Edelweiss' research report on Oriental Bank Of Commerce
Oriental Bank of Commerce (OBC) reported weak Q3FY17 numbers with loss of INR 1.3bn following muted core revenue traction (NII down >17% YoY) and sustained pressure on asset quality. Slippages continued to be high at INR 27bn (>7.5%) with the impact further exacerbated by slower recovery/resolution pace.
OutlookGiven rising BASEL III requirement and limited capital support from government, dilution risk is imminent at weak multiples, which will be detrimental to shareholders’ returns. Factoring muted revenue and higher credit cost we prune FY17/FY18E EPS by 34%/29%. The stock trades at 0.6x FY19E P/ABV. We maintain ‘HOLD/SP’ with revised TP of INR 128 (INR 115 earlier).
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