CMP = Rs 81
Price target: Under review
Key points:
- Andhra Bank reported a disappointing set of numbers for Q4FY2008. The profit after tax (PAT) declined by 10.5% yoy to Rs 124.3 crore. The net interest income (NII) was down 11.6% yoy to Rs 342.9 crore. The interest expenses growth of 42% yoy outpaced the 20.5% growth in the interest income, pointing towards pressure on the net interest margin.
- The non-interest income continued to be a major contributor to the bottom line with a 32.5% growth at Rs 183.3 crore. The operating expenses were down 7.6% yoy to Rs 213.1 crore, primarily driven by a substantially lower staff expenses (down 21.1% yoy).
- Meanwhile, the other operating expenses were up 8.1% yoy. Strong non-interest income coupled with a decline in the operating expenses helped the bank post a positive albeit a muted growth of 5.9% in the operating profit.
- The asset quality of the bank improved further as reflected by a 34 basis points y-o-y decline in % gross non-performing assets (GNPA) to 1.07%. On absolute terms as well, the GNPA declined by 6.2%. Meanwhile, the % net non-performing assets (NNPA) came in at 0.15%, down 2 basis points yoy.
- The capital adequacy ratio at end of the quarter stood at a comfortable 11.61%, largely in line with the year ago level of 11.33%. Advances registered a growth of 22.4% yoy to Rs 34,556 crore. Of the total advances, retail advances growth stood at 19.5% yoy, while small and medium enterprise advances were up by 22.7% yoy. The FY2008 PAT reached at Rs 575.6 crore indicating a growth of 7% yoy.
- At the current market price of Rs 80.6, is is trading at 5.5x FY2009E earnings per share, 2.9x FY2009E pre-provisioning profit and 1x FY2009E book value.
- I am currently reviewing the valuation of this stock and would shortly report my findings. Till then, I would advise my readers to include this stock in their portfolio.
