Oriental Bank of Commerce: Margins are likely to improve by 15 bps q-o-q
- Motilal Oswal expects Oriental Bank of Commerce to post healthy loan growth of ~18% y-o-y. However deposit growth is likely to moderate to ~10% y-o-y, as the bank de-bulks its balance sheet. Sequential growth in loans and deposits is likely to remain moderate.
- Margins are likely to improve by ~15bp q-o-q, as pressure on asset quality is expected to ease in 1QFY13 (high slippage in 4QFY12, led by one-offs, resulting in interest income reversals of Rs1.35b).
- Pressure on asset quality is likely to ease, with reduced slippages (slippages in 4QFY12 stood at Rs13b - annualized slippage ratio of 8.4%, led by four large corporate accounts).
- With pending restructuring in stressed sectors (SEBs) and continued stress in the large corporate segment, restructuring is expected to remain high. In 4QFY12, Rs34b was added to the restructured book.
- The stock trades at 0.6x FY13E and 0.5x FY14E BV, and 5.2x FY13E and 4.5x FY14E EPS. Maintain Buy.
- Key things to watch for: (1) Performance on asset quality, especially on net slippages and restructured loans, (2) Margin movement, (3) Fee income growth (volatile in the last few quarters), (4) Decrease in bulk deposits.
Click here to read the full report
Motilal Oswal was founded in 1987 as a small sub-broking unit, with just two people running the show. Today it has a 2000 member team with a networth of Rs7 bn and market capitalization as of March 31, 2008 at Rs19 bn.
For more information please write in to email@example.com
Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.
- Technical Call: Buy Oriental Bank for targets of Rs300/325
- Oriental Bank Q1FY15: Another weak quarter
- Oriental Bank of Commerce: Healthy capitalization, buy
- Oriental Bank of Commerce: Performance to remain subdued in near term, hold
- Oriental Bank quarter update: Performance to remain subdued in near term, hold
Have a question?
Also On IndiaNotes.Com
- Technical Stock Pick: Sell HDIL between CMP and Rs87
- Federal Bank: Credit growth to resume, maintain buy