Oriental Bank of Commerce (Q1 FY14)

India Infoline News Service | Mumbai |

Asset quality weakened marginally with GNPA ratio rising from 3.21% in Q4 FY13 to 3.36% in Q1 FY14. Delinquency ratio improved from 3.3% in Q4 FY13 to 2.4% in Q1 FY14.

CMP Rs137, Target Rs147, Upside 7.0%
  • OBC’s loan book de-grew by 1.7% qoq against our expectation of 2% growth. This was led by shrivel in Agriculture (4.1% qoq), Large Corporate (3.7%) and Mid-corporate (3.1% qoq) portfolio. The yoy credit growth momentum was healthy in Retail (22.1%) segment. We expect advances growth to remain slow in FY14 in the wake of the weak investment cycle.  Deposits were almost flat sequentially and reported 11.5% growth on yoy basis. Strong growth in Retail Deposits (6.3% qoq) was offset by substantial run down in Bulk deposits (12.4% qoq) and de-growth in CASA deposits (3.1% qoq). Resultantly, their share in the overall deposits declined by 254bps and 81bps respectively on quarter on quarter basis. CASA ratio and Bulk Deposit ratio stood at 23.7% and 17.7% in Q4 FY14.


  • NIM improved by 8bps qoq to 2.9% in Q1 FY14 led by improvement in Yield on Advances (5bps qoq) and decline in Cost of Deposits (8bps qoq). Going forward, we expect margin to remain under pressure. This would be on account of weak credit growth, fragile asset quality, weak CASA mobilization and anticipated increase in Cost of Funds post the recent liquidity tightening measures announced by the RBI. Management has guided a NIM of 2.8-2.85% in the current quarter.  


  • Asset quality weakened marginally with GNPA ratio rising from 3.21% in Q4 FY13 to 3.36% in Q1 FY14. Delinquency ratio improved from 3.3% in Q4 FY13 to 2.4% in Q1 FY14. Of the total fresh slippages of Rs7.6bn in Q1 FY14, there was one chunky account worth Rs1.7bn from large corporate segment; rest all other accounts were less than Rs500mn across the sectors. Outstanding restructured portfolio stands at 8% of total advances (Rs103bn) compared to 7.6% in the previous quarter. During the quarter, bank added advances to the tune of Rs4.2bn to the restructured book and has a pipeline of Rs15bn for Q2 FY14. The major accounts in pipeline are Soma Enterprise, Gammon Infra, Lanco Infratech, etc. The Financial Restructuring Plan is over for Haryana, Rajasthan and Uttar Pradesh SEB and bank expects ~Rs24bn worth of bonds as per the plan. Bank’s total impaired assets are likely to remain elevated in the coming quarters given the tough operating environment. 


  • Non-interest income reported robust growth of 16.5% sequentially driven by substantial treasury gains (Rs2,056mn in Q4 FY13 compared to Rs681mn in Q1 FY13). Resultantly, Cost/Income ratio improved from 43.5% to 41% qoq. However, going forward it is expected to remain high led by weak NII growth and lower trading gains.


  • We believe upside in the stock from the current level is limited despite 45% correction in past 2 months primarily on account of a) weak credit growth, b) ongoing rise in total impaired assets, c) pressure on margins and d) elevated credit cost. We downgrade the stock to Market Performer with a target price of Rs147. 

Result table
(Rs mn)
Q1 FY14
Q4 FY13
% qoq
Q1 FY13
% yoy
Total Interest Income
47,177
45,343
4.0
42,872
10.0
Interest expended
(34,106)
(33,205)
2.7
(31,613)
7.9
Net Interest Income
13,070
12,138
7.7
11,258
16.1
Other income
5,381
4,617
16.5
4,084
31.7
Total Income
18,451
16,755
10.1
15,343
20.3
Operating expenses
(7,568)
(7,290)
3.8
(6,377)
18.7
Provisions
(5,327)
(7,588)
(29.8)
(3,321)
60.4
PBT
5,555
1,878
195.9
5,644
(1.6)
Tax
(2,022)
1,202
(268.2)
(1,730)
16.8
Reported PAT
3,534
3,079
14.8
3,914
(9.7)
EPS
48.4
42.2
14.8
53.7
(9.7)
Source: Company, India Infoline Research

 Key  Ratios
Q1 FY14
Q4 FY13
chg qoq
Q1 FY13
chg yoy
NIM (%)
2.9
2.8
0.1
2.8
0.1
Yield on advances (%)
12.0
12.0
0.0
12.4
(0.4)
Cost of Deposits (%)
7.7
BSE 120.55 1.60 (1.35%)
NSE 120.70 1.95 (1.64%)

***Note: This is a NSE Chart

 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.