Motilal Oswal is bullish on Oriental Bank of Commerce and has recommended buy rating on the stock with a target of Rs 410 in its January 28, 2013 research report.
“Oriental Bank of Commerce (OBC) reported a PAT of INR3.3b for 3QFY13, in line with our estimate. Lower tax rate (nil v/s our expectation of 27.5%) compensated for the marginally lower than expected (~3%) operating profit and higher than expected provisioning of INR4.5b (our estimate: INR3.2b).”
“Slippages for the quarter stood at INR8.1b (annualized slippage ratio of 2.1%) as compared to INR6.5b in 2QFY13 - in line with management guidance. Of the overall slippages (1) INR280m was from retail, (2) INR1.1b from agriculture segment, and (3) INR 1.5b from MSME segment and rest from large and mid-corporate segment (especially from restructured loan where slippages amounted to INR3.1b). Further sector-wise, slippages came from (1) Textiles - INR2.5b (of which INR1b already restructured), (2) Food processing - INR630m, (3) Paper - INR540m and (4) Aviation - INR550m. While recoveries and up-gradations were marginally lower (~INR2.6b v/s INR2.7b in 2QFY13), bank wrote-off of INR3.4b which led to just ~6% QoQ increase in GNPA. Credit cost for the quarter stood at 1.2% as compared to 1.3% in 1HFY13 and PCR (including technical write-off) declined marginally to 63.6% (64.5% in 2QFY13).”
“Reduction in high cost deposits and easing interest rate in the system will be margin accretive. Further the management has been utilizing one-off gains and higher recoveries from written-off accounts to aggressively clean up the balance sheet. De-bulking of balance sheet are the steps in the right direction. Overall we expect earnings CAGR of ~20% over FY12-15. Buy,” says Motilal Oswal research report.
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