Gross global advances for Indian bank grew by 6.9% on a QOQ basis to INR 2058 bn while deposits registered a QOQ growth of 1%. Domestic NIMS were at 2.96% for the quarter. Moratorium was granted to eligible borrowers in respect of EMIs and recovery of interest was deferred. Full provisions at 15% were made for exposure to such borrowers as against the required provision i.e. at the rate of 5%.
Provisions derail profits
The gross global advances for FY20 were at INR 2058 bn, 3% lower than our estimates. Net Interest income for the FY20 was at INR 75894 mn, 3.46% below our FY20 estimates. The pre provisioning profit for the year was at INR 64901 mn, 2.29% above our estimates while provision for the year were at INR 51260 mn against our estimate of INR 40278 mn.
Deposits- Savings save the day
Total deposits registered a QOQ growth of 1% at INR 2602 bn largely due to savings account deposits growing by 4.5% on a QOQ basis (inline with the March quarter trend of higher savings growth) to INR 766 bn while current accounts and term deposits de-grew by 0.5% and 0.4% respectively on a QOQ basis.CASA stood at 34.6%.
Advances led by Corporate loans
The advances for the quarter registered a growth of 7% QOQ to INR 1974 bn led by 16% QOQ growth in corporate loans while the other segments registered QOQ growth in the range of 2-5%. Within the corporate book ~30% of the book is contributed by PSU's. RAM credit stood at 61% of the total advances while the balance was corporate loans. Within sensitive sectors the bank had an exposure of INR 2921 bn up 19% YOY while the HFC exposure within the NBFC exposure went up by 25% to INR 1141.6 bn. The exposure to BB and below has gone up to 17% of advances against 11% last fiscal while the unrated exposure has dropped to 14% of advances against 26%. Within the unrated advances the unrated and non-psu advances have sharply come down to 5% of advances from 14% last fiscal.
Slippages & Recoveries
GNPA's stood at INR 133535mln. PCR stood at 73.05%. Provisions were made at @ 15%- amounting to INR 1089 mn against outstanding of INR 7259 mn that would have slipped into substandard category if no relief was announced. SME book moratorium stood at ~45%.
Valuation and outlook
We will be projecting the figures of the merged entity once the merged balance sheets are issued. Though we believe that no major negative surprises should spring from either of the banks, given Indian banks' robust track record and Allahabad banks' strong PCR with due respect to the uncertainty created by COVID. The expansion focus would be on the states of Gujarat and Rajasthan as the combined entity misses a footprint in both these states. The combined entity is expected to have an advance book of INR ~3348 bn against Indian banks advances of INR 1926 bn while the NPA numbers could substantially deteriorate given Allahabad banks numbers. The book value for FY20 stands at INR 313.75 and the adjusted book value stands at INR 248.94. We hereby place our recommendations on hold, till date the merged balance sheet and business plans are made available by the bank, to ascertain a fair value of the merged bank.
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