Brokerage house Angel Broking is bullish on IDBI Bank and has recommended 'Accumulate' rating on the stock with a target price of Rs 76 in its research report dated May 13, 2014.
Angel Broking's report on IDBI Bank
"IDBI Bank delivered a weak operating performance for 4QFY2014 with earnings de-growth of 6.5% yoy, while the asset quality remained largely stable. The key highlights of the result are a) moderate NII growth at 9.3% yoy (on back of weak loan growth [0.7% yoy]), b) 2bp qoq increase in margins to 2.2%, c) weak non-interest income excluding treasury, which de-grew by 22.2% yoy, dragged by 20.6% yoy de-growth in CEB income, d) asset quality remained stable (as recoveries and upgrades came in higher sequentially); however, the annualised slippage rate came higher at 4.2% as against 1.7% in 3QFY2014."
"During the quarter, the bank’s Balance sheet growth was weak as loan book grew by 0.7% yoy, while deposits grew by 3.8% yoy. Savings deposits grew by 19.3% yoy, while current deposits declined 24.8% yoy. CASA deposits declined 6.5% yoy while CASA ratio for bank declined by 249bp yoy to 22.6%. The Reported margins for the bank increased sequentially by 2bp to 2.2%. The bank reported a weak performance on the non-interest income (excl. treasury) front, with a decline of 22.2% yoy to Rs 781cr, dragged by 20.6% yoy de-growth in income from the CEB stream. The bank’s treasury gain of Rs 370cr during the quarter as against Rs 143cr in 4QFY2013. Overall, the bank reported a largely flat other income on a yoy basis to Rs 1,151cr."
"Asset quality pressures for the bank moderated during 4QFY2014 on back of healthy recoveries and upgrades at Rs 1,266cr as against Rs 167cr in 3QFY2014 and Rs 486cr in 4QFY2014. The Annualized slippage ratio spiked to 4.2% as compared to 1.7% in 3QFY2014 and 2.0% in 4QFY2013. On an absolute basis, while Gross NPA levels remained largely flat qoq, the net NPA levels declined sequentially by 6.1%, as the PCR (including technical write-offs) improved 91bp qoq to 64.5%. During the quarter, the bank restructured advances worth ~Rs 1,300cr. As of 4QFY2014, the total restructured book of the bank stood at Rs 15,452cr."
Outlook and valuation: "Though the asset quality pressures have moderated for the bank during 2HFY2014 (on back of higher recoveries and upgrades), sustaining such performance, going ahead, would be difficult. At CMP, the bank is trading at a valuation of 0.46x FY2016E P/ABV, (0.55x adjusting for the SASF). We maintain our Accumulate rating on the stock with a target price of Rs 76", says Angel Broking research report.
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