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Andhra Bank Result Updated

Andhra Bank Result Updated

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Published by Angel Broking

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Categories:Business/Law, Finance
Published by: Angel Broking on May 11, 2012
Copyright:Attribution Non-commercial

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09/29/2013

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Please refer to important disclosures at the end of this report
 1 
Particulars (
`
cr) 4QFY12 3QFY12
% chg (qoq)
4QFY11
% chg (yoy)
NII 914 984
(7.1)
862
6.1
Pre-prov. profit 661 768
(13.9)
712
(7.1)
PAT 340 303
12.0
313
8.6
 Source: Company, Angel Research
For 4QFY2012, Andhra Bank posted a moderate set of numbers with net profitincreasing by 8.6% yoy (up 12.0% qoq) to
 ` 
340cr, which were higher than ourestimates due to lower effective tax rate than estimated by us.
We recommend aNeutral rating on the stock.
 
Asset-quality pressures moderate but still above normal levels
: For FY2012, thebank’s business growth remained at moderate levels, with advances growing by 17.1% yoy (5.6% qoq during 4QFY2012) and deposits growing by 14.9% yoy (7.3% qoq during 4QFY2012). Current account deposit accretion picked upduring 4QFY2012 with a growth of 15.1% qoq (down 11.0% yoy), while savingsaccounts growth was also reasonable healthy at 4.1% qoq up 10.0% yoy). Thebank’s yield on advances declined by 43bp qoq on account of interest ratereversals amounting to
 ` 
75-80cr. The bank’s cost of deposits also increased by 35bp qoq on account of sequential dip in CASA ratio and higher cost ofborrowings on bulk deposits during the quarter. Consequently, the reported NIMsof the bank declined by 47bp during 4QFY2012. The bank’s asset quality improved during 4QFY2012, with gross and net NPA levels declining by 4.6% and19.9% qoq. The bank’s provision coverage ratio also improved sequentially by 574bp to 71.1%. The slippage levels were higher on a qoq basis (slippage ratio of2.6% compared to 2.1% in 3QFY2012), however continued momentum inrecoveries (
 ` 
551cr during 4QFY2012) led to lower gross NPA levels.
Outlook and valuation:
At the CMP, the stock is trading at 0.7x FY2014E ABV compared to its five-year range of 0.7x–1.4x one-year forward ABV with a medianof 1.1x. Considering the bank’s relatively higher risk exposures, particularly to thepower sector (more than 16% of the loan book) and that peers of the bank arealso trading at similar valuations with similar or better asset quality outlook,
weremain Neutral on the stock.
 
Key financials
Y/E March (
`
cr) FY2011 FY2012E FY2013E FY2014ENII 3,221 3,759 4,245 4,808
% chg 46.8 16.7 12.9 13.3
Net profit 1,267 1,345 1,256 1,436
% chg 21.2 6.1 -6.6 14.3
NIM (%) 3.3 3.3 3.2 3.1
EPS (
`
) 22.6 24.0 22.4 25.7
P/E (x) 4.8 4.6 4.9 4.3P/ABV (x) 0.9 0.8 0.7 0.7RoA (%) 1.3 1.1 0.9 0.9RoE (%) 23.2 19.2 15.8 16.0
 Source: Company, Angel Research
 
NEUTRAL
CMP
 ` 
110Target Price -
Investment Period -
Stock InfoSector BankingMarket Cap (
 ` 
cr) 6,133Beta 1.052 Week High / Low 148/79 Avg. Daily Volume 71,318Face Value (
 ` 
) 10BSE Sensex 16,480Nifty 4,975Reuters Code ADBK.BOBloomberg Code ANDB@INShareholding Pattern (%)Promoters 58.0MF / Banks / Indian Fls 15.4FII / NRIs / OCBs 13.3Indian Public / Others 13.4 Abs. (%) 3m 1yr 3yrSensex (7.6) (11.1) 38.8 Andhra Bank (5.1) (22.1) 76.5
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808vaibhav.agrawal@angelbroking.com
Varun Varma
022 – 3935 7800 Ext: 6847varun.varma@angelbroking.com
Sourabh Taparia
022 – 3935 7800 Ext: 6872sourabh.taparia@angelbroking.com
Andhra Bank
Performance Highlights
4QFY2012 Result Update | Banking
May 9, 2012
 
 
 
 Andhra Bank | 4QFY2012 Result Update
 
May 9, 2012
 2
Exhibit 1:
 
