Dena Bank - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Dena Bank reported a healthy set of numbers with net profit growing by 42.0% yoy to Rs.239cr, higher than our estimates primarily due to lower provisioning expenses than estimated by us.

Business growth aggressive; Asset quality moderate: The bank continued with its aggressive pace of growth in 1QFY2013 as well with advances growing by 39.1% yoy (5.2% qoq in 1QFY2013, 18.3% qoq in 4QFY2012 and 12.2% qoq in 3QFY2012). The deposits growth was also strong at 26.1% yoy (up 3.3% qoq). The performance on the CASA front was subdued in 1QFY2013 with current account deposits declining by 27.4% qoq (up 6.4% yoy) on a high base and saving account deposits remaining muted sequentially (up 12.0% yoy). Consequently, the CASA ratio of the bank declined qoq by over 350bp to 30.9%. Yield on advances for the bank remained stable qoq at 12.0%, however the cost of deposits rose by 25bp qoq on account of the sharp qoq fall in CASA ratio, leading to reported NIMs declining by 15bp qoq to 3.1%. During 1QFY2013, non-interest income for the bank grew by 11.2% yoy to Rs.142cr, primarily due to strong performance on the treasury front (Rs.32cr in 1QFY2013 compared to Rs.14cr in 1QFY2012). The asset quality held up pretty well with slippages ratio of only 1.35% (healthy relative to what other banks have been reporting). Gross NPA ratio as of 1QFY2013 stands at 1.8% (1.7% in 4QFY2012), while net NPA ratio stands at 1.0% (1.0% in 4QFY2012). Provision coverage ratio (including technical write-offs) remained stable sequentially at 75.6%.

Outlook and valuation: The bank has been aggressive in its loan book growth in the last year (39.1% yoy as of 1QFY013) despite deteriorating macro fundamentals. We remain cautious on the bank's asset quality, in line with the sectoral outlook. However, considering the low valuations that the bank is trading at (0.6x FY2014 ABV), we recommend a BUY rating on the stock with a target price of Rs.107.

Source : Equity Bulls

Keywords