Bank of Maharashtra - 3QFY2013 Result Review - Angel Broking

Bank of Maharashtra (CMP: Rs.59 / TP: Rs.64 / Upside: 7.9%)

Bank of Maharashtra reported strong performance for 3QFY2013, both on the operating as well as on the asset quality front. While strong advance growth of 48.5% yoy, resulted in operating income growth of 23.4% yoy, earnings growth came in much higher at 43.2% yoy, further aided by decline in provisioning expenses on a yoy basis.

Business growth strong; Asset quality witnessed improvement: During 3QFY2013, the bank reported a strong growth in its business, with advances and deposits growth of 16.0% and 14.7% qoq, respectively. Owing to strong traction in term deposits, CASA ratio for the bank declined by around 350bp sequentially to 34%. Reported NIMs for the bank came off by 6bp qoq to 2.9%, on back of lower CASA ratio. The non-interest income for the bank grew by 15.9% yoy to Rs.174cr. On the asset quality front, the bank witnessed improvement, as annualized slippage ratio came in at 1.8%, much below the levels of 2.3% witnessed in 1HFY2013. Apart from normalized slippages, the bank also registered inspired performance on recoveries/upgrades front, resulting in sequentially flat gross NPA levels, on an absolute basis. Net NPA levels were also lower sequentially by 12.9%, on an absolute basis. Gross and Net NPA ratio declined sequentially by 29bp and 22bp, respectively to 1.7% and 0.7%. The bank's PCR (including technically written-off accounts) improved by 270bp qoq to 82.8%. Owing to strong growth, as of 3QFY2013, excluding profits, the bank's total CAR stood at 10.7%, with tier-1 ratio at 6.0%, which still remains on the lower side. Apart from likely Government infusion of ~Rs.400cr, the bank has evinced interest to raise funds from the equity markets.

Outlook and valuation: At the CMP, the stock is trading at valuations of 0.7x FY2014E ABV. We recommend Accumulate rating on the stock with a target price of Rs.64.

Source : Equity Bulls

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