Monday, July 25, 2011

Allahabad Bank

Emkay Global Financial Services is bullish onAllahabad Bank and has recommended accumulate rating on the stock with a target of Rs 240 in its July 22, 2011 research report.
“Allahabad Bank (ALBK) NII for Q1FY12 has grown by 38.3%yoy to Rs11.8bn driven by 30.4% yoy (5.5% qoq) growth in advances and largely stable NIM’s.”
“We are positively surprised by resilience of ALBK’s NIMs at 3.4% for the quarter. A 100bps qoq increase in the cost of deposits was more than compensated by (1) 90bps increase in yield on adv (courtesy 75bps increase in rates and strong growth in SME) and (2) 40bps increase in yields on investments thanks to subscription to CDs/CPs. ALBK intends to grow its retail and SME book aggressively over next 12-18 months and intends to improve yields driven by the same (though yields are one of the highest at 11.8%). ALBK has also increased its base rate by 25bps in Jul-11 which will help mitigate deposit repricing. ALBK’s advances have grown by 5.5% qoq driven by SME and Corporate loans which grew by 13.4%qoq and 5.2%qoq to Rs163bn and 556bn respectively. The growth in retail advances was largely driven by 8.0%qoq growth in commercial vehicles loans and 3.1%qoq growth in education loans.”
“We are positively surprised by the resilience of ALBK’s NIMs and lower slippage numbers. Consequently, we have revised our NII number for FY12E by +9.5%, though keeping profit numbers same due to lower trading and other income. Our book value for FY12E stands revised upwards by 5% on account of lower slippages. We believe that ALBK’s current valuations of 1.2x FY12E/1.0 x FY13E ABV are attractive looking at average 19% RoEs for FY12-13E. We maintain ACCUMULATE with TP of Rs 240,” says Emkay Global Financial Services research report.
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