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Allahabad Bank Research Report - 21st Jan 2016

Banking | Published on Nov 20th 2015

IT

Allahabad Bank reported a 25% growth in PAT for 2QFY2016, aided by higher net interest income and lower provisions along with stable asset quality. NIM improves qoq; Slippages remain elevated During 2QFY2016, the bank witnessed a modest growth of 6.3% yoy in its loan book, while deposits growth was sluggish at 1.5% yoy. CASA deposits grew by 8.5% yoy (4.6% qoq), aiding 223bp yoy and 69bp qoq increase in bank’s CASA ratio to 34.9%. Yield on funds for the bank declined 18bp qoq to 9.5% while a 25bp qoq decline in the costs of funds on improved CASA ratio led to a 4bp qoq rise in Reported NIMs to 2.95%. The non-interest income (excluding treasury) for the bank saw a decline of 11.2% yoy led by decline in other income which however was partially offset by growth of 17.3% yoy in the fee income. During the quarter, asset quality pressures for the bank continued, as annualized slippages rate got elevated to 4.4%, higher than 1.9% in 1QFY2016 and 3.8% in 2QFY2015. Gross NPA ratios declined marginally by 0.6% qoq, while net NPA declined 1.6% qoq. The PCR for the bank continued to rise (up 117bp qoq during the quarter to 55.5%). Additionally, the bank restructured advances worth Rs111cr, thereby taking its outstanding restructured book to Rs15,769cr (10.4% of gross credit). Outlook and valuation: At the current market price, the stock trades at 0.3x FY2017E P/ABV. However, given the stress in certain sectors of the economy and with the bank having a meaningful exposure to these stressed sectors, we would follow a cautious stance in the near-term. We recommend a Neutral rating on the stock.

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CMP 74
Target Price
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)5,027.34
MCAP NSE (Rs in Cr)5,031.06
P/E (x)NM
EPS (Rs.)-21.07
BV (Rs.)157.94
Div Yield (%)0.00
FV (Rs.)10.00
P/BV (x)0.43
EV/Sales (x)10.60
EV/EBITDA (x)20.22

Shareholding Pattern (%)

Promoter67.0
Institution17.0
Public & Others11.0
Foreign5.0
Corporate0.0
Grand Total100.0

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