Brokerage house Angel Broking has maintained a 'Neutral' rating on Bank of Maharashtra in its August 20, 2013 research report.
Angel Broking's report on Bank of Maharashtra
"Bank of Maharashtra reported a strong operating performance for 1QFY2014, with a NII growth of 39.5 percent yoy (largely aided by robust advance growth of 44.5 percent yoy) and earnings growth of 89.6 percent yoy. The bank witnessed pressures on asset quality front, as Gross NPA levels increased sequentially by 31.8 percent (albeit on a lower base), however Net NPA levels witnessed much higher increase of 66.9 percent qoq, as PCR dipped 718bp qoq to 76.5 percent."
"During 1QFY2014, the bank continued to witness strong growth in its business, as advances grew by 44.5 percent yoy (8.9 percent qoq), while deposits by 32.0 percent yoy (11.8 percent qoq). Strong advance growth was driven by robust traction witnessed in SME and Agricultural advances, which grew by 41.4 percent and 37.5 percent yoy respectively. Overall, CASA deposits for the bank grew by 17.8 percent yoy (de-grew by 3.2 percent qoq), much less than the strong growth in aggregate deposits, hence CASA ratio for the bank dipped 426bp yoy and 546bp qoq to 35.3 percent. Reported NIM for the bank declined 8bp sequentially to 3.0 percent, on back of 546bp sequential slide in the CASA ratio, even as yield on advances increased marginally by 4bp qoq to 11.3 percent."
"The bank's non-interest income (excluding treasury) grew at a moderate pace of 8.1 percent yoy to Rs 167cr, on back of flat performance on recoveries front and moderate growth of 11.8 percent yoy in its fee income. Treasury income came in at Rs 58cr as against Rs 24cr in 1QFY2013, thus enabling overall other income to grow by 25.9 percent yoy to Rs 225cr. During 1QFY2014, the bank witnessed pressures on the asset quality front, as gross and net NPA levels increased by 31.8 percent and 66.9 percent sequentially (albeit on a low base). Annualized slippage ratio for the bank during the quarter came in at 3.0 percent as against 2.2 percent in 4QFY2013 and 3.1 percent in 1QFY2013. Recoveries and upgrades came in much lower at Rs 106cr as against Rs 307cr in 4QFY2013 and Rs 156cr in 1QFY2013. The bank's PCR dipped 718bp qoq to 76.5 percent, though remains on the higher side within the PSU pack."
Outlook and valuation: "Total CAR for the bank as per Basel III stood at 10.76 percent, however core equity tier-I remains low, raising concerns about book value dilution in near future. Moreover, we remain wary of the asset quality pressures for the bank, as we take into account its recent aggressive loan growth, overall weak macro environment and recent macro developments. Hence, we recommend a Neutral rating on the stock," says Angel Broking research report.
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