August 29, 2016

RESULT UPDATE - Q1FY17

Allahabad Bank
Sensex: 27745

CMP: INR 78

Target: INR 58
BFSI

ALB reported disappointing set of numbers with ~25% QoQ increase in GNPA led by 13% annualized slippages of INR
50.87bn. NII declined by 12.22% YoY to INR 13.93bn on back of 3.15% growth in advances and 50bps decline in NIM. Decline
in NIM was due to interest reversal on back of higher slippages. PPOP declined by 22% YoY as there was write back of
excess wage provisioning last year. CI ratio improved 196bps QoQ to 50.28%. PCR declined by 219bps to 46%. After recent
run up in the stock, we change our recommendation to SELL with TP of INR 58 (0.8x FY18E ABVPS*).
NII below our estimate due to higher slippages
NII declined by 12.22% YoY to INR 13.93bn (SPAe: INR 16.26bn) on
back of muted 3.15% increase in advances and 50bps YoY decline
in NIM on back of interest reversal due to higher slippage. CD
ratio declined 243bps YoY to 79.86%.

yield on advances which was affected due to interest write-back

on back of continued higher slippages. Going forward, we expect
NIM to improve on back of lower slippages and improving product
mix in favour of high yielding segments.
Slippages remain high at 13%, PCR down 219bps to 46%
ALB reported slippages of INR 50.87bn (13% of advances) which
was much higher than the pre AQR quarterly average of ~INR 13bn.
While the slippages continue to remain high, there was no
significant improvement in recovery (INR 12.63bn) which was
similar to the pre AQR quarterly average of INR 11.5bn. GNPA/
NNPA for the quarter was 12.33%/8.69% compared to 9.76%/6.76%
at the end of FY16. PCR declined by 219bps QoQ to 46%.

Non corporate credit grew at ~9%

ALB's credit growth at 3.15% YoY was in line with our estimate of
~4% growth as the bank continues to consolidate its loan profile
amid stress in asset quality. Non corporate credit grew by ~9% YoY
driven by Retail (~18%) and MSME (8.5%). These high yielding
sectors now constitute 51.58% of loan book compared to 48.82%
last year. We expect advances to grow at a CAGR of 11.62% between
FY16-18E. ALB has guided for 12.5% advances growth in FY17.

Outlook & Valuation

Apart from weak operational performance, ALB's result was
particularly disappointing because of continued higher slippages
outside AQR. While most of the PSBs have shown moderation in
slippages post AQR, ALB reported slippages which were even
higher than average slippages reported during AQR. On the positive
side, increased granularity in the liability as well as asset profile
is encouraging for long term sustained growth. However, on
operational front, ALB's competitive prowess will be severely
impacted given focus towards recovery in NPAs coupled with
capital constraints for growth. Hence, we anticipate the bank's
operating profitability to remain under pressure and after recent
run up in the stock, we change our recommendation to SELL with
TP of INR 58 (0.8x FY18E ABVPS*).

CASA ratio improved 281/116 bps YoY/QoQ to 37.06%

CASA ratio improved YoY/QoQ by 281/116 bps to 37.06%, highest
level since FY08. CASA deposit grew by 15% YoY while total deposits
grew by 6.3%. Improvement in CASA was driven by savings deposit
which grew by 18.79% YoY and now constitutes 88% of the CASA.
Lower growth in deposit was due to shedding of high cost CDs and
bulk deposits worth INR 110bn YoY. Proportion of CDs and bulk
deposit in total deposit declined to 16.96% from 24% last year.
We expect deposits/CASA to grow at a CAGR of 9.3%/13.95%
between FY16-18E and CASA ratio to improve to 39% by FY18E.
NIM declined by 50bps YoY to 2.54%
NIM declined by 50bps YoY to 2.54% due to lower interest rate
spread and CD ratio. Interest rate spread declined 68bps on lower
Shareholding (%)

Jun-16

Promoters
FIIs
DIIs
Others

67.21
3.74
17.66
11.39

Key Data

Y/E March (INR mn)

BSE Code

532480

NSE Code

ALBK

Interest income
197161 188849
Interest Expended
135382 129865
Net interest income 61779 58985
Growth
16.32% -4.52%
NIM
2.89%
2.70%
APAT
6212 (7432)
Growth
-46.96%
PL
EPS (INR)
10.87 (12.11)
P/E
9.00
NA
P/ABV
0.91
1.06
Net NPA
3.99%
6.76%
RoA
0.31%
NA
RoE
5.27%
NA
Dividend Yield
1.70%
0.00%

