Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
12,086.70114.9
Stock Analysis, IPO, Mutual Funds, Bonds & More

IDBI Bank: A good long-term bet

Asset quality remains an important concern for IDBI Bank. Since the asset quality concerns are fully priced in, the bank is a good long-term bet.

, ET Bureau|
Jun 17, 2013, 12.27 PM IST
0Comments
Asset quality remains an important concern for IDBI Bank. Since the asset quality concerns are fully priced in, the bank is a good long-term bet.
Asset quality remains an important concern for IDBI Bank. Since the asset quality concerns are fully priced in, the bank is a good long-term bet.
As with most PSU banks, asset quality remains an important concern for IDBI Bank as well. The 28% fall in net profit during the fourth quarter of 2012-13, compared with that in the same period last year, was mostly because of increased provisioning. The fourth quarter provisions jumped 217% to Rs 869 crore on a year-on-year basis. With a fresh addition of Rs 2,960 crore to restructured assets and fresh slippage of Rs 907 crore in the fourth quarter, the stressed assets continue to remain high. The restructured assets and gross NPA together stand at a whopping 11.5% of the loan book as on March 2013. Due to a high exposure to stressed sectors like power (10%) and steel (6%), high slippages may continue in the coming quarters as well.

Despite the Rs 907 crore slippage, the gross NPA increased only by Rs 49 crore on a quarter-over-quarter basis due to the aggressive write-off (Rs 371 crore), recoveries (Rs 289 crore) and upgradations (Rs 197 crore) in the fourth quarter. More importantly, the bank continues to report strong operational level performance. Its preprovision profit grew 33% on a y-o-y basis and 3% on a q-o-q basis despite the higher employee cost. The management’s efforts to garner lowcost deposits are also yielding fruit as CASA deposits rose 37% on a q-o-q basis and this helped the bank improve its CASA ratio by 102 basis points on a y-o-y basis to 25.1%.


IDBI Bank: A good long-term bet


The recent carnage in the public-sector banks due to asset quality concerns has brought down their valuations to very low levels. With this, the valuation gap between private-sector banks and public-sector ones have widened further. With the price correction, IDBI Bank is the cheapest bank even among the public-sector banks in terms of price to book value (PB) and most analyst upgrades, from sell to hold or hold to buy, have been triggered by this. While the decent business growth and improvements in operational ratios should sustain the current valuations, any positive news on the asset quality front will act as a positive trigger for the counter.

IDBI Bank: A good long-term bet


Selection methodology: We pick the stock that has shown the maximum increase in consensus analyst rating during the past month. Consensus rating is arrived at by averaging all analyst recommendations after attributing weightages to each of them (5 for strong buy, 4 for buy, 3 for hold, 2 for sell and 1 for strong sell). An improvement in rating indicates that the analysts are becoming more bullish on the stock. To make sure that we pick only companies with a decent analyst coverage, this search will be restricted to stocks that have been covered by at least 10 analysts.


IDBI Bank: A good long-term bet

Also Read

IDBI Bank looks to sell MF arm to Edelweiss

IDBI Bank rises 10% amid talks of selling stake in Arcil

IDBI Bank in talks with Avenue Capital to sell stake in asset aggregator Arcil

IDBI Bank to sell up to 49% stakes in 2 subsidiaries

IDBI Bank okays preferential issues to LIC, government

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service