Buy Dena Bank; target of Rs 95: Angel Broking

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Buy Dena Bank; target of Rs 95: Angel Broking

Angel Broking is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 95 in its February 7, 2012 research report.

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Angel Broking is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 95 in its February 7, 2012 research report.

"Dena Bank, the pace of business picked up in 3QFY2012, with advances growing by 12.2% qoq (up 15.7% yoy) and deposits growing by 6.4% qoq (13.0% yoy). CASA deposits growth was relatively slower at 4.2% qoq (11.4% yoy), leading to a 72bp qoq (50bp yoy) decline in CASA ratio to 34.9%. Yield on advances for the bank increased by 22bp qoq to 12.2% in 3QFY2012, while cost of deposits increased by relatively lower 12bp, leading to a sequential improvement of 11bp in reported NIM to 3.3%. During 3QFY2012, non-interest income grew by 18.2% qoq to Rs 134cr, mostly due to strong performance in fee income (aided by traction in LCs, guarantees and inflows from forex income), which grew by 13.3% qoq (up 9.7% yoy) to Rs 124cr. Recoveries from written-off accounts were also strong at 19.6% qoq (down 44.2% yoy), while treasury income registered a strong sequential performance. Slippages (Rs 173cr) for the bank were under control during 3QFY2012, with annualized slippage ratio standing at 1.5%. Gross NPA ratio as of 3QFY2012 stood at 1.85% (1.93% in 3QFY2012), while net NPA ratio stood at 1.10% (1.15% in 2QFY2012). NPA provision coverage ratio, including technical write-offs remained healthy at 76.6%. The bank's outstanding restructured book as of 3QFY2012 stands at Rs 1,800cr."

"Dena Bank has structurally a strong CASA ratio of 35%, aiding better NIM than peers. We were cautious on the bank's asset quality; however, so far, the bank's asset quality has held up reasonably well compared to peers and now considering the improving macro environment, we upgrade the stock to Buy with a target price of Rs 95," says Angel Broking research report.

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To read the full report click on the attachment