Angel Broking neutral on Andhra Bank
Angel Broking has maintained a neutral rating on Andhra Bank, in its November 21, 2013 research report. "We remain watchful of incremental asset quality pressures for the bank, owing to its relatively high exposure to sectors like power and iron and steel, amidst an overall weak macro environment," says the research firm.
November 22, 2013 / 12:25 IST
Angel Broking's report on Andhra Bank
"During 2QFY2014, the bank witnessed a healthy growth in its business, as advances and deposits grew by 15.3 percent and 19.0 percent yoy, respectively. CASA deposits grew at a moderate pace of 10.0 percent yoy; hence the CASA ratio dipped by 196bp yoy to 24.0 percent. The Reported NIM for the bank increased by 46bp qoq to 3.2 percent, on account of a 15bp qoq increase in yield on advances (on back of lower slippages), 29bp qoq rise in yield on investments and 6bp qoq decline in cost of deposits. During 2QFY2014, the non-interest income (excluding treasury) de-grew by 11.4 percent yoy to Rs 190cr, which was largely due to an 8.9 percent yoy de-growth in CEB income to Rs 64cr and 57.8 percent degrowth in exchange transactions to Rs 11cr. Recoveries from written-off accounts came in higher during the quarter at Rs 43cr compared to Rs 16cr in 2QFY2013.""During 2QFY2014, the asset quality pressures for the bank continued, as slippages for the bank came in at Rs 782cr (annualized slippage ratio of 3.2 percent) as compared to Rs 1,118cr (annualized slippage ratio of 4.5 percent) in 1QFY2014 and Rs 772cr (annualized slippage ratio of 3.7 percent) in 2QFY2013. Recoveries/upgrades came in much higher during the quarter at Rs 317cr compared to Rs 103cr in 1QFY2014 and Rs 113cr in 2QFY2013. Gross and net NPA levels for the bank increased sequentially by 9.2 percent and 8.3 percent qoq, respectively. On a relative basis, gross and net NPA ratios were higher by 42bp and 27bp qoq respectively to 5.2 percent and 3.5 percent. Over the last six quarters ending 1QFY2014, the PCR for the bank has declined from 71.1 percent to 45.0 percent, and even during the quarter, it declined further by 42bp qoq to 44.6 percent."Outlook and valuation: "We remain watchful of incremental asset quality pressures for the bank, owing to its relatively high exposure to sectors like power and iron and steel, amidst an overall weak macro environment. Hence, we recommend a Neutral rating on the stock," says Angel Broking research report.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. 
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