Angel Broking neutral on Vijaya Bank

Angel Broking has maintained neutral rating on Vijaya Bank, in its May 3, 2012 research report.

“Vijaya Bank reported a healthy set of numbers for 4QFY2012. Net profit grew by 233.8% yoy to `181cr (low base on account of one-off pension and gratuity-related provisioning in 4QFY2011), which was above our estimates on account of a better-than-expected increase in net interest income and lower-than expected provisioning expenses. We maintain our Neutral stance on the stock.”

“For 4QFY2012, the bank’s advances grew moderately by 3.7% qoq (18.9% on a yoy basis), while deposits growth was relatively lower at 1.6% qoq (13.4% yoy). Consequently, the bank’s CD ratio improved to 69.7% in 4QFY2012 from 68.3% in 3QFY2012. CASA ratio improved by 97bp qoq to 22.0%, on account of strong 11.5% qoq growth in current deposits and healthy 4.5% qoq growth in saving deposits. Reported NIM for the quarter remained flat sequentially due to a minimal sequential increase of 11bp in yield on advances and qoq flat cost of deposits. Non-interest income excluding treasury gained traction during the quarter, witnessing growth of 12.2% qoq. The bank’s asset quality showed signs of improvement, with the annualized slippage ratio for the quarter coming significantly lower at 2.8% from the high of 5.3% witnessed in the previous quarter. Gross and net NPA ratios improved marginally to 2.93% (from 2.98% in 3QFY2012) and 1.72% (from 1.81% in 3QFY2012), respectively. Provision coverage ratio (including technical write-offs) improved by 101bp qoq to 62.4%. As of 4QFY012, the bank’s outstanding restructured book stood at `2,939cr (5.1% of total advances). Management guided that major advances in the restructuring pipeline include those given to Haryana and U.P. discoms (combined exposure in the range of `1,500cr to `1,700cr). The bank witnessed slippages at a run rate of 7% of the restructured book for FY2012.”

“During 4QFY2012, although the bank’s asset quality improved slightly, concerns have not eased off completely. Also, the bank’s low core equity ratio could lead to further dilution on account of Basel III guidelines. RoA for the bank is likely to remain at subdued levels of ~0.5% even in FY2014. Currently, the stock trades at 0.7x of FY2014E ABV, which is relatively expensive than its peers; hence, we recommend a Neutral rating on the stock,” says Angel Broking research report.

Institutional holding more than 40% in Indian cos

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