Buy Syndicate Bank; target of Rs 152: Dolat Capital

Dolat Capital is bullish on Syndicate Bank and has recommended buy rating on the stock with a target of Rs 152 in its July 13, 2012 research report.

“In FY12, Syndicate Bank recorded substantial improvement on deposit profile; whole-sale deposits & CDs proportion declined by 470bps to 21% from 26% a year back and core retail deposits increased by almost 430bps to 69%. In FY12, the bank grew its credit book slower than the industry at 15.8% compared to 17.5% of the industry with taking higher amount collaterals. On maturity profile front, the bank’s credit portfolio average maturity remained almost same with 33% of credit book in less than 1 year maturity buckets. The bank reduced its concentration risk of credit portfolio & exposure reflecting into lesser concentration in top twenty loan accounts and borrowers.”
“Syndicate Bank’s proportion of unrated credit book slightly increased to 53% from 51% a year back and share of unrated credit book (with more 100% risk weight) remained almost constant at 5.9%. On margin front, the bank managed to maintain margin even in a difficult scenario mainly on the back of stability on low-cost deposits share with decrease in bulk deposit proportion on liability side and marginal increase in exposure to riskier assets. Also, higher proportion of investments diverted towards longer tenure papers aiding yield on the book. The bank’s RWAs/assets ratio increased to 53.6% from 51% a year back aiding asset yield. The bank’s margin improved by 4bps to 3.06%.”
“Overall, we maintain our positive stance on the stock and estimate that the bank would report RoAA of ~0.8% and RoAE of 16-18% in FY13-14. We reiterate our stock rating to Buy with a price target of ` 152. At current price, it quotes at 0.7x and 0.6x ABV FY13 and FY14 respectively; based on our target price, the stock would trade at 0.9x adjusted book value FY14. The stock is available at an attractive dividend yield of 4.6% (on FY13’s dividend),” says Dolat Capital research report.    Institutional holding more than 40% 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

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