Dear All,
Forwarding you the Result Update on Oriental Bank of Commerce for 4QFY2011 with a Buy recommendation and a Target Price of Rs.403 (12 months)
For 4QFY2011, Oriental Bank of Commerce (OBC) delivered muted performance with net profit declining by 18.3% sequentially and growth of just 5.2% on a yoy basis to `334cr. The results were below our estimates of `359cr, in spite of `51cr write back towards tax liability for the quarter, due to higher-than-estimated provisioning expenses. However, considering the attractive valuations, we recommend Buy on the stock.
Strong sequential business growth, but with higher slippages: During 4QFY2011, the advances and deposit growth gathered pace with advances increasing by 5.6% qoq (14.9% yoy) and deposits growing by 7.5% qoq (15.6% yoy). Savings account growth was healthy at 25.0% yoy (up by 6.1% qoq), however the current account saw a decline of 8.0% yoy (up by 1.4% qoq). Consequently, the CASA ratio dropped by 64bp sequentially to 24.6% in 4QFY2011. OBC’s non-interest income increased by 13.0% yoy (up a healthy 29.6% qoq) to `300cr due to a 82.5% yoy increase in forex income to `38cr and a 60.4% yoy increase in recoveries to `57cr. On the asset quality front, Gross NPA and Net NPA ratios weakened to 1.98% (1.94% in 3QFY2011) and 0.98% (0.91% in 3QFY2011), respectively. Slippages for the quarter were high at `649cr compared to `473cr in 3QFY2011. Consequently the slippage ratio increased from 2.2% in 3QFY2011 to 3.1% in 4QFY2011. Operating expenses de-grew by 1.6% yoy on the back of 15.4% decline in employee expenses. Other operating expenses rose by 8.6% qoq and 19.0% yoy to `228cr.
Outlook and valuation: The stock is currently trading at 0.8x FY2013E ABV and even though NIMs are likely to witness pressure in the coming quarters as deposits get re-priced at higher rates, looking at the cheap valuations, we recommend a Buy on the stock with a Target Price of `403.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600 Ext: 6864 ,6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,5th 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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