Reduce Vijaya Bank; target of Rs 71: Angel Broking

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Reduce Vijaya Bank; target of Rs 71: Angel Broking

Angel Broking is bearish on Vijaya Bank and has recommended reduce rating on the stock with a target of Rs 71 in its May 6, 2011 research report.

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Angel Broking is bearish on Vijaya Bank and has recommended reduce rating on the stock with a target of Rs 71 in its May 6, 2011 research report.

"For 4QFY2011, Vijaya Bank posted disappointing numbers, with net profit declining by 58.3% yoy and 64.3% qoq to Rs54cr. Asset-quality concerns persisted during the year, while pension expenses led to higher employee costs, which resulted in lower RoA for FY2011."

"For 4QFY2011, the bank's advances grew by moderate 17.3% yoy (compared to industry credit growth of 21.4% yoy) to Rs48,719cr, while deposits grew by 18.3% yoy, which was above the industry's growth of 15.8% yoy. CASA deposits grew by healthy 21.3% yoy, driven by 24.3% yoy and 14.2% yoy growth in savings account and current account deposits, respectively. CASA ratio at the end of 4QFY2011 stood at moderate 25.3%. Reported NIM of the bank decreased by 62bp qoq to 2.8% on account of rise in cost of funds. During FY2011, the bank witnessed asset-quality concerns with slippages considerably high at Rs1,362cr. Consequently, the annual slippage ratio stood at 3.3% in FY2011 (3.4% in FY2010). Gross NPA ratio and net NPA ratio stood at 2.6% and 1.5% in FY2011 compared to 2.4% and 1.4% in FY2010, respectively. As of 4QFY2011, the bank's provision-to-coverage ratio (PCR) including technical write-offs stood at 63.7%."

"During FY2011, Vijaya Bank's asset-quality concerns persisted with very high slippages. However, the bank expects substantial recoveries in FY2012, which we have factored in our estimates. Despite this, RoA is likely to remain at ~0.5% in FY2012. Currently, the stock is trading at 1.0x of FY2013E ABV, which is relatively expensive than its peers. We have valued the bank at 0.9x FY2013E ABV with a target price of Rs 71. We recommend a Reduce rating on the stock," says Angel Broking research report.

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