Andhra Bank - Valuations Attractive - Motilal Oswal

ANDHRA BANK 3QFY11: Above est; Strong operating performance; GNPA up 13% QoQ; Valuations attractive

Loans grew 7% QoQ and 28% YoY to Rs656b and deposits grew 4% QoQ and 23% YoY to Rs821b.

CASA ratio declined 185bp QoQ to 28.5%. Saving deposit growth was healthy at 22% YoY and 3% QoQ.

While cost of deposits was up 17bp QoQ, higher YoL (+ 9bp QoQ) and higher CD ratio negated the impact of rising cost and led to stable margins.

Fee income grew 7% QoQ to Rs1.7b, however on a YoY basis it grew by just 4%. Trading gains in 3QFY11 declined to Rs100m vs Rs180m in 2QFY11.

Pending crystallization of 2nd pension liability and gratuity, the bank has made an ad hoc provision of Rs1.58b in 9MFY11 (Rs520m in 3QFY11).

We expect Andhra Bank to report EPS of Rs27 for FY11, Rs30 for FY12 and Rs37 for FY13. BV is expected to be Rs112 in FY11, Rs135 in FY12 and Rs163 in FY13. RoA is expected to be 1.2+% and RoE of ~25% over FY11/13. Stock trades at 1x FY12 and 0.9x FY13 P/B. Maintain Buy with a target price of Rs195 (1.2x FY13E BV).

Source : Equity Bulls

Keywords