Accumulate Dena Bank; target of Rs 94: Angel Broking

Angel Broking is bullish on Dena Bank and has recommended accumulate rating on the stock with a target of Rs 94 in its May 24, 2014 research report.

May 26, 2014 / 13:27 IST

26 Aug, 2025 12:21

Volume

Todays L/H

Angel Broking`s research report on Dena Bank

“Dena Bank reported weak asset quality performance during 4QFY2014, continuing the trend witnessed over the last seven quarters. On the operating performance front, while the NII grew moderate at 9.3 percent yoy, the non-interest income grew 15.7 percent yoy, thus enabling the bank to report an operating profit growth of 11.7 percent yoy to Rs448cr. The provisioning expense for the quarter grew by 66.8 percent yoy to Rs570cr, leading the bank to register a PBT level loss of Rs123cr. But tax reversals to the tune of Rs310cr enabled the bank to register an earnings growth of 49.0 percent yoy to Rs187cr for the quarter.”

“During 4QFY2014, the bank’s advance book grew at a healthy pace of 17.9 percent yoy, while deposits grew moderate at 13.2 percent yoy. Healthy loan growth was primarily aided by strong growth in the agriculture segment which rose by 30.1 percent and healthy growth in the MSME segment which grew by 23.8 percent yoy. CASA deposits grew moderate at 9.9 percent yoy. The CASA ratio for the bank decreased by 89bp qoq to 28.0 percent. The NIM for the bank decreased sequentially by 34bp to 2.3 percent. During 4QFY2014, the non-interest income (excluding treasury) grew strong by 70.7 percent yoy to Rs261cr. Overall, non-interest income for the bank grew by 15.7 percent yoy to Rs272cr. The bank continued to witness asset quality pressures, as slippages spiked sequentially at Rs1,026cr (annualized slippage rate of 6.2 percent), compared to Rs507cr in 3QFY2014 (annualized slippage rate of 3.1 percent). Recoveries and upgrades came in lower at Rs247cr as compared to Rs312cr in 3QFY2014. ARC sale during the quarter stood at Rs535cr (Rs236cr realized). The PCR (incl. technical write-offs) dipped by 784bp sequentially to 56.4 percent. As of 4QFY2014, the bank’s outstanding restructured book stood at ~Rs7,637cr (as compared to Rs7,043cr in 3QFY2014). The restructuring pipeline for the bank stands at Rs300cr for 1QFY2015.”

“Dena Bank has a structurally strong CASA franchise (with a majority of its branches being in rural and semi-urban areas of CASA rich western India), aiding a better NIM than peers. The bank has witnessed a marked decline in its CASA ratio from 34.5 percent as of 4QFY2012 to 28.0 percent as of 4QFY2014, which can be attributed to a) muted performance on CASA deposits front (CAGR of 7.7 percent) and b) healthy traction witnessed in term deposits (CAGR of 25.1 percent) required to fuel its aggressive loan book growth. Bank has aggressively grown its loan book over the past couple of years. At CMP stock trades at 0.7x FY2016E P/ABV. We recommend an Accumulate rating on the stock,” says Angel Broking research report.

For all recommendations, Click here