Hold Andhra Bank;target of Rs 47: Sharekhan

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26 Aug, 2025 12:21

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Sharekhan's research report on Andhra BankAndhra Bank’s earnings deteriorated significantly (down 83% YoY to Rs34 crore) owing to a sharp increase in NPA related provisions (up 67.2% YoY). The net interest income (NII) grew by 8.1% though net interest margin (NIM) contracted by 19BPS to 3.24% (due to a decline in yield on loans). The advances growth was relatively strong (up 14.5% YoY) driven by an uptick in small ans medium enterprises (SMEs) and retail advances (up 32% and 24% respectively) which partly aided NII growth. The non-interest income was largely flattish (down by 2.9% YoY) due to a sharp decline in foreign exchange (forex) and treasury income (down 42% and 70% YoY respectively) though fee income showed a healthy growth of 29.4% YoY. While the bank’s operating performance (up 11.6% YoY) and advances growth were relatively better; rise in NPAs remains a key concern. The stressed loans (gross NPAs + restructured loans) were to the tune of 14.4% of the overall book (ex-state discom loans) which may add pressure to the asset quality. About half of the loan book is towards corporate segment and has relatively higher exposure towards stressed sectors like infrastructure (18% of book) and iron & steel (5% of book). The bank’s lower capital ratio (tier-1 CAR) could result in increased equity dilution. We have revised our estimates downwards resulting in revised price target of Rs54 (0.35x its FY2017 BV). We have downgraded the ratings to Hold on the stock. For all recommendations, click here 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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