Lakshmi Vilas Bank (LVB IN) - Earnings update - Provisions surged leading to steep fall in PAT - CSEC Research

Provisions surged leading to steep fall in PAT; maintain MARKETPERFORMER

- LVB's advances grew 14.2% YoY(-1.3%QoQ) to INR 229 bn, supported by 25% YoY growth in corporate and 8.6% YoY growth in the retail segment. Consequently, the share of corporate and MSME segments was noted at 50% and 24% respectively (from 45% and 27% in 2QFY17). However, management has indicated that the future growth in advances will be led by segments like Retail and MSME to clock an overall loan growth of ~16% in FY18.

- In 2QFY18 deposits grew 9.3%YoY to INR 291.7bn supported by growth of CASA by 32.4%YoY. The current CASA ratio stands at 20.97% (vs 17.3% at 2QFY17) with an improvement of 372bps on YoY basis. Credit to Deposit ratio stands improved at 340 bps YoY to 78.6%.

- NIM showed improvement and stood at 2.83% (5bps YoY, 9bps QoQ).This was largely due to a 69 bps YoY decline in the Cost of funds and a 179 bps YoY increase Yield on advances, which stood at 6.12% & 11.09% respectively. Net Interest Income grew by 24.7% YoY (6.9% QoQ) to INR 2.3bn while the interest expense grew at a slower pace of 6.7%(-1.1.% QoQ). ALM is better placed as their average maturities on both advances and deposits are close to 2.5 years, this helps the bank to maintain stable margin (NIM).

Valuation:

-The bank is expected to raise capital by the end of FY18, post which the loan book is expected to grow ~20%, with major share being contributed by MSME & retail segments. However, asset quality remains a cause of concern with such high slippages from watch-list. Going forward, despite being able to maintain a stable NIM, impact of provision cost may drag the PAT for the coming four quarters. The stock is currently trading at 1.1X FY19E P/BV and 5.8X P/E FY19E. We maintain our MARKETPERFORMER rating and arrive at the target price of INR 147, implying a FY19E P/BV of 1.12X.

Shares of LAKSHMI VILAS BANK LTD. was last trading in BSE at Rs.139.8 as compared to the previous close of Rs. 140.75. The total number of shares traded during the day was 178143 in over 797 trades.

The stock hit an intraday high of Rs. 142.4 and intraday low of 139.5. The net turnover during the day was Rs. 25019690.

Source : Equity Bulls

Keywords