Angel neutral on Corporation Bank, Jammu and Kashmir Bank
Angel Broking has come out with its research reports on Corporation Bank, Jammu and Kashmir Bank and has maintained a 'Neutral' rating on both the stocks in its November 2013 reports.
November 13, 2013 / 16:49 IST
Angel Broking's research report
Corporation Bank"Asset quality pressures for the Corporation Bank have accelerated over the last two quarters, as Gross and Net NPA levels for the bank have nearly doubled since then. Going ahead, considering its exposure to stressed sectors (infra at 16.8 percent, metals (including iron & steel) at 4.7 percent, textiles at 4.4 percent and engineering at 3.3 percent), and an overall weak macro environment, we remain cautious on the incremental asset quality pressures for the bank, at least in the near term. Its CASA ratio (at 18.8 percent as of 2QFY2014) remains one of the lowest in the sector and has contributed to margin pressures. The bank has unprovided MTM loss of roughly Rs 300cr to be provided equally over the next two quarters, which given the state of yields currently, could require even higher provisioning in the next quarter. Moreover, capital infusion of Rs 450cr by the GoI in the bank, is likely to be at book-dilutive valuations. Hence, we recommend a Neutral rating on the stock."Jammu and Kashmir Bank (J&K Bank)"J&K Bank, higher loan growth outlook, increase in CD ratio and shift in loan mix towards higher yielding advances are likely to provide near-term higher momentum to NII growth for the bank relative to other mid-sized banks. The bank also has a higher CASA ratio, strong capital adequacy and robust provision coverage, much higher than most other mid-sized banks. At the CMP, the stock is trading at 1.0x FY2015E ABV, at a higher end compared to peers, which appropriately factors in its better asset quality performance vis-à-vis peers even in a challenging macro environment. Hence, we maintain our Neutral recommendation on the stock."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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