Angel Broking : Bank Stocks Review

Bank of Baroda TP: Rs. 926 Upside: 34.8%)

For 4Q FY 2012, Bank of Baroda (BOB)  posted a moderate set of numbers on the

operating front. Deterioration in asset quality was also witnessed during

4Q FY 2012 due to higher slippages &  restructuring.

However, tax write-back of Rs. 425 cr led to bottom-line growing by 17.3% year on year (yoy).

For FY2012, the bank’s advances and deposits grew by strong 25.7% yoy and

26.0% yoy, respectively.

The bank’s domestic CASA growth remained reasonably healthy at 15.9% yoy. The bank’s domestic yield on advances declined by 0.30% quarter on quarter (qoq)  to 11.7 %, while domestic cost of deposits came in higher by 0.27% qoq to 6.9 %, leading to a 0.07% fall in reported NIM to 3.4 % during 4Q FY 2012.

Fee income of the bank remained muted in 4Q FY 2012, growing marginally by 0.4%

qoq (up a moderate 6.6% yoy).

Commission and brokerage income was higher in 4Q FY 2012 (up 17.7% qoq), however was negated by lower income from Forex transactions &  incidental charges. Employee expenses for the bank increased by

51.2 % qoq on the back of additional pension provisioning of Rs. 300 cr. Slippage

levels for the bank, which had increased to Rs. 952 cr in 3Q FY 2012 (quarterly run

rate of Rs. 500 cr), increased further to Rs.1,323 cr in 4Q FY 2012 (on the back of a

chunky media account). The bank’s restructured book increased by 51.7% qoq

(Rs. 5,139cr restructured during 4Q FY 2012) on the back of restructuring of SEBs

(Rs. 2,000cr) and Air India (Rs. 2,400 cr).

The bank reported a tax write-back of Rs. 425 cr during 4Q FY 2012 on account of pending tax credit and higher tax exemptions during 4Q FY 2012 due to higher NPA write-offs (Rws. 530 cr during 4Q FY 2012). We

currently have a Buy rating on the stock with a target price of Rs. 926.

Allahabad Bank TP: Rs.19, Upside: 14.2 %

Allahabad Bank reported its results for 4Q FY 2012. Bank reported NII of  Rs. 1,288 cr,

which declined by 6.7 % qoq on account of sequential fall in NIMs. Non-interest

income for the bank also dipped by 24.4 % on a yoy basis to Rs. 355 cr.

Further, operating expenses for the bank increased by 6.2 % qoq, which coupled with 4.9%

qoq decline in operating income, lead the pre-provisioning profits to decline by

12.5 % qoq to Rs. 901 cr.

Net profit declined by even higher by 28.6% qoq to Rs. 400 cr,on back of increase in provisioning expenses by 7.9% qoq. The bank’s asset quality deteriorated slightly during the quarter, with net NPA ratio increasing by

0.19%. We recommend Accumulate rating on the stock with a target price of Rs. 194.

IOB TP: Rs. 104 Upside: 24.7%

IOB reported a healthy set of numbers with net profit growing by 21.8 % yoy to

Rs. 529 cr, above our estimates on account of higher margin expansion and lower

provisioning expenses than estimated by us.

Calculated margins of the bank increased by 0.12% sequentially to 2.6 %. Asset

quality of the bank remained stable with gross NPA level declining by 1.3 % qoq.

However, the bank chose to decrease its provisioning coverage ratio by 4%

(67.7 % as of 4Q FY 2012), leading to lower provisioning expenses in the PnL (down

13.1 % yoy) and an increase of 19.2 % qoq on the net NPA level. We currently have

a Buy rating on the stock with a target price of Rs.104.

UCO Bank  Target  Price Rs. 67.  Downside: 6.9 %)

During  4Q FY 2012, UCO bank reported disappointing set of operating numbers.

NII  (Net Interest income) for the bank remained almost flat on q o q basis to Rs. 1,051 cr. Non-interest

income for the bank dipped on a y o y basis by 13.7% to Rs. 252 cr. Operating

expenses for the bank increased by 13.3% q o q (3.2 % y o y) to Rs. 574 cr, which

despite subdued 2.7 % q o q growth in operating income, lead the pre-provisioning

profits to decline by 4.3 % q o q to Rs. 728 cr. Higher provisioning expenses (up by

8.5 % q o q), dragged the Net profit by even higher 24 % q o q to Rs. 253 cr.

Asset quality for the bank remained stable sequentially, with gross and net NPA ratio

coming in at 3.48 % & 1.96 %, respectively.

We recommend Reduce on the stockwith a target price of Rs.67.

United Bank  TP: Rs. 87,  Upside: 36.5%

United Bank reported a weak set of numbers with net profit growing by muted

4.2% yoy to Rs. 149 cr, which were below our estimates mostly due to higher

provisioning expenses than estimated by us.

Calculated margins for the bank dipped by 0.38% qoq to 2.6 %. Asset quality of the

bank deteriorated during 4Q FY 2012 with gross NPA level increasing by 12.2 %

qoq. The bank’s provisioning coverage ratio, however, increased by 2.65% qoq to

69.2 %, leading to net NPA level declining by 8.7 % sequentially. We currently have

a Buy rating on the stock with a target price of Rs. 87.

Review By Angel Broking

6^th Floor, Ackruti Star

Central Road,MIDC

Andheri (E) , Mumbai-93

Main : (91-22) 3935 7600 Extn : 6956

Website : www.angelbroking.com

angelresearch@angelbroking.com <angelresearch@angelbroking.com>

Vaibhav Agrawal

022 – 3935 7800 Ext: 6808

vaibhav.agrawal@angelbroking.com

Varun Varma

022 – 3935 7800 Ext: 6847

varun.varma@angelbroking.com

Sourabh Taparia

022 – 3935 7800 Ext: 6872

sourabh.taparia@angelbroking.com

Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com

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