Allahabad Bank (ALBK) reported a net profit growth of 15% to INR 2245 Mn YoY (below our estimates of INR 3750 Mn). The net interest income increased by 25% to INR 7426 Mn YoY (estimates of INR 7634 Mn). Bank registered a business growth of 23.6% YoY on back of 21.9% increase in its loan book to INR 724.4 Bn YoY. ALBK’s core operating profit growth remained strong (up 115.8% YoY). However, treasury gains were lower at INR 0.61 Bn against INR 2.45 Bn YoY.
ALBK’s net interest margins (NIMs) improved by 3 bps to 3% from 2.97%, both QoQ & YoY. NIMs remained steady at 3% on healthy liability management with cost of deposits improving to 5.58% from 6.36% in Q4FY10. Going forward, bank is expected to maintain the NIMs at 3%.
ALBK is planning to increase its market share of advances & deposits by leveraging its branch network. Bank will focus on its core business & maintain the CASA ratio at ~33-35%, which will help the bank in maintaining its NIMs at ~3%. Bank will further enhance its fee income streams with introduction of new product suites & services. However, there are concerns over the asset quality, which the management claims would be taken care of. At the CMP INR 155 stock trades at 1.39x of its P/BV.
