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Q3FY12 –Asset quality concerns continue for the bank
• The bank reported a negative PAT growth of 9.7% Y-o-Y in Q3FY12 mainly due to fall in margins
and 26.8% growth in provisions Q-o-Q basis.
• Advances have grown by 16.2% Y-o-Y and deposits grew by 17.9% Y-o-Y in Q3FY12 keeping
Credit Deposit Ratio (CD ratio) elevated at 88.2% during the quarter.
• NIM stood at 1.9% in Q3FY12 vs 2.0% in Q2FY12 and 2.4% in Q3FY11.
• Cost to income ratio jumped to 44.7% in Q3FY12 vs 31.3% in Q3FY11.
• Asset quality deteriorated sequentially as Gross NPA stood at 2.9% in Q3FY12 vs 2.5% in Q2FY12.
This led to growth of 26.8% in provisions Q-o-Q in Q3FY12.
• The bank had tax provision of just 1.9% in Q3FY12 due to change in accounting for DTL.
• At present, the bank has network of 933 branches and 1518 ATMs.
Result Highlights
Margins continue southward journey due to yields impacted by NPAs
Margin fell further to 1.9% in Q3FY12 as cost of funds inched higher for the bank. This was due to a
large chunk of its funding (~44%) coming from high cost bulk deposits. On the other hand yield on
funds have not moved up in tandem with the rise in cost of funds and fresh slippages which has led
to reversal of interest income on these accounts and lower yielding assets on banks books. CASA
deposits stood at 19.67% in Q3FY12 vs 19.2% in Q2FY12 and 15.1% in Q3FY11.
Business growth in line with industry
Advances and deposits have grown in-line with industry but the banks focus for credit growth still
remains in agri segment to comply with Priority sector lending norm. The proportion of agri
segment in total advances has moved to 7.6% in Q3FY12 vs 6.9% in Q2FY12. Proportion of SME
segment has come down to 5.7% in Q3FY12 vs 6.2% in Q2FY12. The management still maintains its
guidance of below industry growth in FY12E.
Asset quality concerns get dipper
The bank’s asset quality has deteriorated sequentially as GNPA grew by 19.3% Q-o-Q in Q3FY12.
Major contribution to NPAs is from service segment as its NPA has moved to 4.56% in Q3FY12 from
1.23% in Q2FY12. Fresh slippages have moved up to 0.8% in Q3FY12 vs 0.6% in Q2FY12. Recoveries
and up gradations have shown declining trend sequentially leading to worsening asset quality.
Valuation & Viewpoint
The bank is set on consolidation phase but concerns on asset quality are getting deeper as NPAs
have continuously increased from last four quarters. Asset quality remains the key concern of the
bank and improvement in it can lead to higher valuation for the stock. At the CMP, the stock is
trading at 0.67x and 0.62x Book value of FY12E and FY13E respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q3FY12 –Asset quality concerns continue for the bank
• The bank reported a negative PAT growth of 9.7% Y-o-Y in Q3FY12 mainly due to fall in margins
and 26.8% growth in provisions Q-o-Q basis.
• Advances have grown by 16.2% Y-o-Y and deposits grew by 17.9% Y-o-Y in Q3FY12 keeping
Credit Deposit Ratio (CD ratio) elevated at 88.2% during the quarter.
• NIM stood at 1.9% in Q3FY12 vs 2.0% in Q2FY12 and 2.4% in Q3FY11.
• Cost to income ratio jumped to 44.7% in Q3FY12 vs 31.3% in Q3FY11.
• Asset quality deteriorated sequentially as Gross NPA stood at 2.9% in Q3FY12 vs 2.5% in Q2FY12.
This led to growth of 26.8% in provisions Q-o-Q in Q3FY12.
• The bank had tax provision of just 1.9% in Q3FY12 due to change in accounting for DTL.
• At present, the bank has network of 933 branches and 1518 ATMs.
Result Highlights
Margins continue southward journey due to yields impacted by NPAs
Margin fell further to 1.9% in Q3FY12 as cost of funds inched higher for the bank. This was due to a
large chunk of its funding (~44%) coming from high cost bulk deposits. On the other hand yield on
funds have not moved up in tandem with the rise in cost of funds and fresh slippages which has led
to reversal of interest income on these accounts and lower yielding assets on banks books. CASA
deposits stood at 19.67% in Q3FY12 vs 19.2% in Q2FY12 and 15.1% in Q3FY11.
Business growth in line with industry
Advances and deposits have grown in-line with industry but the banks focus for credit growth still
remains in agri segment to comply with Priority sector lending norm. The proportion of agri
segment in total advances has moved to 7.6% in Q3FY12 vs 6.9% in Q2FY12. Proportion of SME
segment has come down to 5.7% in Q3FY12 vs 6.2% in Q2FY12. The management still maintains its
guidance of below industry growth in FY12E.
Asset quality concerns get dipper
The bank’s asset quality has deteriorated sequentially as GNPA grew by 19.3% Q-o-Q in Q3FY12.
Major contribution to NPAs is from service segment as its NPA has moved to 4.56% in Q3FY12 from
1.23% in Q2FY12. Fresh slippages have moved up to 0.8% in Q3FY12 vs 0.6% in Q2FY12. Recoveries
and up gradations have shown declining trend sequentially leading to worsening asset quality.
Valuation & Viewpoint
The bank is set on consolidation phase but concerns on asset quality are getting deeper as NPAs
have continuously increased from last four quarters. Asset quality remains the key concern of the
bank and improvement in it can lead to higher valuation for the stock. At the CMP, the stock is
trading at 0.67x and 0.62x Book value of FY12E and FY13E respectively.
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