Buy Indian Overseas Bank; target of Rs 122: Dolat Capital

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Buy Indian Overseas Bank; target of Rs 122: Dolat Capital

Dolat Capital is bullish on Indian Overseas Bank and has recommended buy rating on the stock with a target of Rs 122 in its February 1, 2012 research report.

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Dolat Capital is bullish on Indian Overseas Bank and has recommended buy rating on the stock with a target of Rs 122 in its February 1, 2012 research report.

"In Q3 FY12, Indian Overseas Bank's (IOB) NII grew 8% YoY to Rs 12.2bn- 5% lesser than our estimate of Rs 12.8bn. Operating profit grew merely by 2.3% YoY to Rs 8.2bn, as against our estimate of Rs 9.3bn. Much higher provisioning dented bottom-line to Rs 1.1bn compared to our estimate of Rs 3bn and consensus estimate of Rs 2.7bn."

"IOB reported higher business growth than expected; however, there was decline in margin to 2.61% as against 3.27% in Q3 FY11 and 2.86% in Q2 FY12. Higher liabilities cost impacted core income as well as margins. Non-interest income was below than our expectation due to lesser than expected cash recoveries which restricted operating profit growth. An unexpected drop in bottom-line came mainly due to the higher provisioning for restructured accounts and investment depreciation. The gross slippage ratio decline on sequential basis to 2.36% from 3.7% in Q2 FY12. Sequentially, NPL provisioning was lower, reflecting in the higher net NPA ratio. Overall, the results were below than expectations on account of lesser NII, cash recoveries and higher provisions. We reduce our earnings estimates by 19% and 7% for FY12 and FY13 and reduce our Price target by 10% to Rs 122. We reiterate our Buy rating on the stock. At current price, it quotes at 0.6x ABV FY13," says Dolat Capital research report.      

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To read the full report click on the attachment