IDBI Bank - 1QFY2013 Result Update - Angel Broking

IDBI Bank reported a weak set of numbers for 1QFY2013, with profit before tax increasing by a muted 2.8% yoy. The performance on the bottom-line level (up 27.5% yoy) was due to a higher tax expenses in 1QFY2012 (effective tax rate of 44.6%). The reported PBT was lower than our estimates due to higher provisioning expenses than estimated by us.

Asset quality deteriorates sequentially: The bank's balance sheet contracted significantly in 1QFY2013 (advances down by 7.4% qoq and deposits down by 8.9% qoq), post the sharp surge witnessed in 4QFY2012 (advances up by 16.0% qoq and deposits up by 18.8% qoq). The banks current account deposits had surged in 4QFY2012 on account of higher floats due to activities such as issuance of tax-free bonds. Consequently on a high base the current account deposits were down by 46.3% qoq (up a muted 1.2% yoy). However, saving account deposits also declined by 7.3% qoq (still up a strong 29.1% yoy). The qoq decline has come after 3 consecutive quarters of more than 10% qoq growth in saving account deposits for the bank. The CASA ratio consequently was lower by ~600bp qoq at 18.1%. The margins for the bank managed to stay stable sequentially despite significant decline in CASA ratio of the bank during the quarter. The reported NIMs as of 1QFY2013 stand at 2.1%. The fee income growth for the bank was moderate at 15.9% yoy, aided by healthy growth in CEB income (up 37.3% yoy). The income from treasury was strong at Rs.44cr (vs. Rs.23cr in 1QFY2012). The banks' asset quality deteriorated sequentially, with both gross and net NPA levels witnessing an increase of 75bp and 46bp, respectively to 3.2% and 2.1%, respectively. PCR of the bank also deteriorated sequentially by ~280bp to 65.5%.

Outlook and valuation: The bank has been among the fastest-growing banks in terms of CASA deposits over the past few years (CAGR of ~36% over FY2007-12) even when compared to private banks and now has a market share of 2.5% (as of FY2012). At the CMP, the bank is trading at valuations of 0.5x FY2014E P/ABV, (0.7x adjusting for the SASF). We value the stock at 0.7x FY2014 ABV and, hence, recommend Buy on the stock with a target price of Rs.105.

Source : Equity Bulls

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