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India Equity Research Reports, IPO and Stock News
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M a r g i n s s u s t a i n , a s s e t q u a l i t y a d a m p e n e r …
IDBI maintained its margins at 2.07% while NII exceeded our expectations
at | 1152 crore (up 4% QoQ). This was despite business mix contracting
2% QoQ to | 3.31,266 crore. Fee income declined 38% QoQ due to lower
processing & syndication fee. Provisions shot up 51% QoQ as IDBI
provided | 279 crore for changed norms for asset quality despite a writeback of | 92 crore on investment depreciation. Consequently, PAT came
in below expectations at | 335 crore. The bank also merged IDBI Home
Finance (contributed | 18 crore to PAT) and IDBI Gilts Ltd (loss making)
this quarter. Asset quality declined as slippages of | 622 crore pushed up
GNPA to 2.1% (up 34 bps QoQ). We have factored in lower credit growth
of 15% YoY and higher provisions in FY12E. We expect business to grow
at 17% CAGR leading to PAT growth of 20% CAGR over FY11-13E.
ƒ NIM maintained QoQ at 2.07% despite CASA deflating to 17.3%...
Calibrated growth and passing on of costs helped IDBI maintain NIM
at 2.07% (down 3 bps QoQ). This was despite CASA declining QoQ
from 20.9% to 17.3% (outgo of one-off current accounts from
Q4FY11) and CoF rising 54 bps QoQ to 7.99%. We expect pressure
on NIM to be visible in Q2FY11 & see full year NIM at 2% in FY12E.
ƒ Asset quality concerns persist…
GNPA shot up 18.1% QoQ to | 3288 crore (GNPA ratio@ 2.1%) due
to higher slippages at | 622 crore (50% SME and remaining from
mid-large corp). NNPA rose 15.2% QoQ to | 1933 crore (NNPA ratio
@1.25%) as | 112 crore was transferred from provisions to countercyclical buffer. PCR is healthy at 74%. We see incremental slippages
pushing up GNPA ratio to 1.9% and NNPA ratio to 1% by FY13E.
ƒ Other takeaways from conference call…
IDBI aims to increase its current branch network of 883 branches to
~1050 by FY12E, which would weigh on opex. Effective tax rate was
high at 44.6% as certain provisions were not tax deductible. The
management has guided for a normal tax rate at 27-28% as MAT
credit entitlements and other benefits have been used up.
V a l u a t i o n
Higher provisioning dented profits leading to lower return ratios with RoA
at 0.54% and RoE at 10.4% in Q1FY12. Calibrated growth and focus on
CASA augur well in the long-term but asset quality woes may remain. We
have valued the bank at 1.1x FY13E and ascribed | 25 to its investment
book arriving at a target price of | 160.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M a r g i n s s u s t a i n , a s s e t q u a l i t y a d a m p e n e r …
IDBI maintained its margins at 2.07% while NII exceeded our expectations
at | 1152 crore (up 4% QoQ). This was despite business mix contracting
2% QoQ to | 3.31,266 crore. Fee income declined 38% QoQ due to lower
processing & syndication fee. Provisions shot up 51% QoQ as IDBI
provided | 279 crore for changed norms for asset quality despite a writeback of | 92 crore on investment depreciation. Consequently, PAT came
in below expectations at | 335 crore. The bank also merged IDBI Home
Finance (contributed | 18 crore to PAT) and IDBI Gilts Ltd (loss making)
this quarter. Asset quality declined as slippages of | 622 crore pushed up
GNPA to 2.1% (up 34 bps QoQ). We have factored in lower credit growth
of 15% YoY and higher provisions in FY12E. We expect business to grow
at 17% CAGR leading to PAT growth of 20% CAGR over FY11-13E.
ƒ NIM maintained QoQ at 2.07% despite CASA deflating to 17.3%...
Calibrated growth and passing on of costs helped IDBI maintain NIM
at 2.07% (down 3 bps QoQ). This was despite CASA declining QoQ
from 20.9% to 17.3% (outgo of one-off current accounts from
Q4FY11) and CoF rising 54 bps QoQ to 7.99%. We expect pressure
on NIM to be visible in Q2FY11 & see full year NIM at 2% in FY12E.
ƒ Asset quality concerns persist…
GNPA shot up 18.1% QoQ to | 3288 crore (GNPA ratio@ 2.1%) due
to higher slippages at | 622 crore (50% SME and remaining from
mid-large corp). NNPA rose 15.2% QoQ to | 1933 crore (NNPA ratio
@1.25%) as | 112 crore was transferred from provisions to countercyclical buffer. PCR is healthy at 74%. We see incremental slippages
pushing up GNPA ratio to 1.9% and NNPA ratio to 1% by FY13E.
ƒ Other takeaways from conference call…
IDBI aims to increase its current branch network of 883 branches to
~1050 by FY12E, which would weigh on opex. Effective tax rate was
high at 44.6% as certain provisions were not tax deductible. The
management has guided for a normal tax rate at 27-28% as MAT
credit entitlements and other benefits have been used up.
V a l u a t i o n
Higher provisioning dented profits leading to lower return ratios with RoA
at 0.54% and RoE at 10.4% in Q1FY12. Calibrated growth and focus on
CASA augur well in the long-term but asset quality woes may remain. We
have valued the bank at 1.1x FY13E and ascribed | 25 to its investment
book arriving at a target price of | 160.
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