AnandRathi cuts earning forecast, target price of IDBI Bank

Moneycontrol Bureau

Brokerage house AnandRathi has maintained its “buy” rating on IDBI Bank. However, the broking firm has lowered its earnings estimates and target price for the stock citing weak asset quality. Net profit estimates for financial years 2014 and 2015 have been lowered by 5.4 percent and 4.4 percent respectively on slower credit growth assumptions.

“Management’s strategy to focus on priority-sector loans reflected in IDBI Bank’s cautious business growth. Although core earnings have improved, the capital cushion has been stretched by the high restructured book and net NPA,” said the AnandRathi note to clients.  

"We lower our target for the standalone bank from Rs 118 to Rs 106. We price the investments at book value (Rs 23), arriving at our target of Rs 129. While the focus on prudent credit growth, NIM protection and controlling operating costs are strong positives, asset quality needs to improve, in our view, for a strong valuation upside," said the AnandRathi note.