 Buy State Bank of Travancore; target of Rs 800: MicrosecPublished on Mon, Aug 29, 2011 at 15:10 | Source : Moneycontrol.com Updated at Wed, Sep 28, 2011 at 14:35 3066 Investors following State Bnk Tr. Share this News with them.
Microsec Capital is bullish on State Bank of Travancore and has recommended buy rating on the stock with a target of Rs 800 in its August 26, 2011 research report. "The State Bank of Travancore (SBT) was incorporated in 1945 as Travancore Bank sponsored by the erstwhile princely state of Travancore. Later the bank was made an associate of State Bank of India, which is the largest banking group in India. Currently the bank has network of 712 branches and 389 ATMs spread across in 16 states in India. State Bank of Travancore operates 580 branches in Kerala itself. Headquartered in Kerala, the bank has largest number of ATMs in the home state." "Average NII growth from FY99-11 stood at 16.2% with Average NIM's of 2.67%. During the last 3 Years the bank had been able to protect its margin in the narrow range of 2.2% -2.4%. Going forward we may see some pressure on NIMs to the tune of 15-20 bps mainly due to ALM mismatch and migration from CASA to Term deposits. Other Income grew by 12.7% over FY99-11. From FY98-05 the proportion of treasury income to other income was very high (average 40.4%). The bank reduced its dependence on volatile treasury income to 23% of Other Income. Other income growth with out treasury income remained at 12.6% over the same period. Cost to Income (ex-treasury) stood at 56% which is quite high compared to 52% Industry average. However the bank had improved upon its cost efficiency. Earlier through FY98-03, the average C/I (ex T) was 63%. In the last 8 years the bank had reduced that by almost 1300 bps to 50.7%. Staff cost constitute around 68% of the total operational expenses which is typical of any PSU bank. The bank had improved a lot on asset quality front with Net NPA% came down from a life time high of 12.21% in FY98 to only 0.98% in FY11. This also showed in provision to total income (ex-T) ratio which declined from 37.1% to 13.7%. The bank has never seen a degrowth in its PAT since FY00 with average PAT growth for the last 12 ears stood at 27 9%." "The main medium term trigger for State Bank Of Travancore (SBT) is merger with its parent SBI. SBT currently trading at 57% valuation discount to SBI which is at historic low level. Apart from that, the return ratios are quite healthy for this bank. Valuation is also quite inexpensive compared to its peers. However pressure on asset quality & Company Details Industry Bank - Public Chairman Pratip Chaudhuri Managing Director P Nanda Kumaran ISIN INE654A01024 growth slowdown can be a near term concern. We have used Residual Income Method & Comparable valuation technique for arriving at a weighted average target price of INR 800. Currently the stock is trading at a P/E x of 3.5 & P/BV x of 0.62 based on its FY13 expected earnings," says Microsec Capital research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment |
