Thursday, April 26, 2012

Accumulate IDBI Bank; target Rs 117


"IDBI Bank reported a healthy performance for 4QFY2012. Net profit grew by 49.3% yoy to Rs 771cr, above our estimates, primarily due to lower provisioning expenses than estimated by us. Improvement in asset quality and NIM were the key highlights of the result. The bank’s loan book witnessed significant traction in 4QFY2012 on account of meeting year-end targets (particularly priority sector lending). The bank’s advances grew by 16.0% qoq (up 15.3% yoy) and deposits grew by 18.8% qoq (up 16.6% yoy). Growth in current and savings accounts was healthy at 33.6% yoy and 36.4% yoy, respectively. CASA ratio as of 4QFY2012 stood at 24.1% (19.7% in 3QFY2012). The bank’s NIM expanded by 18bp qoq during 4QFY2012 on account of lower cost of funds (down 26bp sequentially), primarily due to higher CASA floats (CA deposits up 77.4% qoq)."

"The bank relies heavily on bulk deposits for its funding (~55% of overall deposits as of 4QFY2012); however, the bank rolled over most of these deposits during January 2012 and escaped the high costs that prevailed during most of 4QFY2012. The bank’s commission-based fee income increased sharply during 4QFY2012 by 94.3% qoq (up 24.9% yoy), as the bank realized pending fee accruals (processing and syndication-based fee income) that got approved in 4QFY2012. For 4QFY2012, IDBI Bank’s asset quality surprised positively with slippage ratio declining to 1.0% in 4QFY23012 from 3.1% in 3QFY2012. Consequently, provisioning cost declined sharply by 32.6% qoq in 4QFY2012 to Rs 274cr (Rs 406cr in 3QFY2012). The bank restructured ~Rs 1,500cr worth of accounts during 4QFY2012, of which Rs 763cr relates to restructuring of Air India."

"Considering the bank’s healthy performance in 4QFY2012, we have lowered our provisioning expense estimates for FY2013 by 8.3% and increased our bottom-line estimates by 12.6%. We value the stock at 0.7x FY2014 ABV and, hence, recommend Accumulate on the stock with a target price of Rs 117,” says Angel Broking research report.

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