Buy Dena Bank - Motilal Oswal

Dena Bank (DBNK IN; Mkt Cap USD0.6b, CMP Rs103, Buy)

NII growth of 65% YoY was largely in line with our estimate. NIM declined 25bp QoQ to 3.27% (in-line) from an elevated level of 3.52% a quarter ago.

Yield on loans remained stable QoQ at 10.3%, whereas cost of deposits increased 21bp QoQ to 5.65%. For 9MFY11, NIM improved 80bp YoY to 3.2%.

Business growth picked up strongly QoQ, loans growth of 13% QoQ and 34% YoY to Rs414b and deposit growth of 13% QoQ and 26% YoY to Rs605b.

CASA ratio declined from 39.1% a quarter ago to 35.4%. CASA deposits grew 2% QoQ and 26% YoY to Rs214b.

Asset quality was stable QoQ with GNPA declining 3% QoQ. PCR (including technical write-offs) was 76% v/s 75.4% a quarter ago.

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%+, respectively over FY11-13. Maintain Buy.

Source : Equity Bulls

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