Now Get InvestmentGuruIndia.com news on WhatsApp. Click Here To Know More
Better quarter but way to go
* Overall slippages were lower at Rs2.41bn with corporate/agri lower but SME slippages remain steady, while retail see small uptick
* Bank’s operating metrics like NIMs & CASA profile remained stable
SIB’s earnings were marginally below expectations with PAT at Rs733mn (PLe: Rs890mn) as operating performance is improving only gradually. Provisions came in lower as slippages of Rs2.41bn was lower sequentially which helped stable asset quality but marginally lift PCR to 32.3% (45.1% incl. technical w.off). Bank is closely monitoring some of the dispensation related loans restructured during Kerala floods but does not see large risks from same. Structurally PCR remains lowest in peer group which has to be stepped up, which should be helped by improving operations. We maintain BUY with TP of Rs18 (unchanged) based on 0.8x Mar-21 ABV.
* Slowly & gradually improving on operational front: NII growth of 8.4% YoY, other income of 24.7% YoY (helped by treasury) and controlled opex growth of 7.9% YoY has helped improve PPOP by 18% YoY (6% YoY core PPOP) from quite muted trends. NIMs was up 7bps QoQ to 2.5% but given slower loan growth at 13%, NII traction was lower. Cost of funds still remain high for the bank, keeping NIMs sub optimally lower, but management is expecting NIMs to improve to 2.7-2.75% by FY20 end on back of mix change towards retail & shedding of some high cost deposits.
* Loan growth slows but retail continues to grow well: Loans grew by 13% YoY which was slower due to corporate loans slowing to 4% YoY, while retail continued to be strong growing at 25% YoY. Retail loan growth was driven by most segments like gold, LAP, Housing etc. On liabilities front, CASA mix was steady at 24% with growth of 10% YoY with TDs growth of 11.6% YoY, although Bulk deposits growth was higher at 20% YoY but was down sequentially by 2% QoQ. Overall, liabilities franchise remained stable with NRI deposit base also remaining stable at 26% of deposits.
* Asset quality remains steady but PCR needs to be enhanced: Overall Bank’s asset quality remained steady with GNPAs/NNPAs at 4.96%/3.41% with lower slippages of Rs2.41bn which has been coming down from much higher trends. With continued provisioning (in-line with guidance), bank saw improvement in PCR to 32.3% up 140bps QoQ (45.1% incl. technical w.off up 260bps QoQ). Overall slippages were lower from corporate/Agri but marginally were up in retail, while SME continued with trends at slightly higher levels. Bank guided and remained confident to bring down FY20 slippages to Rs10.0bn from Rs18.0bn seen in FY19.
* Capital levels are steady and not alarming: Bank’s Tier-I of 9.7% (CET-I at 9.7%) is at steady levels while it is also not alarming but given stance of improving PCR (which remains one of lowest) earnings will remain under pressure not accruing to capital and keep business growth slower.
To Read Complete Report & Disclaimer Click Here
For More Prabhudas Lilladher Ltd Disclaimer http://www.plindia.com/DownloadForm/Discliamer_PL.pdf
Above views are of the author and not of the website kindly read disclaimer