Andhra Bank - Lack of provision buffers to keep RoAs suppressed - Emkay

- Andhra Bank (ANDB) Q4FY13 results below expectation with NII/ PAT at Rs9.5bn/ 3.4bn. Even modest earnings growth led by other income and lower tax rate

- Key negatives: a) stressed asset addition at Rs20.2bn (2% of loans) b) LLP at 35% of incr. net slippages c) decline in PCR to 35.2% d) Further rise in NNPL/ Networth ratio to 29%

- Just 60bps (!!!) of provisions on 2.3% net slippages helped FY13 earnings. Low PCR to come back to haunt in FY14 and suppress RoAs considerably to 70-80bps

- Concerns on NPA and lower LLP continue to linger on ANDB's profitability and will drag growth lower, valuations at 0.7 / 0.6x FY14/FY15 ABV seem reasonable. Retain HOLD

Source : Equity Bulls

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