Hold Allahabad Bank; target Rs 145: Emkay
Emkay Global Financial Services has recommended hold rating on Allahabad Bank with a target price of Rs 145, in its November 5, 2012 research report.
November 06, 2012 / 15:28 IST
Emkay Global Financial Services has recommended hold rating on Allahabad Bank with a target price of Rs 145, in its November 5, 2012 research report.
"Allahabad Bank Q2FY13 results came in below expectation primarily led by host of exceptional items during the quarter which took a toll on NII and asset quality. The bank reported NII of Rs11.7bn (-11%yoy) significantly lower than our estimates (Rs13.4bn), led by interest reversal of Rs1.7bn during the quarter. Adjusted for the same NII would have been at Rs13.4bn, inline with estimates. Moreover adjusted NIM’s would also have expanded by 6bps qoq to 2.9%, as against 37bps decline on reported basis. The bank reported Rs7.2bn of normalized slippages (adjusting for one lumpy account of Rs2.8bn in steel sector and Rs7.2bn of accounts where the asset classification was changed from standard restructured assets to NPA, post difference of opinion with RBI), and Rs20.2bn of standard asset restructuring during the quarter.On the balance sheet front: While advances remain flat qoq at Rs1.1tn, deposit grew by 3.2%qoq, resulting in ~200bps decline in Loan to deposit ratio. CASA ratio improved by 67bps qoq to 30.3% with bulk deposit also coming down further during the quarter. Despite no growth in loan book sequentially, the RWAs were up 7% qoq.Valuations and view: We have cut our earnings estimates for ALBK by 12%/1.3% for FY13/14E to take into account the higher slippages during the quarter. Although, the valuations at 0.8x/0.7x FY13/14E ABV remains attractive, any rerating from here will hinge on few things:The slippages from restructured book have now reached 33% of the 12-m trailing book in line with other PSU banks. The restructuring in the infrastructure sector excluding SEBs has already touched Rs20bn in FY13. Any likelihood of the reclassification even happening again would remain as overhang on the stock.Although ALBK’s stressed asset portfolio (NPAs + restructuring) excluding SEBs is at 10%, the provision cover (one of biggest positives till date) has fallen dramatically. Improvement in the PCR will be very much necessary for meaningful rerating from hereon.Despite flat advances book for Q2FY13, the RWA have gone up 7% qoq with tier I CAR at 8.9%. Any unfavorable risk adjusted growth will also dampen the rerating process. In light of above concerns we assign HOLD rating on the stock with TP of Rs 145, valuing the stock at 0.8x FY13/14E average ABV," says Emkay Global Financial Services research report.Bodies Corporate holding more than 50% 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 
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
