Equity Analysis

• On operating environment front, the bank sees it to have remained tough but the signs of economic activity stabilizing at lower level were visible. The credit flow to NBFCs is showing some stabilization.
• The bank has posted 20% growth in loan book, which is impacted by repayment of loans amounting to Rs 7000 crore in nine months ended December 2019.
• Among the various loan segments, the credit to non-vehicle retail segment increased 17%, vehicle segment 16% and corporate credit 8%. The slower growth in corporate loan book is mainly on account of recoveries and repayment of loans.
• The microfinance loan book showed some moderation but it has gained back its momentum rising 44%. The bank had slowed down microfinance book growth in Assam and West Bengal three months back, while the growth for rest of state is healthy.
• Deposits increased 23%, while bank has continued strong 48% growth in retail deposits. The CASA deposits ratio has improved on sequential basis to 42.4% end December 2019.
• The bank has posted interest income growth higher than loan growth, helping to improve net interest margin to 4.15% in Q3FY2020.
• The fee income growth was healthy and steady at 22%, while core fee income improved 19% in Q3FY2020.
• The operating profit of the bank has jumped 30%, while pre-provisioning operating to asset ratio of the bank at 3.83% is highest in the industry.
• The bank has 2 million new customers in Q3FY2020, raising customer base to 25 million end December 2019.
• The bank has sent the name of new managing director for the bank to the RBI and its awaiting their response.
• The bank has made accelerated provisions of Rs 251 crore in Q3FY2020, in addition to Rs 355 crore in Q2FY2020. This has helped the bank to ramp up provision coverage ratio by 10 percentages point to 53%. Net profit of the bank has jumped 57% to Rs 1497 crore excluding accelerated provisions.
• Credit cost of the bank stood at 28 bps in Q3FY2020 and 59 bps in 9MFY2020. The bank expects credit cost at 80 bps for FY2020. The normal credit cost is expected at 60-70 for FY2021 (ex IL&FS).
• The bank has classified exposure to couple of account from HFC and a travel segment as fraud in Q3FY20. The travel sector account was recognized as NPA, while HFC sector account had exposure through investment book. The bank has provided 25% or Rs 240 crore for fraud through P&L and 75% or Rs 720 crore was drawn down from the Reserves. The drawn down amount shall be debited to P&L equally over the next 3 quarters.
• The fresh slippages of loans increased to Rs 1945 crore in Q3FY2020, of which Rs 1237 crore came from the corporate book with slippages above Rs 100 crore included a travel company (Rs 282 crore), a diversified group from 3 stressed groups (Rs 250 crore; fully recovered), a paper company (Rs 177 crore).
• The NPA reduction in the corporate sector stood at Rs 1119 crore in Q3FY2020, which included upgrades of Rs 187 crore, recovery of Rs 345 crore, sale to ARC of Rs 70 crore and write-offs of Rs 516 crore (including Rs 250 crore for the large infrastructure NBFC, which was classified as NPA in Q4FY19).
• The exposure to 3 stressed groups has further declined from 1.9% end March 2019 to 0.4% end December 2019 driven by recoveries and repayment. The balance exposure has 170% security cover and accounts remains standard.
• The exposure to NBFC has declined from 3.7% to 3.2% end December 2019.
• The bank has exhibited decline in sub investment grade book by 1 percentage point in Q3FY2020.
• Against the exposure to infrastructure conglomerate of Rs 3000 crore, the bank has raised provision coverage to 73% end December 2019. The bank is expecting strong recoveries of 75% in case of one tunnel project.
• The RBI has completed banks asset quality supervision and bank does not have any NPA divergence to report.

Powered by Capital Market - Live News