IDBI Bank - Earnings Update - Uptick in asset quality - CSEC Research

IDBI Bank's profits were higher than expected driven by lower than forecasted charges on assets. Earnings growth was largely driven by a tax reversal even as operating profits were flat.

Quarterly Highlights

- Topline better than expected
- PAT up 49.3% YoY at Rs 7.7bn
- Credit growth at 15.3%YoY
- Deposit growth healthy at 16.6%YoY
- CASA improves to 24.1% of aggregate deposits up 322 bps
- Downtick in NPLs, net NPAs at 1.6%
- Spreads under pressure
- Net interest income up 9.24%YoY
- Equity infusion by Government of India and LIC to the tune of Rs 33.2bn

Valuation
For FY13 and FY 14 a rising CASA composition is likely to augur well for an uptick in margins, margins are expected at a shade above the 2% mark. Net interest income is likely to remain the mainstay of topline growth. At current levels the stock trades at 0.8X FY14E adjusted book value and 5.1X FY14E EPS. The recent equity infusion has put to rest concerns on capital adequacy and is expected to ease pressure on credit growth. We rate the stock an OUTPERFORMER with a target price of Rs 153. Key risks include deterioration in spreads and greater than expected slippages.

Source : Equity Bulls

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