Accumulate Andhra Bank - Kotak

Q4FY12 results: Disappointing quarter

- Subdued NII growth (6.1% YoY) came on back of sharp decline in NIM (35bps YoY; 47bps QoQ) despite healthy loan growth (17.4% YoY). Net profit came at Rs.3.40 bn (8.6% YoY) mainly aided by lower NPA as well as tax provisions.

- Advances grew 17.4% during Q4FY12 mainly aided by strong growth in 'agriculture' and MSME segments. Deposit growth was relatively moderate (14.9% YoY) leading to marginal improvement in C/D ratio. CASA mix remained stable QoQ at 26.4% at the end of Q4FY12.

- Slippage jumped during Q4FY12 - 5.01% annualized number; restructured book also spiked with the addition of Rajasthan SEB and Air India a/cs to the kitty. Now, cumulative restructured book stands at Rs.60.8 bn (7.2% of advances), higher than its peers. Moreover, higher exposure to Infrastructure (especially power exposure at ~15% of loan book) continues to be the potential risk for its asset quality.

- We have cut the earnings estimate for FY13 and now expect net income to grow at 13.4% YoY. We are downgrading the stock from BUY to ACCUMULATE with TP of Rs.125 (Earlier Rs.148), on back of adverse pressure on its NIM, CASA mix as well as higher exposure to power sector (~15%). At the fair value, stock is likely to trade 1.0x FY13 ABV.

Source : Equity Bulls

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