Maintain Buy on Dena Bank - Motilal Oswal

Dena Bank's (DBNK IN, CMP Rs103, Mkt Cap US$0.6b, Buy)

3QFY11 PAT grew 15% YoY to Rs1.6b driven by higher than expected other income and lower opex. NII growth of 65% YoY (on a lower base) is largely inline with estimates. Margins have declined 25bp QoQ from an elevated level of 3.52% a quarter ago.

Asset quality remained stable with GNPA in absolute terms declining 3% QoQ and PCR (including technical write offs) at 76.1% vs 75.4% a quarter ago. Business growth remained strong with loans and deposits growing 13% QoQ. Restructured loans stood at Rs13.2b (3.2% of loans); during the quarter bank added Rs670m to restructured pool.

During the quarter, the bank has provided Rs700m for pension and gratuity under employee expenses. The bank has stated the initial estimate of Rs4.7b and likely to amortise over 5 years.

The bank expects capital infusion from GoI by end of 4QF11.Bank remains hopeful of capital infusion via equity shares. Post capital infusion, GoI holding is expected to increase to ~60%. We have not factored in capital infusion in our estimates.

We expect Dena Bank to report EPS of Rs20 in FY11, Rs23.4 in FY12 and Rs27.2 in FY13. BV would be Rs101 in FY11, Rs121 in FY12 and Rs144 in FY12. The stock trades at 4.4x FY12E EPS and 0.9x FY12E BV. RoA and RoE are likely to be at 0.9-1% and 20%+ over FY11-13. Maintain Buy with a target price of Rs145 (1.2x FY12E BV).

Source : Equity Bulls

Keywords