3.2% (+18 bp QoQ), aided by a 18 bp QoQ rise in loan
yields (the bank has increased PLR by 125 bp since August 2010).
Domestic margins were up 20 bp QoQ to 3.8% and international
margins were up 7 bp QoQ to 1.4%. The bank expects to maintain
margins to moderate from the current levels going forward (given a
sharp rise in the cost of deposits). The deposit growth kept pace with
loan growth at 31% YoY (unlike the trend witnessed at other banks)
and BOB’s loan-deposit ratio is currently the lowest among the peers.
The share of CASA deposits was stable at 35%. Fee income growth
was muted at 14% YoY and management expects it to be in line with
the loan growth going forward. Pension provisions for the bank (Rs20
bn; Rs4 bn per year) was lower than peers. The bank has already
provided Rs3 bn for 9M11 and should be making Rs1 bn per quarter
over the next five years. Its Tier I is comfortable at 9.2% (including.
9M11 profits)
Asset quality best among peers
Asset quality continued to be robust with stable gross NPLs (1.3%)
and net NPLs (0.4%), and gross slippages during the quarter
continued to be low at 0.6% of the loans annualised (vs 1.5-2.0% for
the peers that have reported this quarter). The coverage continued to
be healthy at 85% (including writeoffs) despite low credit costs of
0.4%. The outstanding restructured assets are at 2.6% of loans and
the cumulative slippages from the restructured assets are at 10% (of
restructured loans). BOB’s exposure to MFIs is also low at Rs1.2 bn
(0.06% of loans). Our credit cost forecast for FY12 is at 0.6%.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
BOB--------------------------------------------------------------------------------Maintain OUTPERFORM
Another set of impressive results
● BOB reported another set of robust results and its operating profit
was up a strong 76% YoY, driven by robust NII growth and lower
provisions (net profit was up 28% YoY).
● Loan growth was robust at 33% YoY (7% QoQ) and margins were
better than expected (+18 bp QoQ to 3.2%), similar to the trends
at peer banks. Management expects margin pressure going
forward. Deposit growth kept pace with loan growth (unlike peers).
● Asset quality continued to be strong (gross slippages of only 0.6%
vs 1.5-2.0% for peers in the quarter). Credit cost was only at 0.4%
and coverage was healthy at 85%.
● Pension shortfall was lower than peers at Rs20 bn (Rs4 bn
provision over five years) and with BOB already having provided
for pension for FY11, FY12 cost-income should be unaffected.
● We increase our FY11-12E EPS by 19-13% due to better margins,
lower pension provisions and higher treasury gains. Given BOB’s
strong profitability (FY11-12 RoE of 20-23%), consistent
performance (trading at 7.6x FY12E EPS), we maintain our
OUTPERFORM
Operating performance continued to be strong
Loan growth was healthy at 33% YoY (+7% QoQ) and growth was
broadbased across the segments. Management maintains its FY11
loan growth guidance of 23-24% YoY. Margins were better than
expected at 3.2% (+18 bp QoQ), aided by a 18 bp QoQ rise in loan
yields (the bank has increased PLR by 125 bp since August 2010).
Domestic margins were up 20 bp QoQ to 3.8% and international
margins were up 7 bp QoQ to 1.4%. The bank expects to maintain
margins to moderate from the current levels going forward (given a
sharp rise in the cost of deposits). The deposit growth kept pace with
loan growth at 31% YoY (unlike the trend witnessed at other banks)
and BOB’s loan-deposit ratio is currently the lowest among the peers.
The share of CASA deposits was stable at 35%. Fee income growth
was muted at 14% YoY and management expects it to be in line with
the loan growth going forward. Pension provisions for the bank (Rs20
bn; Rs4 bn per year) was lower than peers. The bank has already
provided Rs3 bn for 9M11 and should be making Rs1 bn per quarter
over the next five years. Its Tier I is comfortable at 9.2% (including.
9M11 profits)
Asset quality best among peers
Asset quality continued to be robust with stable gross NPLs (1.3%)
and net NPLs (0.4%), and gross slippages during the quarter
continued to be low at 0.6% of the loans annualised (vs 1.5-2.0% for
the peers that have reported this quarter). The coverage continued to
be healthy at 85% (including writeoffs) despite low credit costs of
0.4%. The outstanding restructured assets are at 2.6% of loans and
the cumulative slippages from the restructured assets are at 10% (of
restructured loans). BOB’s exposure to MFIs is also low at Rs1.2 bn
(0.06% of loans). Our credit cost forecast for FY12 is at 0.6%.
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