Buy Allahabad Bank; target of Rs 195: SPA Research

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

SPA Research is bullish on Allahabad Bank and has recommended buy rating on the stock with a target of Rs 195 in its February 6, 2013 research report.
 
“Allahabad Bank came out with mixed set of numbers in the last quarter. Profitability came in lower than expectations declining by 44.5% YoY largely due to increased provisioning for standard assets and provision for wage revision of employees. On the positive side, pace of worsening in asset quality moderated after sharp deterioration witnessed in Q2FY13 and NIMs sequentially improved by 22 bps to 3.0% in Q3FY13 aided by 17 bps softening in cost of deposits. Incremental restructuring stood at only INR 7.9 bn (substantially lower compared to INR 16.3 bn in Q2FY13 and INR 47.8 bn in Q1FY13) resulting in total restructured book of INR 130.7 bn (10.8% of advances). We change our estimates to factor in increased provisioning requirements and retain our BUY rating on the stock with a revised target price of INR 195.”
 
“ALB reported 19.6% growth in advances to INR 1216 bn led by 26.8% surge in agri loan segment. ALB focussed more on high yielding retail segment which witnessed a growth of 14.0% to INR 164 bn (13.5% of total advances) aided by 49.1% surge in trade loans. The bank is exercising caution while lending to power (11% of advances), telecom and metal sector. ALB plans to maintain its focus on retail segment and is targeting to increase the share of retail loan to 20% in FY14. In addition it is banking on MSME and corporate segment to drive its loan book. ALB witnessed a sharp sequential improvement of 22 bps in NIMs to 3.0% aided by 17 bps decline in cost of deposits due to reliance on low cost foreign borrowings and repayment of high cost bulk deposits (share reduced by 500 bps sequentially to 9% in Q3FY13). We expect NIMs to remain stable at +3% on the back of increased focus on high margin retail and MSME segments.”
 
“Although ALB disappointed on the earnings front in the last quarter, we believe the stock at 0.8x FY14E ABV adequately covers all the concerns relating to the asset quality. Moreover we expect asset quality concerns to recede for the entire banking industry with the expected macro economic recovery in the next financial year. Its strategy of focussing in favour of high yielding MSME & retail segment and reducing reliance on bulk deposits in addition to stressing on CASA deposit mobilization, which will provide cushion to net interest margins. Further higher exposure of ~42% in AFS book (duration of 2.7 years) will aid profitability in a declining interest rate scenario. We change our estimates to factor in increased provisioning requirements and retain our BUY rating on the stock with a revised target price of INR 195. At our target price, the stock would trade at FY14E P/BV of 1.1x,” says SPA Research report.

Read More