Dear All,
Forwarding you the Result Update on Indian Overseas Bank for 4QFY2011 with an Accumulate recommendation and a Target Price of `171 (12 months).
For 4QFY2011, Indian Overseas Bank (IOB) reported strong numbers, registering robust growth of 240.5% yoy and 87.5% qoq in net profit to `434cr, above our estimates of `232cr on account of higher non-interest income and lower operating expenses than factored in by us. We recommend an Accumulate rating on the stock.
Strong business growth; but with higher slippages: For 4QFY2011 advances grew by 11.7% qoq and by 41.6% yoy to `111,833cr, while deposits increased by 16.1% qoq and 31.1% yoy to `145,229cr. The credit-deposit ratio stood at 77.0% compared to 80.0% in 3QFY2011. The CASA ratio for 4QFY2011 stood at 30.2% (31.0% in 3QFY2011). Non-interest income increased by healthy 36.3% yoy and by 9.5% qoq to `385cr on account of a 33.7% yoy increase (up 41.4% qoq) in fee income and a 182.2% yoy increase (down 40.9% qoq) in recoveries to `46cr. Slippages for the quarter came in at `873cr, higher by `691cr over `183cr in 3QFY2011, implying an annualised slippage ratio of 4.3% (0.9% in 3QFY2011). Operating expenses declined by 3.7% yoy (down 8.0% qoq) to `623cr on the back of a 16.2% yoy decline (down 25.0% qoq) in employee expenses to `363cr. Other operating expenses rose by 21.5% yoy (up 34.4% qoq) to `260cr during the quarter.
Outlook and valuation: We maintain our positive view on the stock, considering the improvement in RoEs going forward. However, a flagging asset quality remains the biggest risk to the bank’s ability to deliver sustained performance in the future. At the CMP, the stock is trading at 0.9x FY2013E P/ABV, which is below our target multiple of 1.1x for the stock. We recommend an Accumulate rating on the stock with a target price of `171, implying an upside of 12.8%.
Kindly click on the following link to view the Report.
Indian Overseas Bank - RU4QFY2011
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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