Allahabad Bank [Merged] share price target

Allahabad Bank reported a 25% growth in PAT for 2QFY2016, aided by higher net interest income and lower provisions along with stable asset quality. NIM improves qoq; Slippages remain elevated During 2QFY2016, the bank witnessed a modest growth of 6.3% yoy in its loan book, while deposits growth was sluggish at 1.5% yoy. CASA deposits grew by 8.5% yoy (4.6% qoq), aiding 223bp yoy and 69bp qoq increase in banks CASA ratio to 34.9%. Yield on funds for the bank declined 18bp qoq to 9.5% while a 25bp qoq decline in the costs of funds on improved CASA ratio led to a 4bp qoq rise in Reported NIMs to 2.95%. The non-interest income (excluding treasury) for the bank saw a decline of 11.2% yoy led by decline in other income which however was partially offset by growth of 17.3% yoy in the fee income. During the quarter, asset quality pressures for the bank continued, as annualized slippages rate got elevated to 4.4%, higher than 1.9% in 1QFY2016 and 3.8% in 2QFY2015. Gross NPA ratios declined marginally by 0.6% qoq, while net NPA declined 1.6% qoq. The PCR for the bank continued to rise (up 117bp qoq during the quarter to...

Lower opex leads to PPOP beat

ALBK positively surprised with (a) lower gross stressed additions coupled with improvement in PCR, (b) better than expected NIM and (c) continued rise in CASA share. However, ALBK continues to grow its exposures in sensitive sectors, RWA 3% QoQ vs. 1.5% decline in headline loan book. This is despite weak Tier I of 7.5%.

ALBKs 4Q net earnings beat estimate by 14%, although quality of beat was not upto the mark. Growth remains elusive with elevated stressed assets formation. NII was 9% below estimate led by yield pressure. Despite high fee income ( 50% QoQ, seasonal trend) and stable opex, we were disappointed with 190bps QoQ decline in tangible PCR. Higher write-off provided cushion to an otherwise muted asset quality performance. Capital position too remains weak with Tier-1 at 7.8%.

ALBKs 3Q result was a mixed bag. Asset quality performance was muted with stressed additions increasing to Rs 37bn vs. Rs 30/24bn in 2/1QFY15. Further disappointment came in from QoQ drop in coverage ratio (-515bps) and muted fee income (17% miss on estimate).

Allahabad Bank, founded in 1865 is one of the oldest nationalized banks in India, currently headquartered in Kolkata. Allahabad bank is a midsized bank with balance sheet size of Rs 182958 crore (as on FY12). The bank has a...

The cycle of interest rate hike has stopped and now the speculations are going on about the fall in interest rates. Though the Reserve Bank of India reduced the Cash Reserve Ratio (CRR) in the recent monetary policy review...