Lakshmi Vilas Bank (LVB IN) - Growth picks up; higher provisioning drags PAT growth - CSEC Research

Growth picks up; higher provisioning drags PAT growth

- LVB's advances grew strongly (20.9%YoY) to INR 240bn. sequentially, the loan book showed a robust growth of 21.5%. Management indicated growth outlook for FY18 at ~5% above the whole system credit growth and would largely be driven by Retail and SME. Management intends to bring down the share of Corporate portfolio from Current level of ~45% to ~25% over next 5 years.

- Deposits grew (20.1%YoY, 10.1%QoQ) to INR 305.5bn in 4QFY17 supported by growth of CASA by 32.2%YoY. The current CASA ratio stands at 19.1% as against 17.4% at 4QFY16. However CASA ratio declined sequentially from 21.4% (-2.3pps) on redemption of deposits. Credit to Deposit ratio stands improved sharply at 78.4% as against 71% in the last quarter.

- NIM improved sharply to 3.1% (+28bps YoY, +38bps QoQ) led by increase in Credit-deposit ratio and lower interest expense. Cost of funds dropped by 111bpsYoY to 6.14% whereas Yield on funds fell at a slower pace by 65bps YoY to 9.13%. (Improved sequentially by 6bps). Net Interest Income grew strongly by 32% YoY at INR 2.3bn in 4QFY17.

Valuation: Bank has now shown a uptick in its loan book growth along with maintaining asset quality and margins at healthy level which gives a positive outlook for the bank. The stock is currently trading at 1.3X FY19E P/BV and 7.1X P/E FY19E. We maintain our MARKETPERFORMER rating and upgrade target price to INR 174 (Prev. Target of INR 140), implying a FY19E P/BV of 1.2X. Risks: Weakness on the asset quality from the SME division, lower than expected recoveries in the corporate book and sustained high operating cost.

Shares of LAKSHMI VILAS BANK LTD. was last trading in BSE at Rs.178.85 as compared to the previous close of Rs. 179.4. The total number of shares traded during the day was 177459 in over 1323 trades.

The stock hit an intraday high of Rs. 181.25 and intraday low of 174.7. The net turnover during the day was Rs. 31532554.

Source : Equity Bulls

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