Company Report | Q1FY12 Result Update

LONG TERM INVESTMENT CALL

25 July 2011
Industry CMP (INR) Target (INR) 52 week High/Low (INR) Market Cap (INR MN) 3M Avg. Daily Volumes P/BV FY12E Shareholding Pattern (%)
Institutions, 15.75% NonInstitutions, 11.74%

BUY

Banking 220 304 271/172 10383 861840 0.9x

Q1FY12 Result Highlights Allahabad Bank (ALBK) delivered strong quarter, with net profits increasing by 21% to INR 4.2 bn on YoY basis. This was contributed by higher growth in net interest income (NII) of INR 11.7 bn (38% YoY) driven by 30.4% yoy growth in advances. Other income declined by 4.2% YoY to INR 2.9 bn primarily led by 71% decline in trading gains and fee income by 31%. NIMs improved to 3.4% in Q1FY12 from 3.1% in Q1FY11 after a 100 bps rise in cost of deposits which was more than compensated by 90 bps increase in yield on advances. However, on sequential basis NIMs declined from 3.49%. CASA ratio declined to 32% from 33.5% in Q4FY11 due to 12% decline in saving deposits. Going forward, CASA deposits are likely to improve on back of ALBKs mandate

FII, 14.51%

Promoters, 58.00%

with state government to handle the salary accounts of its staff. ALBKs advances have grown by 30% YoY driven by SME which

Stock Performance
300 280 260 240 220 200 180 160 140 120 100 Aug Dec Jul Sep Jan Nov May Oct Feb Mar Apr Jun Jul

grew by 55% YoY to INR 163 bn. The growth in retail advances was largely driven by 290% YoY growth in commercial vehicles loans, 217% growth in trade loans and 24% YoY growth in education loans. In Q1FY12, slippages came down considerably to 0.2% from 0.9% in Q4FY11. The recoveries/upgradation also improved to INR 2 bn, as a result the GNPAs declined to 1.6% from 1.7% in Q4FY11 & NNPAs to 0.6% from 0.7% in Q4FY11. Also provision coverage ratio improved to 79.9% from 75.6% in the previous quarter. Outlook & Valuation 3 Months -0.8 -4.0 1 Year 22.3 3.5 Allahabad Bank is in a strong growth trajectory with strong distribution network and vast customer base in CASA-rich states. This provides significant business opportunities in the current rising interest rate scenario. This along with a balanced loan portfolio and high proportion of low-cost funds would help the bank earn better margins compared with other public sector banks. The stock trades at 0.9x of its FY12E BV. Maintaining asset quality would be a key challenge for the bank going ahead, but cheap valuations offer a good buying opportunity. We maintain BUY rating on the stock for target price of INR 304.

ALBK

NSE Nifty

Performance (%) 1 Month ALBK 15.5 NIFTY 6.7

* Source: Ace, Unicon Research

(INR in mn)

Particulars NII Operating Profit PAT

Actual
11756 8896 4181

Estimates 12735 10518 4430

* Source: Ace, Unicon Research

Analyst Shweta Rane | srane@uniconindia.in

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@uniconindia.in

Financials
INR in mn)

Interest income Interest expense Net Interest Income Other Income Total Operating income Operating expenditure Operating Profit Operating Profit (%) Provisions PBT Tax PAT EPS (INR.) NIMs
Source: Company, Unicon Research

Q1 FY12 35498 19679 11756 2859 14615 5719 8896 25.06 3197 5700 1518 4181 8.78 3.40

Q1 FY11 24031 15528 8503 2986 11489 4443 7046 29.32 1511 5535 2064 3471 7.77 3.1

Y-o-Y 47.72 26.73 38.24 -4.23 27.21 28.70 26.26 -425 bps 111.63 2.98 -26.44 20.47 13.00 30bps

Q4 FY11 31182 19679 11503 4695 16198 8407 7791 24.98 4655 3136 569 2567 5.39 3.49

Q-o-Q 13.84 0.00 2.19 -39.10 -9.77 -31.98 14.19 7.6 bps -31.33 81.72 166.68 62.88 62.88 -9 bps
*Standalone

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@uniconindia.in

Unicon Investment Ranking Methodology

Rating Return Range Buy >= 20% Accumulate 10% to 20% Hold -10% to 10% Reduce -10% to -20% Sell <= -20%

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@uniconindia.in