4QFY2012 performance 
Particulars (
`
cr) 4QFY12 3QFY12
% chg (qoq)
4QFY11
% chg (yoy)
Interest earned 2,999 2,923
2.6
2,363
26.9
- on Advances / Bills 2,430 2,391
1.6
1,918
 26.7
- on investments 545 499
9.4
409
33.4
- on balance with RBI & others 24 34
(30.1)
7
 261.5
- on others - -
NA
30
NA
Interest Expended 2,085 1,939
7.5
1,502
38.8
Net Interest Income 914 984
(7.1)
862
6.1
Other income 230 235
(2.3)
299
(23.1)
Other income excl. treasury 207 219
(5.6)
234
(11.6)
- Fee Income 181 180
0.8
185
(1.9)
- Treasury Income 23 16
 42.4
65
(64.5)
- Recoveries from writ.-off acc 20 9
132.1
15
 29.7
- Forex 6 31
(81.5)
34
(83.2)
Operating income 1,144 1,219
(6.2)
1,161
(1.4)
Operating expenses 483 452
6.9
449
7.5
- Employee expenses 319 285
11.9
298
7.0
- Other Opex 164 167
(1.5)
151
8.5
Pre-provision Profit 661 768
(13.9)
712
(7.1)
Provisions & Contingencies 244 309
(21.2)
303
(19.5)
- Provisions for NPAs 104 39
163.9
203
(48.6)
- Provisions for Investments 37 19
93.5
0
NA
- Other Provisions 103 251
(59.1)
100
3.0
PBT 417 458
(8.9)
409
2.1
Provision for Tax 78 155
(49.9)
96
(19.2)
PAT 340 303
12.0
313
8.6
Effective Tax Rate (%) 18.6 33.8
(1523)bp
23.5
(489)bp
 Source: Company, Angel Research
Exhibit 2:
 
4QFY2012 – Actual vs. Angel estimates 
Particulars (
`
cr) Actual Estimates
Var. (%)
Net interest income 914 1,016
(10.1)
Non-interest income 230 266
(13.6)
Operating income 1,144 1,282
(10.8)
Operating expenses 483 500
(3.4)
Pre-prov. profit 661 783
(15.5)
Provisions & cont. 244 257
(5.2)
PBT 417 526
(20.6)
Prov. for taxes 78 197
(60.6)
PAT 340 328
3.4
 Source: Company, Angel Research
 
 
 Andhra Bank | 4QFY2012 Result Update
 
May 9, 2012
 3
Exhibit 3:
 
4QFY2012 performance 
Particulars 4QFY12 3QFY12
%chg (qoq)
4QFY11
%chg (yoy)
Balance sheet
 Advances (
 ` 
cr) 83,642 79,169
5.6
71,435
17.1
Deposits (
 ` 
cr) 105,851 98,680
7.3
92,156
14.9
Credit-to-Deposit Ratio (%) 79.0 80.2
(121)bp
77.5
150bp
Current deposits (
 ` 
cr) 6,369 5,532
15.1
7,160
(11.0)
Saving deposits (
 ` 
cr) 21,578 20,729
 4.1
19,619
10.0
CASA deposits (
 ` 
cr) 27,947 26,261
6.4
26,779
 4.4
CASA ratio (%) 26.4 26.6
(21)bp
29.1
(266)bp
CAR (%) 13.2 12.6
60bp
14.4
(120)bp
Tier 1 CAR (%) 9.0 8.2
79bp
9.7
(65)bp
Profitability Ratios (%)
Cost of deposits 7.9 7.6
35bp
6.5
146bp
Yield on advances 12.3 12.8
(43)bp
11.6
73bp
Yield on investments 7.9 7.8
10bp
7.4
 49bp
Yield on funds 10.0 10.3
(36)bp
9.2
75bp
Cost of funds 6.9 6.8
8bp
5.9
107bp
Reported NIM 3.3 3.8
(47)bp
3.7
(35)bp
Cost-to-income ratio 42.2 37.0
518bp
38.7
352bp
Asset quality
Gross NPAs (
 ` 
cr) 1,798 1,884
(4.6)
996
80.6
Gross NPAs (%) 2.1 2.4
(26)bp
1.4
74bp
Net NPAs (
 ` 
cr) 756 943
(19.9)
274
176.2
Net NPAs (%) 0.9 1.2
(30)bp
0.4
53bp
Provision Coverage Ratio (%) 71.1 65.4
574bp
83.9
(1281)bp
Slippage ratio (%) 2.6 2.1
51bp
1.4
128bp
NPA to avg. assets (%) 0.3 0.1
 21bp
0.8
(44)bp
 Source: Company, Angel Research
NIMs decline on interest rate reversals
For FY2012, the bank’s business growth remained at moderate levels, withadvances growing by 17.1% yoy (5.6% qoq during 4QFY2012) and depositsgrowing by 14.9% yoy (7.3% qoq during 4QFY2012).Current account deposit accretion picked up during 4QFY2012 with a growth of15.1% qoq (down 11.0% yoy), while savings accounts growth was also reasonablehealthy at 4.1% qoq up 10.0% yoy). However due to a relatively higher sequentialincrease in deposits, the CASA ratio marginally declined by 21bp during4QFY2012.The bank plans to open ~200 branches in the northern and eastern part of thecountry during FY2013. We have factored in a loan growth of 14.5% in FY2013and 16.0% in FY2014.

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