Dear All,
Forwarding you the Result Update on Allahabad Bank for 4QFY2011 with an Accumulate recommendation and a Target Price of `227 (12 months).
For 4QFY2011, Allahabad Bank reported a moderate growth of 14.7% yoy in net profit (down 38.0% sequentially) to `258cr. Strong sequential business growth and non-interest income growth were the key highlights of the result. We recommend Accumulate on the stock.
Strong sequential business growth, but with higher slippages: The healthy business growth seen in 9MFY2011 continued in 4QFY2011 too, with advances and deposits registering a sequential growth of 7.9% and 9.0%, respectively. On a yoy basis, advances grew by 30.1% to `93,625cr, while deposits grew by 24.4% to `1,31,887cr. CASA ratio increased by 22bp to 33.5% for 4QFY2011. During the quarter, cost of deposits increased by 6bp to 6.0%, however, the yield on advances also increased by 13bp to 10.7%, leading to a 5bp increase in reported NIM to 3.5% for 4QFY2011. Allahabad bank’s non-interest income increased by 82.2% qoq (up 16.8% yoy) to `469cr due to a 72.4% qoq increase in fee income to `300cr. Slippages for the quarter were significantly higher at `813cr compared to `362cr in 3QFY2011. Consequently the slippage ratio increased from 2.0% in 3QFY2011 to 4.5% in 4QFY2011. Operating expenses grew by 72.7% yoy to `841cr on the back of provisions arising out 2nd pension liability (`394cr) that the bank made in FY2011. Other operating expenses rose by 31.7% yoy to `238cr.
Outlook and valuation: Considering the stable CASA deposits base, healthy capital adequacy and strong advances growth, the bank looks reasonably priced. At CMP, the stock is trading at 1.0x FY2013 P/ABV. Historically, the bank has traded in the range of 0.6-1.2x one-year forward ABV with a median of 0.96x. Taking into account the bank’s healthy NIMs and other income, we have assigned a FY2013E P/ABV multiple of 1.1x to the stock. Hence, we recommend an Accumulate rating on the stock with a Target Price of `227.
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: 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. 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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