With all PSU mid-cap banks having declared their Q3FY11 results (except Syndicate Bank, expected to announce results today), we thought of doing a quick synopsis of the results for the quarter gone by and their ramp-up for the nine months of FY11.
While most of the banks reported robust earnings, a few faltered here and there – with additional provisioning eating into the profits for a few while better CASA ratio helped improve NIMs for the others. Overall, all banks are on healthy growth trajectory, both in terms of business per branch and revenue per employee, in-line with the macro trends.
(Positive points are marked in green while negative points are shown in red)
| FY10 | Q3FY11 | 9mFY11 | 31-12 | 31-1 | | | |||||||||
| Bank Name | Total | Total | EPS | NIM | Net | CAR | PCR | Total | PAT | RoA | EPS | BVPS | CMP | PBV | PE |
| | Income | Income | | | NPAs | | | Income | | | | | | | |
| | Rs. Cr. | Rs. Cr. | Rs. | (%) | (%) | (%) | (%) | Rs. Cr. | (%) | (%) | Rs | | | Dec10 | FY11E |
| Allahabad Bk | 9,913 | 3,113 | 9.3 | 3.44% | 0.59% | 12.78% | 80.22% | 8,796 | 13.6% | 1.2% | 26.1 | 177.2 | 203 | 1.15 | 5.73 |
| Andhra Bk | 7,341 | 2,320 | 6.8 | NA | 0.47% | 12.00% | 80.42% | 6,526 | 14.6% | 1.42% | 19.7 | 105.9 | 140 | 1.32 | 5.28 |
| Bank of Mah. | 5,327 | 1,552 | 2.1 | 2.69% | 1.85% | 13.24% | NA | 4,391 | 5.9% | 0.50% | 6.1 | 60.1 | 59 | 0.98 | 7.23 |
| Corp. Bk | 8,489 | 2,786 | 26.7 | 2.63% | 0.58% | 14.27% | 72.81% | 7,464 | 14.3% | 1.24% | 74.5 | 477.1 | 574 | 1.20 | 5.68 |
| Dena Bk | 4,599 | 1,417 | 5.4 | 3.27% | 1.26% | 11.08% | 76.09% | 3,979 | 11.4% | 1.02% | 15.9 | 106.3 | 105 | 0.99 | 4.94 |
| Indian Bk | 9,037 | 2,641 | 11.2 | 3.84% | 0.57% | 12.35% | 83.01% | 7,678 | 16.6% | 1.55% | 29.4 | 183.3 | 210 | 1.15 | 5.18 |
| IOB | 11,389 | 3,453 | 4.3 | 3.27% | 1.51% | 13.45% | 65.37% | 9,410 | 6.8% | 0.58% | 11.7 | 128.3 | 130.5 | 1.02 | 8.18 |
| OBC | 11,457 | 3,264 | 16.3 | 3.25% | 0.91% | 12.38% | 77.42% | 9,516 | 12.3% | 1.08% | 46.7 | 338.9 | 331 | 0.98 | 5.26 |
| Punj & Sind Bk | 4,346 | 1,352 | 7.3 | 3.00% | 0.44% | 14.13% | 83.00% | 3,884 | 10.2% | 0.92% | 21.6 | 125.2 | 106 | 0.85 | 3.67 |
| UCO Bk | 10,492 | 3,108 | 5.5 | NA | 1.13% | 13.02% | 66.24% | 8,935 | 7.6% | 0.67% | 11.5 | 78.1 | 108 | 1.38 | 6.36 |
| United Bk | 5,808 | 1,777 | 4.6 | 2.80% | 1.52% | 12.51% | 71.20% | 4,992 | 7.6% | 0.65% | 11.5 | 103.2 | 95 | 0.92 | 5.89 |
| Vijaya Bk | 5,880 | 1,585 | 3.1 | 3.44% | 1.38% | 13.67% | 67.60% | 4,626 | 10.2% | 0.88% | 9.8 | 63.9 | 91 | 1.42 | 7.04 |
|
| | | | | | | | | | | | | | 1.11 | 5.87 |
|
| | | | | | | | | | | | | | 1.08 | 5.71 |
Note: NIM = net interest margin, CAR = capital adequacy ratio, PCR = provision coverage ratio, RoA = return on assets
Allahabad Bank:
· Lending improved as credit-deposit ratio rose to 72% from 70% in the previous year
· Improvement in NIMs is definitely positive, from under 3% in FY10 to 3.34% for 9mFY10 during benign interest rate environment
· Net NPAs improved from FY10's 0.72% but deteriorated from Q1FY11's 0.41%
Andhra Bank:
· Moderate decline in NPAs resulting in expansion in RoAs
· Strengthening its net margins, already one of the highest in peer-set
Bank of Maharashtra:
· NIMs improving to 2.69% versus 1.94% in FY10
· However net profit margins low due to higher provisioning against non-performing assets leading to RoAs being lowest among peers
Corporation Bank:
· NIMs improving to 2.63%, from 2.3% in FY10 albeit fall in CAR to 14.27% from over 15% last yr and rise in NPAs
Dena Bank:
· During the quarter, advances improved at a higher rate vis-à-vis deposits, amidst poorer assets quality
· Re-pricing of cost of deposits downwards coupled with higher CASA ratio at 35%+ (due to spread of branch network in Maharashtra & Gujarat), NIMs likely to improve going forward
Indian Bank:
· Although bank's RoA for 9mFY11 contracted to 1.55% versus 1.67% in FY10, the return is still very high among the peer group, thanks to a CASA ratio of 32%
· Continues to enjoy high PCR (83%) and NIMs (3.84%)
· NPAs declined sequentially, in absolute terms, due to sale of bad loans worth Rs. 347 crore to ARCIL
IOB:
· Although NPAs and RoA have improved QoQ, gross NPAs over Rs. 3,250 crore and net NPAs about Rs. 1,500 crore remain a cause of worry, justifying the share trading at near BV
· Credit deposit ratio at healthy 80%, while CASA stands at 31%
· PCR below RBI's stipulated 70%, to be achieved by March 2011
OBC:
· Although CASA ratio improved to 25% (21% a year ago), it is still shy of other PSU banks
· Strong improvement in NIMs due to lower cost of deposits, although net NPAs rising
Punjab and Sind Bank:
· Newly-listed bank, follows conservative accounting norms, taking its PCR among the industry highest at 83%
· Also net NPAs are among industry lowest
· Modest 25% CASA due to poor technology and RoA declining from over 1% in FY10 to 0.9% now, remain a little concern on the share price
UCO Bank:
· RoA and PCR among the lowest, indicating low profitability and unhealthy state of bank
· Despite this, PBV highest of all the 12 PSU banks above
United Bank of India:
· One of the smallest PSU banks saw CAR boosted due to Rs. 800 inflow due to Govt. re-capitalisation in Q3FY11
· Although NIM declined, asset quality improved, as net NPAs reduced to Rs. 763 crore (1.52%) on 31-12-10 from Rs. 779 crore (1.84%) on 31-03-10
· Bank also saw RoA improvement in the first nine months of FY11
Vijaya Bank:
· Although gross NPAs increased marginally to Rs. 1,073 crore (Rs. 994 crore as on 31-03-10), management is comfortable and believes them to be "under control"
· Despite PCR below stipulated 70%, share ruling at high PBV of 1.42x and PE of over 7x
To conclude, mid-cap PSU banks have been able to expand topline coupled with operational efficiency. However, they still rule at a steep discount, at an average 1.1x PBV vis-à-vis BSE Bankex's current 2.6x PBV, indicating that a lot of catching-up is still needed to stop the valuation gap from widening further.
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