Recommendations » India

Bank of Maharashtra 2QFY2013 performance highlights and results update

Contributed by Angel Broking

During 2QFY2013, Bank of Maharashtra reported a strong 65.3% yoy growth in net profit to Rs.166cr, as provisioning expenses declined by 20% yoy (due to high base in 2QFY2012). The key highlight of the result was the stability witnessed on the asset quality front, with slippages coming at normalized levels.

Business growth strong, NIM improves, Asset quality witnessed stability: During 2QFY2013, the bank reported a strong growth in its business, with advances and deposits growth of 27.6% and 24.7% yoy, respectively. CASA deposits were higher by 14.7% on a yoy basis, aided by a 17.4% growth in current deposits and 14.0% growth in savings deposits. The CASA ratio declined by 214bp sequentially to 37.4%. However, the bank witnessed strong traction in its overall retail deposits, with a growth of 25.0% yoy aided by a strong growth of 34.1% yoy in its retail term deposits. As of 2QFY2013, the share of bulk deposits (including CDs) stood at 12.8% compared to 13.8% as of 1QFY2013. The reported NIM for the bank improved by 8bp qoq to 3.0% as a 26bp sequential improvement in the yield on funds fully negated the 19bp qoq increase in costs of funds. The noninterest income (excluding treasury) for the bank grew by 10.0% yoy to Rs.161cr, as subdued growth of 4.2% yoy was witnessed in CEB income stream. On the asset quality front, the bank witnessed stability with the gross NPA remaining flat qoq and the net NPA witnessing a marginal increase of 1.7% sequentially, on an absolute basis. The gross NPA ratio improved by 24bp sequentially to 2.0% during the quarter, while the net NPA ratio improved from 1.0% to 0.9%. Slippages came in at Rs.210cr during the quarter compared to Rs.441 cr in 4QFY2012. The annualized slippage ratio came in at 1.5% compared to 3.1% witnessed in 1QFY2013 and 3.9% in 4QFY2012. The provisioning coverage ratio for the bank improved by 80bp qoq to 80.1%.

Outlook and valuation: At the CMP, the stock is trading at valuations of 0.7x FY2014E ABV, which we believe factors in an expected 33.4% CAGR in earnings over FY2012-14E. Owing to the asset quality concerns arising due to weak macro-economic outlook, we recommend a Neutral rating on the stock.