Accumulate Andhra Bank; target of Rs 152: Angel Broking

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Accumulate Andhra Bank; target of Rs 152: Angel Broking

Angel Broking is bullish on Andhra Bank and has recommended accumulate rating on the stock with a target of Rs 152 in its May 12, 2011 research report.

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Angel Broking is bullish on Andhra Bank and has recommended accumulate rating on the stock with a target of Rs 152 in its May 12, 2011 research report.

"For 4QFY2011, Andhra Bank posted moderate set of numbers with NII increasing marginally by 2.6% qoq (up 31.3% yoy) and NIM declining by 22bp qoq to 3.7%. The key positive of the result was a 50.5% increase in non-interest income, driven by higher treasury and forex gain and a slight improvement in CASA ratio to 29.1%."

"The bank's business momentum continued sequentially with 8.9% and 12.3% qoq growth in advances and deposits, respectively. The pace of deposit growth was also accompanied by strong sequential growth in current account deposits (37.3%) and saving account deposits (7.7%). Consequently, CASA ratio improved by 52bp qoq to 29.1%. The effect of rising interest rates was felt in 4QFY2011 with cost of deposits increasing by 64bp to 6.5%. Reported NIM witnessed a decline of 22bp to 3.7%, partly compensated by the 53bp qoq increase in yield on advances to 11.6%. During 4QFY2011, CEB income declined by 21.6% qoq (1.9% yoy). However, non-interest income managed to grow by 50.5% qoq (11.1% yoy) on the back of substantial treasury gains (6.5 times of 3QFY2011) of Rs65cr and forex gains (up 116.8% qoq) of Rs34cr. Slippages were stable with an annualised slippage ratio of 1.4% for 4QFY2011, a decline of 9bp over 3QFY2011. Gross NPA ratio stood at 1.4% (1.3% in 3QFY2011) and net NPA ratio stood at 0.4% (0.5% in 3QFY2011). The provision coverage ratio including technical write-offs stood at 83.9% in 4QFY2011 (80.4% in 3QFY2011). Pension expenses for 4QFY2011 led to a 14.7% (up 22.2% yoy) increase in employee expenses for the quarter."

"Post correction, at the CMP, the stock is trading at 0.9x FY2013E ABV compared to its five-year range of 0.8x-1.4x one-year forward ABV with a median of 1.15. We value the stock at 1.0x FY2013E ABV and, hence, recommend Accumulate on the stock with a target price of Rs152," says Angel Broking research report.

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To read the full report click on the attachment