Month: July 2008

Bank of Baroda reported 1Q09 profits up 12% YoY ahead of estimates. Key highlights are – Flat margins QoQ, strong fee income growth and no significant deterioration in asset quality. BOB’s core fee incomes increased substantially (over 40% YoY). NIMs were flat QoQ (down 26bps YoY) with pressures building up on the domestic business. Expect moderate reductions in margins.

Loan growth (42% YoY) was aggressive, especially offshore (+68% YoY), now 23% of book. Management suggests will continue to grow this strongly, though could scale back on domestic growth to 20-25% (+36% in 1Q09). Growth is fairly broad-based (retail, SME, agriculture), profitable for now.

Asset quality of the bank remains a positive – the coverage of the bank remains comfortable at around 72%. Reported NPL grew 6% QoQ in the quarter – however, adjusted for farm loan waiver, NPL grew 11% QoQ. Going forward Bank of Baroda is expected to report negative growth in EPS for FY09 – Rs 32 to Rs 35.

Andhra Bank: Andhra’s 1Q09 profits down 45% YoY. Margins contracted significantly over the year and its relatively mid-market loan book is increasingly at risk. QoQ margins were stable; Andhra’s relatively lower CASA ratio suggests that margins will continue to be under pressure. Key positive for the quarter though was the sustained growth in fee incomes (+28% YoY).

NPLs have increased a little (+5.5% QoQ); reported asset quality is still fine with Gross NPLs at 1.2% and over 90% loan-loss coverage levels. Andhra’s loan book is relatively more exposed to agriculture and mid-market focused. Andhra Bank is expected to report flat EPS growth of Rs 11 to Rs 12 for FY09.

Punjab National Bank (PNB) has reported a net profit of Rs5.1bn. NII at Rs14.4bn, up 11% yoy and operating profit at Rs9.8bn, up 5.3% yoy, were inline with estimates. The NII growth was mainly led by healthy advances growth (up 19.6% yoy). The NIM’s contracted by 39bps yoy. Nevertheless, lower provisioning and controlled Opex resulted in 20.3% yoy growth in net profit to Rs5.1bn.

The asset quality improved further with GNPA and NNPA having declined to 2.8% (3.8% Q1FY08) and 0.6% (0.98% Q4FY08) respectively. Overall NPLs reduced in 1Q09, gross slippages were at 2% levels (management suggests this is temporary and expects improvements ). PNB’s loan book, however, is relatively more exposed to agriculture and SMEs – susceptible to spillovers from the loan waivers and further environmental deterioration.

Analysts expect PNB to report flat EPS growth for FY09 at Rs 65.18.

HDFC Bank – HDBK’s profit and quality performance is largely along expected lines. HDFC Bank’s earnings (up 45% YoY factoring impact of CBOP merger) ; driven by a 75% rise in top line (NII) and 40% jump in operating profits. Credit costs were up only 8% YoY; but the bank continues to keep its NPL coverage at 65-70% (specific) and at >100% (incl. general). This is in line with levels HDFC Bank maintained even earlier. Core fee income growth at 37% was lower than est. as there was minimal contribution from CBOP.

HDBK continues to grow aggressively. Loan book is up almost 15% qoq (ex-centurion), and asset behaviour beyond acquired NPA’s remains in line with historical trends. Centurion’s acquisition has been expensive – in the actual price paid, the step down in operating and profit measures and the time consumed.

HDFC Bank is expected to report a fully diluted EPS of Rs 55 to Rs 57 for FY09.