CMP Rs126, Target price Rs130, Upside 3.3%
Allahabad Banks loan book grew in-line with our expectation at 8% qoq/18% yoy. Deposits grew by modest 5% qoq/12% yoy with savings and retail term deposits growing at a faster pace. On a sequential basis, CASA ratio improved by 50bps qoq to 30.7%. Bulk deposits including CDs were flat yoy and comprised only 11% of total deposits.
NIM declined by sharp 70bps qoq (against our expectation of 10bps contraction) and stood at multi-quarter low of 2.3%. The steep reduction was driven by ~100bps qoq decline in the average yield on advances due to substantial interest reversal (~Rs1.95bn) on slipped/restructured accounts and reduction in Base Rate during early February. Yield earned on investments was also lower by 50bps qoq during the quarter. Average cost of deposits was marginally lower due to benign cost as well as lower share of bulk deposits. Banks is confident of earning 3% NIM is FY14 which we think would be an uphill task.
Fee income continues to remain weak declining 7% on yoy basis. Trading profit was higher than the previous quarter at Rs980mn. Opex was up 10% yoy but included Rs600mn provision towards the upcoming wage negotiations. Weak revenue growth drove cost/income ratio higher to 51.5%.
Asset quality deteriorated significantly with Gross NPA rising 46% qoq. Slippages came in at Rs26bn (bank had eluded Rs8-10bn in the previous quarter) implying an alarming delinquency ratio of 8%. Largest four accounts slipped constituted almost 50% of the additions - Kemrock Industries (Rs4.7bn), Survinayak Industries (Rs3.1bn), Sterling Group (Rs2.4bn) and Orchid Chemicals (Rs2.3bn). The next five accounts aggregated Rs3.1bn and balance slippages during the quarter were granular. In terms of segments, bulk of the fresh NPAs came from Mid Corporate segment while it was diversified across industries. Fresh restructuring during the quarter was also substantial at close to Rs14bn and the outstanding portfolio stood at Rs149bn, 11.4% of total advances. Restructuring pipeline stands at Rs5-5.5bn and includes Gammon India account of ~Rs1.3bn.
Specific provisioning stood at Rs5.1bn implying a credit cost of 160bps. However, this being lower-than-commensurate PCR declined qoq from 61% to 50%. Bank also provided Rs650mn for NPV loss on accounts restructured during the quarter. Net NPAs rose 67% qoq and reached 36% of networth. Quarterly RoA stood at paltry 0.26% due to an overall anaemic operating performance. Tier-I capital ratio stands at 8.1%; bank expects to receive Rs15bn capitalization from the Government during the year.
We lower FY14/15 earnings and book value estimates of Allahabad Bank drastically to factor deeper all-round operational challenges in the medium term. Reduce 9-month target price to Rs130 and downgrade the rating to Market Performer. Result table
|(Rs mn)||Q4 FY13||Q3 FY13||% qoq||Q4 FY12||% yoy|
|Total Interest Income||42,524||44,447||(4.3)||41,682||2.0|
|Net Interest Income||10,560||13,302||(20.6)||12,884||(18.0)|
Source: Company, India Infoline ResearchFinancial Summary
|Key Ratios||Q4 FY13||Q3 FY13||chg qoq||Q4 FY12||chg yoy|
|Cost of Funds (%)||7.0||7.2||(0.2)||7.2||(0.2)|
|Non-interest income (%)||33.2||20.4||12.8||21.6||11.6|
|Non-int inc/Int exp (%)||16.4||10.9||5.5||12.3||4.1|
|Cost to Income (%)||51.5||48.5||2.9||45.2||6.3|
|Gross NPA (%)||3.9||2.9||1.0||1.8||2.1|
|Net NPA (%)||3.2||2.1||1.1||1.0||2.2|
|Y/e 31 Mar (Rs m)||FY12||FY13||FY14E||FY15E|
|Total operating income||64,613 ||63,433 ||71,493 ||84,573 |
|yoy growth (%)||19.8 ||(1.8)||12.7 ||18.3 |
|Operating profit (pre-provisions)||37,699 ||33,852 ||38,363 ||46,804 |
|Net profit||18,668 ||11,852 ||13,669 ||18,282 |
|yoy growth (%)||31.2 ||(36.5)||15.3 ||33.7 |
|EPS (Rs)||37.3 ||23.7 ||27.3 ||36.6 |
|Adj. BVPS (Rs)||171.1 ||127.3 ||141.1 ||160.7 |
|P/E (x)||3.4 ||5.3 ||4.6 ||3.4 |
|P/ Adj. BV (x)||0.7 ||1.0 ||0.9 ||0.78 |
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When It's About Money: Don't just save for your child's education
India Infoline News Service / 08:59, Sep 15, 2014
Many a times parents overlook other goals as they are too busy focusing on just one goal, that is on their child's education. They are too emotionally involved in achieving this particular goal that they forget planning for their retirement and saving for other emergencies.