Dear All,
Forwarding you the Result Update on Andhra Bank for 4QFY2011 with an Accumulate recommendation and a Target Price of `152 (12 months).
For 4QFY2011, Andhra Bank posted moderate set of numbers with NII increasing marginally by 2.6% qoq (up 31.3% yoy) and NIM declining by 22bp qoq to 3.7%. The key positive of the result was a 50.5% increase in non-interest income, driven by higher treasury and forex gain and a slight improvement in CASA ratio to 29.1%. We recommend an Accumulate rating on the stock.
Healthy business growth with stable operating parameters: The bank’s business momentum continued sequentially with 8.9% and 12.3% qoq growth in advances and deposits, respectively. The pace of deposit growth was also accompanied by strong sequential growth in current account deposits (37.3%) and saving account deposits (7.7%). Consequently, CASA ratio improved by 52bp qoq to 29.1%.
The effect of rising interest rates was felt in 4QFY2011 with cost of deposits increasing by 64bp to 6.5%. Reported NIM witnessed a decline of 22bp to 3.7%, partly compensated by the 53bp qoq increase in yield on advances to 11.6%. During 4QFY2011, CEB income declined by 21.6% qoq (1.9% yoy). However, non-interest income managed to grow by 50.5% qoq (11.1% yoy) on the back of substantial treasury gains (6.5 times of 3QFY2011) of `65cr and forex gains (up 116.8% qoq) of `34cr. Slippages were stable with an annualised slippage ratio of 1.4% for 4QFY2011, a decline of 9bp over 3QFY2011. Gross NPA ratio stood at 1.4% (1.3% in 3QFY2011) and net NPA ratio stood at 0.4% (0.5% in 3QFY2011). The provision coverage ratio including technical write-offs stood at 83.9% in 4QFY2011 (80.4% in 3QFY2011). Pension expenses for 4QFY2011 led to a 14.7% (up 22.2% yoy) increase in employee expenses for the quarter.
Outlook and valuation: Post correction, at the CMP, the stock is trading at 0.9x FY2013E ABV compared to its five-year range of 0.8x–1.4x one-year forward ABV with a median of 1.15. We value the stock at 1.0x FY2013E ABV and, hence, recommend Accumulate on the stock with a target price of `152.
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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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