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| India Infoline Research Team / 17:54 , May 07, 2012 |
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- Driven by robust growth in Agri (24% yoy), MSME (15% qoq) and Priority sector credit (20% qoq), Allahabad Bank’s loan book grew by strong 9% qoq (our expectation was 6% qoq). For the full year, credit growth stood at 18% led by brisk growth in the MSME segment (30% + yoy). The bank targets to grow advances by 23-24% in FY13 with retail segment being the key focus area. Deposits grew in line with advances at 10% qoq and 21% yoy during the quarter. Traction in retail TD remained strong (12% qoq and 35% yoy) while CASA ratio continued to slid (10bps qoq and 300bps yoy decline). The reliance on bulk deposits remains low at 12%.
- Unexpectedly, NIM declined sharply by 50bps qoq to 3.2% impacted by interest reversal on substantial fresh NPAs and material spike (50bps qoq) in cost of deposits. The latter was driven by higher re-pricing of retail TDs, spike in the cost of bulk deposits and weak CASA mobilization. Further, a large portion of incremental corporate credit disbursed during the quarter was around the base rate. NII declined by 7% qoq and represented a modest growth of 12% yoy. NIM is likely to remain weak in Q1 FY13 (impact of PSL lending and elevated retail TD costs) and the bank has guided for margin in excess of 3% for the entire year.
- ± Core fee income was higher sequentially by 30% but for the full-year growth was modest at 11%. Steep jump in other opex (18% qoq) along with NII decline led to significant deterioration in C/I ratio (increased from 40% to 45%).
- Slippages came in significantly higher than expectation at Rs9.3bn; annualized delinquency ratio at elevated 3.6%. About 70% of the slippages were contributed by Agri (~Rs2.8bn) and Micro SME segments (~Rs4bn), mainly sub Rs1mn accounts. Allahabad Bank has traditionally witnessed higher slippages in the last quarter of a fiscal (delinquency ratio around 3.5% in Q4 FY11 and Q4 FY10). Most of the Agri slippages are recovered or get upgraded in the subsequent quarters though. Restructuring was substantial during the quarter at Rs26.4bn contributed mainly by Air India (~Rs5bn) and SEBs (~Rs10bn). Bank’s exposures to Uttar Pradesh (~Rs21bn) and Punjab (~Rs1.2bn) SEBs is likely to get restructured in coming quarters. Outstanding restructured assets now comprise 5.7% of advances. GNPL increased 10% sequentially standing at 1.8% of gross advances. In response to higher slippages, provisioning was raised to 1.5% (1.2% in previous two quarters). However, PCR declined to 74% and Net NPLs grew by sharp 20% qoq.
- The bank paid lower tax for third consecutive quarter on account of surplus tax paid in previous two years and availing of all tax exemptions. Margin fall, higher opex and higher credit cost drove a sharp sequential decline in RoA from 1.4% to 0.9%.
- Q4 FY12 performance of Allahabad Bank was significantly weaker than our expectations (NII and PAT were below estimate by 10% and 21% respectively). Factoring some weakness in our NIM and asset quality assumptions, we have downgraded FY13/14 profit estimates by 15-20%. Reduce BV estimates and valuation multiple (an adjustment to lower RoA delivery) and lower rating to Market Performer. Our 9-month target price stands revised to Rs166.
Results table
(Rs mn)
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Q4 FY12
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Q3 FY12
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% qoq
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Q4FY11
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% yoy
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Total Interest Income
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41,682
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39,119
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6.6
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31,192
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33.6
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Interest expended
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(28,799)
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(25,314)
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13.8
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(19,679)
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46.3
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Net Interest Income
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12,884
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13,805
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(6.7)
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11,513
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11.9
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Other income
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3,551
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3,484
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1.9
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4,695
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(24.4)
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Total Income
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16,435
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17,289
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(4.9)
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16,208
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1.4
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Operating expenses
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(7,424)
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(6,990)
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6.2
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(8,407)
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(11.7)
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Provisions
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(4,544)
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(4,212)
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7.9
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(4,655)
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(2.4)
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PBT
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4,467
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6,087
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(26.6)
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3,145
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42.0
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Tax
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(465)
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(483)
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(3.8)
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(569)
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(18.4)
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PAT
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4,002
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5,604
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(28.6)
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2,576
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55.4
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EPS
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32.0
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47.1
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(32.0)
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21.6
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48.0
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Key Ratios
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Q4 FY12
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Q3 FY12
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chg qoq
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Q4FY11
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chg yoy
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NIM (%)
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3.2
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3.7
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(0.5)
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3.5
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(0.3)
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Cost of Funds (%)
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7.2
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6.8
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0.5
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6.0
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1.2
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CASA (%)
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30.5
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30.6
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(0.1)
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33.5
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(3.0)
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C/D (x)
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0.70
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0.70
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(0.00)
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0.72
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(0.02)
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Non-interest income (%)
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21.6
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20.2
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1.5
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29.0
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(7.4)
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Non-int inc/Int exp (%)
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12.3
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13.8
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(1.4)
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23.9
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(11.5)
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Cost to Income (%)
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45.2
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40.4
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4.7
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51.9
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(6.7)
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Provisions/Income (%)
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10.0
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9.9
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0.2
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13.0
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(2.9)
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BV (Rs)
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192.9
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210.2
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(17.3)
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178.6
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14.3
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RoE (%)
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16.7
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24.2
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(7.5)
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14.0
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2.6
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RoA (%)
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0.9
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1.4
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(0.5)
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0.7
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0.1
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CAR (%)
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12.8
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12.8
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0.1
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13.0
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(0.1)
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Gross NPA (%)
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1.8
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1.9
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(0.0)
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1.7
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0.1
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Net NPA (%)
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1.0
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0.8
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0.2
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0.8
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0.2
| Source: Company, India Infoline Research
Financial Summary
Y/e 31 Mar (Rs m)
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FY11
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FY12
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FY13E
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FY14E
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Total operating income
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53,929
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64,633
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70,310
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86,155
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yoy growth (%)
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29.4
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19.8
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8.8
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22.5
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Operating profit (pre-provisions)
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30,546
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37,719
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39,359
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50,561
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Net profit
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14,231
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18,673
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17,905
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23,147
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yoy growth (%)
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18.0
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31.2
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(4.1)
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29.3
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EPS (Rs)
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29.9
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37.3
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35.8
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46.3
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BVPS (Rs)
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145.0
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171.0
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194.9
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225.3
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P/E (x)
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5.7
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4.6
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4.7
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3.7
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P/BV (x)
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1.2
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1.0
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0.9
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0.8
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ROE (%)
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21.0
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21.6
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17.4
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19.6
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ROA (%)
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1.0
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1.1
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0.9
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1.0
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Dividend yield (%)
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1.7
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3.5
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3.5
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4.1
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CAR (%)
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13.0
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12.8
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12.4
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11.9
| Source: Company, India Infoline Research
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