Hold Syndicate Bank; target of Rs 130: Nirmal Bang

Nirmal Bang has recommended hold rating on Syndicate Bank with target of Rs 130 in its October 23, 2012 research report.

“Syndicate Bank reported 2QFY13 earnings of Rs4,634mn backed by a modest YoY growth of 5.9% in net interest income (NII) and tax write-back of Rs998mn, which is above our net profit estimate of Rs4,066mn by 14% and Bloomberg consensus estimate by 23.8%. Syndicate Bank reported interest income growth of 13.4% YoY and 0.8% QoQ, while interest costs grew 17.4% YoY, but declined1.3% sequentially, to fuel NII growth of 5.9% YoY and 5.4% QoQ at Rs13,908mn against our estimate of Rs14,254mn. NII showed a deviation of 2.4% from our estimate. Syndicate Bank reported growth of 10.5% YoY and sequential growth of 14.7% in non-interest income at Rs2,702mn against our estimate of Rs2,654mn.”
“ Overheads rose 22.7% YoY and 14.6% QoQ at Rs8,178mn, with staff costs increasing 25.9% YoY and other overheads rising 16.2% YoY. Profit before loan provisioning stood at Rs8,432mn against our estimate of Rs9,352mn, a decline of 5.4% YoY and flattish growth of 0.3% QoQ. Syndicate Bank reported decline of 33.1% YoY and 5.3% QoQ in total provisioning at Rs3,798mn against our estimate of Rs5,286mn. Profit after tax clocked growth of 43.5% YoY and 5.3% QoQ at Rs4,634mn against our estimate of Rs4,066mn. Syndicate Bank reported balance sheet expansion of 11.9% YoY led by growth in advances of 12.7% YoY and deposit growth of 10.5% YoY. Slower growth in advances appears to be a prudent strategy adopted by the bank to counter asset quality concerns in a subdued economic environment. However, we have factored in disbursement CAGR of 14.8% over FY12-14E amid weak macro-economic environment and sluggish corporate demand.”
“Syndicate Bank reported net earnings of Rs4.6bn for 2QFY13 against our estimate of Rs4.1bn, aided by tax write-back of Rs998mn. We have factored in tax breaks for Syndicate Bank over FY13 and FY14, lowering our tax assumptions for FY13E and FY14E by 46.6% and 46.5%, respectively, leading to upgrade in our earnings estimates for FY13E and FY14E by 3.3% and 3.4%, respectively. Consequently, we have increased our target multiple from 1.5x to 1.6x on FY13E adjusted book value, arriving at a target price of Rs130, up 7% from the current market price,” says Nirmal Bang research report. Non-Institutions holding more than 90% 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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