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February 7, 2012
Dena Bank
Performance Highlights
BUY
CMP Target Price
2QFY12 515 352 194 % chg (qoq) 5.1 11.7 (3.6) 3QFY11 466 316 155 % chg (yoy) 16.0 24.3 20.3
`79 `95
12 months
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code
For 3QFY2012, Dena Bank registered healthy 20.3% yoy growth to `187cr, above our estimates due to higher margin expansion and lower provisioning expenses than estimated by us. We recommend Buy on the stock.
Asset quality continues to impress: The pace of business picked up in 3QFY2012, with advances growing by 12.2% qoq (up 15.7% yoy) and deposits growing by 6.4% qoq (13.0% yoy). CASA deposits growth was relatively slower at 4.2% qoq (11.4% yoy), leading to a 72bp qoq (50bp yoy) decline in CASA ratio to 34.9%. Yield on advances for the bank increased by 22bp qoq to 12.2% in 3QFY2012, while cost of deposits increased by relatively lower 12bp, leading to a sequential improvement of 11bp in reported NIM to 3.3%. During 3QFY2012, non-interest income grew by 18.2% qoq to `134cr, mostly due to strong performance in fee income (aided by traction in LCs, guarantees and inflows from forex income), which grew by 13.3% qoq (up 9.7% yoy) to `124cr. Recoveries from written-off accounts were also strong at 19.6% qoq (down 44.2% yoy), while treasury income registered a strong sequential performance. Slippages (`173cr) for the bank were under control during 3QFY2012, with annualized slippage ratio standing at 1.5%. Gross NPA ratio as of 3QFY2012 stood at 1.85% (1.93% in 3QFY2012), while net NPA ratio stood at 1.10% (1.15% in 2QFY2012). NPA provision coverage ratio, including technical write-offs remained healthy at 76.6%. The banks outstanding restructured book as of 3QFY2012 stands at `1,800cr. Outlook and valuation: Dena Bank has structurally a strong CASA ratio of 35%, aiding better NIM than peers. We were cautious on the banks asset quality; however, so far, the banks asset quality has held up reasonably well compared to peers and now considering the improving macro environment, we upgrade the stock to Buy with a target price of `95.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 58.0 7.6 11.8 22.6
3m 0.7 (1.4)
Key financials
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Source: Company, Angel Research
FY2010 1,100 3.3 511 21.0 2.1 17.8 4.4 0.9 1.0 23.5
FY2011 1,763 60.3 612 19.6 2.8 18.3 4.3 0.8 1.0 20.9
FY2012E 2,065 17.1 739 20.8 2.8 22.2 3.5 0.6 1.0 19.6
FY2013E 2,343 13.5 705 (4.6) 2.8 21.1 3.7 0.6 0.8 16.1
Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com
Varun Varma
022 3935 7800 Ext: 6847 varun.varma@angelbroking.com
