Dear All,
Forwarding you the Result Update on IDBI Bank for 4QFY2011 with a Neutral recommendation.
For 4QFY2011, IDBI Bank posted robust net profit growth of 62.1% yoy (54% after adjusting for the merger) to `516cr. Improvement in asset quality and strong growth in non-interest income, driven by 58.2% qoq growth in fee income and 231.8% qoq growth in recovery from written-off accounts, were the key highlights of the result. We recommend a Neutral rating on the stock.
Strong advances growth; NIMs sustain above 2%: For 4QFY2011, the bank’s net advances grew by robust 16.8% qoq to `1,57,098cr, while total deposits grew by 20.1% qoq to `1,80,485cr, driven by 115.4% growth in current account deposits. Savings accounts grew by 20.3% qoq and 58.6% yoy to `13,936cr in 4QFY2011. Due to the year-end surge in current account deposits, CASA ratio jumped from 15.1% in 3QFY2011 to 20.9% as of 4QFY2011. NII declined by 7.9% qoq due to the increase in cost of liabilities by 33bp to 6.73%. Consequently, reported NIM dropped from 2.28% in 3QFY2011 to 2.10% in 4QFY2011. During 4QFY2011, overall asset quality improved considerably with slippages coming down to `187cr compared to slippages of ~`694cr in 3QFY2011. Annualised slippage ratio for the quarter fell to 0.5% in 4QFY2011 compared to 2.1% in 3QFY2011.
Outlook and valuation: IDBI Bank’s discount to bigger PSU banks is quite low despite considerably lower RoEs, largely due to the prospect of diminishing performance gap vis-à-vis peers. We believe IDBI Bank is set to improve its credit and deposit mix going forward. However, at the CMP, the bank is trading at 1.3x FY2013E P/ABV adjusting for SASF (0.9x P/ABV without adjusting), which we believe is relatively expensive in light of cyclical headwinds. Hence, we recommend Neutral on the stock.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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