ICICIdirect.com's report on Dena Bank
Dena Bank’s NII growth was below our estimate at Rs 611 crore (Idirect estimate: Rs 662 crore) due to higher cost of funds and interest reversals as NPA rose sharply. Other income was modest at Rs 144 crore (Q1FY14: Rs 365 crore) on muted trading gains
Consequently, PAT came in lower-than-expected at Rs 81 crore (Idirect estimate: Rs 117 crore) down 56% QoQ
Deposits grew 12%YoY to Rs 105,718 crore while advances grew 15.9% YoY to Rs 75351 crore in Q1FY15 in line with industry
Asset quality deteriorated sharply with GNPA rising to Rs 3169 crore (4.21% of credit) from Rs 2616 crore (3.33% of credit) at the end of FY14. NNPA increased to Rs 2174 crore (2.94% of credit) from Rs 1818 crore (2.35% of credit) at the end of FY14.
"Dena Bank’s operational performance has weakened in the past two years with margins declining to the lowest ever, cost-to-income ratio rising and asset quality deteriorating sharply. Consequently, return ratios have declined significantly (RoE at 5.12% and RoA at 0.27% -Q1FY15). We have factored in our estimates, rise in GNPA to 4.4% and thereby lowered FY16E ABV to Rs 82 from Rs 97 earlier. We maintain our HOLD rating while revising down target price to Rs 66 (0.8% of ABV FY16E) from Rs 85 led by worsening of asset quality and return ratios in FY14-16E", says ICICIdirect.com research report.
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