Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M a r g i n s s l i d e , p r o v i s i o n s o n t h e h i g h e r s i d e …
Pressure on NIM and higher provisioning for opex, NPA and a
countercyclical buffer remained an overhang on Q1FY12 profits that
declined 52.7% QoQ to | 205.6 crore. Advances grew 44% YoY (4.7% QoQ)
to | 119147 crore while deposits rose 38% YoY (4.1% QoQ) to | 151173
crore. Sequential decline in CASA from 30% to 27.6% and rising CoF led to
NIM sliding from 3.16% in Q4FY11 to 2.85% in Q1FY12. Opex, which
declined 25% QoQ on a reversal of provisions of | 118 crore last quarter,
jumped 39% QoQ as the bank provided for proposed wage revision (| 27
crore/quarter). The bank also provided | 145 crore as provision for changed
asset quality norms and provided | 41 crore for countercyclical provision.
Slippages remained high and GNPA rose 7% QoQ to | 3292 crore. We
expect slippages to remain high as the bank is yet to shift loans below | 50
lakh to system based NPA recognition (| 23000-24000 crore).
ƒ Trend reversal in asset quality: Slippages to step up…
GNPA rose 7% QoQ to | 3292 crore after declining for four
consecutive quarters while NNPA declined 5% QoQ to | 1258 crore.
Moreover, recoveries and upgradations had been higher than
slippages since Q1FY11. However, reductions were lower than
slippages this quarter at | 283 crore and | 485 crore, respectively.
Recoveries from written off accounts were high at | 99.5 crore and
PCR rose to 73.5%. IOB is yet to shift loans below | 50 lakh to system
based NPA recognition (| 23000-24000 crore). We expect slippages to
remain high and estimate GNPA of 2.4% and NNPA of 1% by FY13E.
ƒ Leading to higher provisioning…
Provisions were up 243% YoY (22% QoQ) at | 597 crore on account of
higher provision for NPA (| 394.5 crore), provision for countercyclical
buffer (| 41 crore) and investments depreciation (| 53.3 crore). We
expect higher provisions in FY12E due to fresh slippages and countercyclical buffer provisions to dent profits.
V a l u a t i o n
IOB saw a turnaround in Q2FY11 with aggressive business growth and
consistently improving asset quality. However, we see credit growth
moderating to 21% YoY. We see pains in asset quality and higher credit
costs impacting return ratios in FY12-13E. We have factored in a dilution of
13% in FY12E, which has suppressed return ratios further. Hence, we are
valuing the stock at 1x FY13E ABV (valued at 1.1x earlier) at a target price of
| 142
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M a r g i n s s l i d e , p r o v i s i o n s o n t h e h i g h e r s i d e …
Pressure on NIM and higher provisioning for opex, NPA and a
countercyclical buffer remained an overhang on Q1FY12 profits that
declined 52.7% QoQ to | 205.6 crore. Advances grew 44% YoY (4.7% QoQ)
to | 119147 crore while deposits rose 38% YoY (4.1% QoQ) to | 151173
crore. Sequential decline in CASA from 30% to 27.6% and rising CoF led to
NIM sliding from 3.16% in Q4FY11 to 2.85% in Q1FY12. Opex, which
declined 25% QoQ on a reversal of provisions of | 118 crore last quarter,
jumped 39% QoQ as the bank provided for proposed wage revision (| 27
crore/quarter). The bank also provided | 145 crore as provision for changed
asset quality norms and provided | 41 crore for countercyclical provision.
Slippages remained high and GNPA rose 7% QoQ to | 3292 crore. We
expect slippages to remain high as the bank is yet to shift loans below | 50
lakh to system based NPA recognition (| 23000-24000 crore).
ƒ Trend reversal in asset quality: Slippages to step up…
GNPA rose 7% QoQ to | 3292 crore after declining for four
consecutive quarters while NNPA declined 5% QoQ to | 1258 crore.
Moreover, recoveries and upgradations had been higher than
slippages since Q1FY11. However, reductions were lower than
slippages this quarter at | 283 crore and | 485 crore, respectively.
Recoveries from written off accounts were high at | 99.5 crore and
PCR rose to 73.5%. IOB is yet to shift loans below | 50 lakh to system
based NPA recognition (| 23000-24000 crore). We expect slippages to
remain high and estimate GNPA of 2.4% and NNPA of 1% by FY13E.
ƒ Leading to higher provisioning…
Provisions were up 243% YoY (22% QoQ) at | 597 crore on account of
higher provision for NPA (| 394.5 crore), provision for countercyclical
buffer (| 41 crore) and investments depreciation (| 53.3 crore). We
expect higher provisions in FY12E due to fresh slippages and countercyclical buffer provisions to dent profits.
V a l u a t i o n
IOB saw a turnaround in Q2FY11 with aggressive business growth and
consistently improving asset quality. However, we see credit growth
moderating to 21% YoY. We see pains in asset quality and higher credit
costs impacting return ratios in FY12-13E. We have factored in a dilution of
13% in FY12E, which has suppressed return ratios further. Hence, we are
valuing the stock at 1x FY13E ABV (valued at 1.1x earlier) at a target price of
| 142
No comments:
Post a Comment