Despite decent NII growth of 19% YoY, higher provisioning on account of COVID-19, MTM requirements on certain SR exposure and PCR enhancement to 34.1% (up 315bps YoY and 225bps QoQ) to maintain asset quality, adversely impacted profits leading to a loss of Rs 1.4bn. The bank has a strong Retail/MSME loan book also supported by a growing Gold Loan book, improving operations and has raised Rs5bn of capital (AT-1 bonds) but higher provisions for PCR enhancement as well as COVID impact will keep earnings growth restricted, plus we remain watchful of Asset Quality.
OutlookWe retain BUY maintaining TP of Rs11 based on 0.5x Mar-22 ABV as valuations remain undemanding.
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