Andhra Bank - Result highlights
Andhra Bank has reported a profit after tax (PAT) of Rs161.5 crore in Q2FY2009 indicating an increase of 6.8% year on year (yoy). The same was well above our estimate of Rs131.0 crore.
The net interest income (NII) for Q2FY2009 registered a robust growth of 33.6% yoy and stood at Rs433.5 crore on account of a healthy 19.5% year-on-year(y-o-y) growth in the advances coupled with a strong 48-basis-point y-o-y increase in the reported net interest margin (NIM).
The NIM for the quarter came in at 3.42%, up by 48 basis points yoy from 2.94% during the year-ago period. The expansion in the margin primarily stemmed from a 98-basis-point y-o-y increase in the yields on the advances on account of 125-basis-point prime lending rate (PLR) hike undertaken by the bank during the quarter.
The non-interest income during the quarter fell by 14.4% yoy to Rs135.4 crore on the back of a treasury loss of Rs8.7 crore as compared with a Rs39.0 crore gain during the year-ago period. However, a healthy growth in the commission, exchange and brokerage (CEB) income and strong recoveries to some extent mitigated the impact of the treasury loss during the quarter.
The operating expenses increased by 16.0% yoy during the quarter as the employee expenses increased by 10.9% yoy, while the operating expenses increased by 23.7% yoy. The employee expenses include an ad-hoc provision of Rs20 crore towards pending settlement for wage revision. Though on a sequential basis the cost-to-income ratio declined by ~470 basis points to 51.1% during the quarter, it still remains one of the highest among its peers.
Notably the provisions spiked up to Rs56.9 crore in Q2FY2009 vs Rs11.0 crore in Q2FY2008. The spike was primarily due to a significant jump in the provisions towards non-performing assets (NPAs) and standard assets. Moreover, a provision of Rs12.0 crore towards investment depreciation in Q2FY2009 as compared with a provision write-back of Rs26.0 crore during the year-ago period pushed up the overall provisioning expenses.
The asset quality of the bank remained healthy with an improvement on absolute as well as relative basis. The gross non-performing assets (GNPAs) declined by 9.3% yoy, however the net non-performing assets (NNPAs) increased by 54.2% yoy. This sharp increase in NNPAs is due to a significant (962-basis-points y-o-y) decline in the provision coverage of the bank.
The growth in the advances came in at 19.5% yoy, lower compared to the industry growth, while the deposits registered a growth of 13.7% yoy. Notably the current account and savings account (CASA) ratio of the bank improved by 210 basis points yoy and stood at 34.13% for the quarter.
The capital adequacy ratio (CAR) stood at comfortable 13.43% as compared with 11.56% during the year-ago period.
At the current market price and dividend the stock offers a dividend yield of ~8%, which provides a healthy margin of safety to the investor. At the current market price of Rs50 the stock trades at 4.3x 2009E earnings per share (EPS), 2.2x 2009E pre-provisioning profit (PPP) and 0.7x 2009E book value (BV).Buy the stock with a price target of Rs90.
Andhra Bank has reported a profit after tax (PAT) of Rs161.5 crore in Q2FY2009 indicating an increase of 6.8% year on year (yoy). The same was well above our estimate of Rs131.0 crore.
The net interest income (NII) for Q2FY2009 registered a robust growth of 33.6% yoy and stood at Rs433.5 crore on account of a healthy 19.5% year-on-year(y-o-y) growth in the advances coupled with a strong 48-basis-point y-o-y increase in the reported net interest margin (NIM).
The NIM for the quarter came in at 3.42%, up by 48 basis points yoy from 2.94% during the year-ago period. The expansion in the margin primarily stemmed from a 98-basis-point y-o-y increase in the yields on the advances on account of 125-basis-point prime lending rate (PLR) hike undertaken by the bank during the quarter.
The non-interest income during the quarter fell by 14.4% yoy to Rs135.4 crore on the back of a treasury loss of Rs8.7 crore as compared with a Rs39.0 crore gain during the year-ago period. However, a healthy growth in the commission, exchange and brokerage (CEB) income and strong recoveries to some extent mitigated the impact of the treasury loss during the quarter.
The operating expenses increased by 16.0% yoy during the quarter as the employee expenses increased by 10.9% yoy, while the operating expenses increased by 23.7% yoy. The employee expenses include an ad-hoc provision of Rs20 crore towards pending settlement for wage revision. Though on a sequential basis the cost-to-income ratio declined by ~470 basis points to 51.1% during the quarter, it still remains one of the highest among its peers.
Notably the provisions spiked up to Rs56.9 crore in Q2FY2009 vs Rs11.0 crore in Q2FY2008. The spike was primarily due to a significant jump in the provisions towards non-performing assets (NPAs) and standard assets. Moreover, a provision of Rs12.0 crore towards investment depreciation in Q2FY2009 as compared with a provision write-back of Rs26.0 crore during the year-ago period pushed up the overall provisioning expenses.
The asset quality of the bank remained healthy with an improvement on absolute as well as relative basis. The gross non-performing assets (GNPAs) declined by 9.3% yoy, however the net non-performing assets (NNPAs) increased by 54.2% yoy. This sharp increase in NNPAs is due to a significant (962-basis-points y-o-y) decline in the provision coverage of the bank.
The growth in the advances came in at 19.5% yoy, lower compared to the industry growth, while the deposits registered a growth of 13.7% yoy. Notably the current account and savings account (CASA) ratio of the bank improved by 210 basis points yoy and stood at 34.13% for the quarter.
The capital adequacy ratio (CAR) stood at comfortable 13.43% as compared with 11.56% during the year-ago period.
At the current market price and dividend the stock offers a dividend yield of ~8%, which provides a healthy margin of safety to the investor. At the current market price of Rs50 the stock trades at 4.3x 2009E earnings per share (EPS), 2.2x 2009E pre-provisioning profit (PPP) and 0.7x 2009E book value (BV).Buy the stock with a price target of Rs90.
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