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For 2QFY2012, Dena Bank registered healthy 20.5% yoy growth in its PAT to
`194cr, above our estimates due to lower provisioning expenses than estimated
by us. Reported NIM increased by 32bp qoq. The bank’s asset quality held up
pretty well for the quarter. We recommend a Neutral rating on the stock.
Loan book shrinks marginally qoq; slippages surprise positively: The growth in
business was slow during 2QFY2012, with advances declining by 0.3% qoq (up
18.0% yoy) and deposits growing by 1.6% qoq (20.1% yoy). On the back of lower
growth in deposits, the bank was able to sequentially increase its CASA ratio by
45bp to 35.6%. Yield on advances increased by 64bp qoq to 12.0% in
2QFY2012, leading to a sequential improvement of 32bp in reported NIM to
3.2%. During 2QFY2012, non-interest income declined by 8.8% qoq to `113cr,
mostly due to a 14.4% decline in fee income to `97cr. Recoveries were strong
during 2QFY2012, registering 25.4% qoq growth (down 52.8% yoy). Treasury
income also trebled to `4cr, owing to a low base. Asset quality of the bank held
up pretty well, despite switchover of `50lakhs and below accounts to
system-based NPA recognition during 2QFY2012. Gross NPA ratio stood at
1.93% (1.86% in 1QFY2012) and net NPA ratio stood at 1.15% (1.08% in
1QFY2012), as of 2QFY2012.
Outlook and valuation: Dena Bank, with a strong CASA ratio of 35.6%, is better
placed than its peers to protect its NIM in a high interest rate environment.
After the equity capital infusion of about `540cr by the government, the bank's
tier-I ratio has improved to 9.7%. At the CMP, the stock is trading at 0.6x
FY2013E P/ABV, one of the cheapest among PSU banks. However, considering
the hefty exposure to the power sector (~20% of the loan book), which might lead
to some chunky NPAs or large restructuring in the books in the coming quarters,
we recommend a Neutral rating on the stock, and would look to upgrade the
stock only once the near-term headwinds subside.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, Dena Bank registered healthy 20.5% yoy growth in its PAT to
`194cr, above our estimates due to lower provisioning expenses than estimated
by us. Reported NIM increased by 32bp qoq. The bank’s asset quality held up
pretty well for the quarter. We recommend a Neutral rating on the stock.
Loan book shrinks marginally qoq; slippages surprise positively: The growth in
business was slow during 2QFY2012, with advances declining by 0.3% qoq (up
18.0% yoy) and deposits growing by 1.6% qoq (20.1% yoy). On the back of lower
growth in deposits, the bank was able to sequentially increase its CASA ratio by
45bp to 35.6%. Yield on advances increased by 64bp qoq to 12.0% in
2QFY2012, leading to a sequential improvement of 32bp in reported NIM to
3.2%. During 2QFY2012, non-interest income declined by 8.8% qoq to `113cr,
mostly due to a 14.4% decline in fee income to `97cr. Recoveries were strong
during 2QFY2012, registering 25.4% qoq growth (down 52.8% yoy). Treasury
income also trebled to `4cr, owing to a low base. Asset quality of the bank held
up pretty well, despite switchover of `50lakhs and below accounts to
system-based NPA recognition during 2QFY2012. Gross NPA ratio stood at
1.93% (1.86% in 1QFY2012) and net NPA ratio stood at 1.15% (1.08% in
1QFY2012), as of 2QFY2012.
Outlook and valuation: Dena Bank, with a strong CASA ratio of 35.6%, is better
placed than its peers to protect its NIM in a high interest rate environment.
After the equity capital infusion of about `540cr by the government, the bank's
tier-I ratio has improved to 9.7%. At the CMP, the stock is trading at 0.6x
FY2013E P/ABV, one of the cheapest among PSU banks. However, considering
the hefty exposure to the power sector (~20% of the loan book), which might lead
to some chunky NPAs or large restructuring in the books in the coming quarters,
we recommend a Neutral rating on the stock, and would look to upgrade the
stock only once the near-term headwinds subside.
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