3QFY12 2QFY12 % chg (qoq) 3QFY11 % chg (yoy) 1,676 1,293 375 9 1,135 541 134 124 109 10 15 675 282 171 111 393 124 69 21 35 269 82 187 30.6 1,634 1,226 397 11 0 1,119 515 113 109 97 4 13 628 276 163 114 352 81 65 11 5 271 77 194 28.5 2.6 5.5 (5.5) (23.8) (100.0) 1.4 5.1 18.2 13.3 12.5 151.0 19.6 7.5 2.1 5.0 (2.2) 11.7 52.9 5.3 84.9 587.1 (0.7) 6.6 (3.6) 208bp 1,290 986 300 4 823 466 127 113 86 14 27 593 277 181 96 316 86 50 20 15 231 76 155 32.7 30.0 31.1 25.0 140.0 NA 37.8 16.0 5.4 9.7 26.9 (28.6) (44.2) 13.8 1.8 (5.5) 15.5 24.3 45.1 36.4 1.4 132.1 16.5 8.8 20.3 (217)bp
% chg 2.7 1.6 2.4 (0.8) 4.9 (3.8) 9.5 3.1 12.5
February 7, 2012
3QFY12 2QFY12 % chg (qoq) 3QFY11 % chg (yoy) 47,928 68,339 70.1 23,848 34.9 11.6 8.5 7.1 12.2 3.3 41.8 885 1.9 524 1.1 76.6 1.5 0.4 42,723 64,236 66.5 22,879 35.6 12.6 9.3 7.0 12.0 3.2 44.0 830 1.9 491 1.2 77.1 1.4 0.4 12.2 6.4 362bp 4.2 (72)bp (97)bp (75)bp 12bp 22bp 11bp (220)bp 6.6 (8)bp 6.7 (5)bp (58)bp 16bp (0)bp 41,426 60,479 68.5 21,406 35.4 11.1 7.2 5.8 10.3 3.3 46.7 803 1.9 519 1.3 76.1 1.2 0.3 15.7 13.0 164bp 11.4 (50)bp 50bp 132bp 134bp 186bp 6bp (492)bp 10.2 (9)bp 0.9 (16)bp 47bp 35bp 5bp
February 7, 2012
14.4 13.0
8.2 6.2
66.5
(4.4) (1.5)
(0.3)
1.6
12.2
67.8
6.4
35.4
35.4
35.2
35.6
(5.0) (10.0)
February 7, 2012
34.9
76.1
74.6
77.9
77.1
76.6
803 519
842 549
797 458
830 491
ATMs (RHS) 520
1.2
3.0
1.3
1.4
1.5
0.1
1,284
1,291
1,297
1,298
46.7
47.4
46.1
44.0
41.8
40.0 38.0
1.5
1,307
885 524
1.4 1.3
460 440
February 7, 2012
Investment arguments
Structurally strong CASA
Dena Bank has maintained its CASA ratio at healthy 35%+ levels on account of having higher concentration of its branches in rural and semi-urban areas (mainly in Gujarat and Maharashtra). In the past two years, the bank has maintained a CASA market share of 1.1%, despite competition from private banks. This structural advantage is reflected in the bank's cost of funds at 5.5% in FY2011, which is one of the lowest amongst peers.
February 7, 2012
Coverage ratio
Source: Angel Research
FY2013 Earlier estimates 2,281 591 2,872 1,282 1,590 641 949 308 641 Revised Var. (%) estimates 2,343 575 2,918 1,289 1,630 587 1,043 338 705 2.8 (2.7) 1.6 0.5 2.5 (8.4) 9.9 9.9 9.9
Earlier estimates 2,034 544 2,577 1,114 1,463 462 1,001 325 676
Revised Var. (%) estimates 2,065 545 2,610 1,120 1,490 396 1,094 355 739 1.6 0.2 1.3 0.5 1.8 (14.2) 9.2 9.2 9.2
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
February 7, 2012
Mar-12
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Source: Company, Angel Research; Note: *Target multiples=SOTP Target Price/ABV (including subsidiaries); #Without adjusting for SASF
February 7, 2012
Income statement
