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Monday, December 5, 2011

Syndicate Bank:-Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Syndicate Bank

Story:In Q2 FY12, Syndicate Bank’s NII grew 18.5% YoY to Rs 13bn- 12% higher than our estimates. Margin rose 20bps QoQ to 3.36%, compared to 3.16% in Q1 FY12 and 3.55% in Q2 FY11. Other income grew 5.6% YoY to Rs 2.4bn. Bottomline stood at Rs 3.2bn (36% YoY growth) compared to our estimates of Rs 3.1bn. Considering Q2 FY12 and H1 FY12, we believe the bank has been able to completely pass-on increase in its cost of deposits to its borrowers. In Q2 FY12, higher yield on investments and incremental C-D ratio aided margin on sequential basis. The bank’s asset quality remained under control with GNPA and NNPA at 2.38% and 0.93% respectively; PCR was at 79% providing a buffer in the turbulent times. In Q2 FY12, the bank’s business grew by 20% YoY on the back of 21.5% growth in deposits and 19% YoY expansion in credit book. We expect the bank’s business to grow at 17.5% CAGR in FY11-13 and factor in margin compression of 31bps and 2bps in FY12 and FY13 to 2.71% and 2.69% respectively. We estimate that the bank would report RoAA of ~0.8% and RoAE of 19-22%.We reiterate our Buy rating on the stock with a price target of Rs 149 at 1.0x adjusted book value (ABV) FY13. At current price, the stock quotes at 0.84x and 0.7x ABV FY12 and FY13 respectively. The stock is available at an attractive dividend yield of 4.5% (on FY12’s dividend).

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