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For 2QFY2012, Andhra Bank registered 4.3% yoy growth in its PAT to
`316cr, slightly above our estimate due to higher net interest income and
lower tax expenses than factored in by us. We recommend a Neutral rating
on the stock.
Asset quality deteriorates significantly: The bank’s loan book declined sequentially
by 2.8% to `73,592cr (up 21.5% yoy); however, deposits grew by 3.9% qoq to
`94,435cr (up 20.2% yoy). CASA deposits declined by 2.4% qoq (up by weak
3.4% yoy), leading to CASA ratio dropping sequentially by 169bp (substantial
435bp yoy decline) to 26.1%. The bank’s yield on advances rose by 22bp qoq to
12.5% in 2QFY2012, however further deposit re-pricing during 2QFY2012 led to
cost of deposits increasing by relatively higher 43bp qoq to 7.5%. Consequently,
reported NIM remained flat sequentially at 3.8%. The bank’s asset quality
deteriorated substantially during 2QFY2012, with gross NPA rising by 68.9% qoq
to `1,987cr and net NPA more than trebling to `1,087cr. The bank switched over
accounts worth `25lakhs and above to system-based NPA recognition during the
quarter. Gross NPA ratio as of 2QFY2012 stood at 2.7% (1.6% in 1QFY2012)
and net NPA ratio stood at 1.5% (0.5% in 1QFY2012). Provision coverage ratio
(including technical write-offs) declined sharply to 61.7% in 2QFY2012 from
82.0% in 1QFY2012.
Outlook and valuation: At the CMP, the stock is trading at 0.7x FY2013E ABV
compared to its five-year range of 0.8x–1.4x one-year forward ABV with a
median of 1.1x. Considering the banks hefty exposure to the power sector (more
than 20% of the loan book) and sharp deterioration in asset quality during
2QFY2012, we recommend Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, Andhra Bank registered 4.3% yoy growth in its PAT to
`316cr, slightly above our estimate due to higher net interest income and
lower tax expenses than factored in by us. We recommend a Neutral rating
on the stock.
Asset quality deteriorates significantly: The bank’s loan book declined sequentially
by 2.8% to `73,592cr (up 21.5% yoy); however, deposits grew by 3.9% qoq to
`94,435cr (up 20.2% yoy). CASA deposits declined by 2.4% qoq (up by weak
3.4% yoy), leading to CASA ratio dropping sequentially by 169bp (substantial
435bp yoy decline) to 26.1%. The bank’s yield on advances rose by 22bp qoq to
12.5% in 2QFY2012, however further deposit re-pricing during 2QFY2012 led to
cost of deposits increasing by relatively higher 43bp qoq to 7.5%. Consequently,
reported NIM remained flat sequentially at 3.8%. The bank’s asset quality
deteriorated substantially during 2QFY2012, with gross NPA rising by 68.9% qoq
to `1,987cr and net NPA more than trebling to `1,087cr. The bank switched over
accounts worth `25lakhs and above to system-based NPA recognition during the
quarter. Gross NPA ratio as of 2QFY2012 stood at 2.7% (1.6% in 1QFY2012)
and net NPA ratio stood at 1.5% (0.5% in 1QFY2012). Provision coverage ratio
(including technical write-offs) declined sharply to 61.7% in 2QFY2012 from
82.0% in 1QFY2012.
Outlook and valuation: At the CMP, the stock is trading at 0.7x FY2013E ABV
compared to its five-year range of 0.8x–1.4x one-year forward ABV with a
median of 1.1x. Considering the banks hefty exposure to the power sector (more
than 20% of the loan book) and sharp deterioration in asset quality during
2QFY2012, we recommend Neutral on the stock.
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