Y/E March (` cr) NII - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY07 855 18.4 422 (8.0) 1,278 8.1 612 8.9 666 7.4 433 (23.9) 233 352.5 31 13.5 202 176.1 FY08 859 0.4 478 13.2 1,337 4.6 650 6.4 686 3.1 369 (14.8) 318 36.3 (42) (13.3) 360 78.5 FY09 1,064 23.9 430 (10.0) 1,495 11.8 768 18.1 726 5.8 185 (49.9) 541 70.5 119 21.9 423 17.5 FY10 1,100 3.3 589 36.9 1,689 13.0 848 10.4 841 15.7 154 (16.8) 687 26.8 176 25.6 511 21.0 FY11 1,763 60.3 534 (9.3) 2,297 36.0 1,073 26.6 1,224 45.6 326 111.7 898 30.8 287 31.9 612 19.6 FY12E 2,065 17.1 545 2.1 2,610 13.6 1,120 4.4 1,490 21.7 396 21.6 1,094 21.8 355 32.4 739 20.8 FY13E 2,343 13.5 575 5.5 2,918 11.8 1,289 15.0 1,630 9.4 587 48.2 1,043 (4.6) 338 32.4 705 (4.6)
Balance Sheet
Y/E March (` cr) Share Capital Reserve & Surplus Deposits Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash balances Bank balances Investments Advances Growth (%) Fixed Assets Other Assets Total Assets Growth (%) FY07 287 1,210 27,690 17.2 451 535 1,278 31,451 1,957 861 9,235 18,303 28.6 442 652 31,451 18.5 FY08 287 1,514 33,943 22.6 395 1,066 1,437 38,642 3,533 505 10,283 23,024 25.8 412 885 38,642 22.9 FY09 287 1,884 43,051 26.8 52 1,391 1,796 48,461 4,982 875 12,473 28,878 25.4 405 847 48,461 25.4 FY10 287 2,315 51,344 19.3 46 1,516 2,079 57,587 4,355 759 15,694 35,462 22.8 407 908 57,587 18.8 FY11 333 3,323 64,210 25.1 176 1,516 1,281 70,838 4,721 687 18,769 44,828 26.4 404 1,429 70,838 23.0 FY12E 333 3,945 71,915 12.0 199 1,728 2,104 80,224 4,674 1,604 20,779 51,104 14.0 444 1,618 80,224 13.2 FY13E 333 4,534 81,983 14.0 227 2,005 2,425 91,507 5,329 1,830 22,730 59,281 16.0 491 1,846 91,507 14.1
February 7, 2012
Ratio Analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov./Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis (%) NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage (x) RoE 2.9 1.5 1.5 0.1 1.6 1.3 2.9 2.1 0.8 0.1 0.7 25.2 17.5 2.5 1.1 1.4 0.3 1.7 1.1 2.8 1.9 0.9 (0.1) 1.0 25.0 25.6 2.4 0.4 2.0 0.1 2.1 0.9 3.0 1.8 1.2 0.3 1.0 24.8 24.0 2.1 0.3 1.8 0.3 2.1 0.8 2.9 1.6 1.3 0.3 1.0 24.4 23.5 2.7 0.5 2.2 0.0 2.3 0.8 3.1 1.7 1.4 0.4 1.0 21.9 20.9 2.7 0.5 2.2 0.0 2.2 0.7 2.9 1.5 1.4 0.5 1.0 20.0 19.6 2.7 0.7 2.0 0.0 2.1 0.7 2.7 1.5 1.2 0.4 0.8 19.6 16.1 11.2 2.1 1.0 6.3 1.5 1.3 5.3 1.3 1.5 4.4 0.9 2.5 4.3 0.8 2.8 3.5 0.6 3.8 3.7 0.6 3.8 7.0 36.8 0.8 12.5 51.8 1.0 14.7 62.2 1.2 17.8 2.0 18.3 2.2 22.2 3.0 21.1 3.0 83.4 103.5 122.4 140.1 4.0 2.0 3.6 1.0 50.0 2.4 0.9 2.2 0.8 60.7 2.1 1.1 2.9 0.5 48.3 1.8 1.2 2.2 0.2 78.6 1.9 1.2 2.1 0.4 74.6 2.2 1.2 2.0 0.3 76.0 3.3 1.4 2.1 0.6 75.0 44.5 66.1 11.5 6.1 39.2 67.8 11.1 6.8 34.8 67.1 12.1 6.8 36.0 69.1 12.8 8.2 35.5 69.8 13.4 9.8 35.4 71.1 13.9 10.1 34.6 72.3 14.1 10.1 3.1 47.9 0.7 17.5 2.5 48.7 1.0 25.6 2.5 51.4 1.0 24.0 2.1 50.2 1.0 23.5 2.8 46.7 1.0 20.9 2.8 42.9 1.0 19.6 2.8 44.2 0.8 16.1 FY07 FY08 FY09 FY10 FY11 FY12E FY13E
February 7, 2012
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E-mail: research@angelbroking.com
Website: www.angelbroking.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Dena Bank No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
February 7, 2012
11