Bloomberg Code

ALBK IN

Reuters Code

Relative Prince Performance

ALBK.BO

Shares O/S (mn)

120

723.03

Face Value
100
80
60

10

Mcap (INR bn)

56.58

52 Week H/L

87/40

2W Avg. Qty, NSE

ALBK

Deepak Tewary
deepak.tewary@spagroupindia.com
Ph. No. 91 33 40114800/ 859

Jul-16

Aug-16

Jun-16

Apr-16

May-16

Mar-16

Jan-16

Feb-16

Dec-15

Oct-15

Nov-15

Sep-15

Aug-15

40

4889555

Free Float (INR bn)

18.55

Beta

1.46

FY15

FY16

FY17E

FY18E

203350 228244
136540 150700
66810
77544
13.27% 16.07%
2.77%
2.89%
1549
13880
LP 795.79%
2.14
14.60
36.47
5.35
2.75
1.07
7.37%
5.64%
0.07%
0.57%
1.26%
9.04%
0.00%
0.00%

* For calculating ABVPS, we have included 45% of the revaluation reserve.

Sensex

BFSI
Other Highlights
No loans were restructured during the quarter and restructured
accounts worth INR 16.5bn (20% of standard restructured
assets) slipped into NPA. Standard restructured asset at the
end of Q1FY17 declined to 4.3% of advances compared to 5.5%
in Q4FY16.

Asset quality deterioration outside AQR is a cause for

concern

12

Operating profit was down 25% YoY to INR 9.7bn due to 18.7%
increase in operating expense. Non-Interest income increased
by 15.5% YoY on back of 31% increase in trading profit to INR
1.95bn. Fee based income increased by 7% YoY to INR 3.12bn.

50.00

6
4

45.00

During the quarter the bank added 15 branches taking the

total number of branches to 3224.

40.00
Q4FY15

As per Basel III norms, ALB's CAR stands at 10.58% at the end of
Q1FY17 and Tier1/CET1 stands at 8.05%/7.94% respectively.
During the quarter, ALB issued 109.2mn equity shares to
Government of India at INR 63.17 per share.

Q1FY17

Q4FY16

Q1FY16

% QoQ

% YoY

Interest Earned

45705

44967

49180

1.64

(7.07)

Interest Expended

31773

32230

33309

(1.42)

(4.61)

Net Interest Income

13932

12737

15871

9.38

(12.22)

NIM (%)

2.54

2.33

3.04

21 bps

(50 bps)

Other Income

5524

5547

4785

(0.42)

15.46

19456

18284

20656

6.41

(5.81)

Operating Expenses

9782

9552

8241

2.41

18.70

Payments to / Provisions for employees

5709

5145

4723

10.96

20.87

Other operating expenses

4073

4407

3518

(7.58)

15.79

Cost/Income Ratio (%)

50.28

52.24

39.90

(196 bps)

1038 bps

Operating Profits

9674

8733

12415

10.79

(22.07)

Provisions & Contingencies

13308

24872

8548

(46.49)

55.69

Profit Before Tax

-3633

-16139

3867

(77.49)

(193.96)

Provision for Tax

Net Profit

2016

(10328)

2399

(119.52)

(15.94)

-55.49%

63.99%

62.02%

(186.71)

(189.47)

-5650

-5811

1469

(2.78)

(484.69)

EPS

-7.81

-9.47

2.57

Equity

7,230

6,138

5,714

17.80

26.54

GNPA

192086

153846

79870

24.86

140.50

NNPA

129764

102925

54210

26.08

139.37

(%) GNPA

12.33

9.76

5.29

257 bps

704 bps

(%) NNPA

8.69

6.76

3.67

193 bps

502 bps

0.27

RoA (%)

Q2FY16

Q3FY16

Q4FY16

NNPA (%)

Q1FY17

PCR (%) - RHS

Sllipages surged due to higher slippages from restructured

assets

60

Quarterly Financials

Net Total Income

Q1FY16
GNPA (%)

75

Particulars (INR mn)

55.00

10

20%
15%

45
10%
30
5%

15
0

0%
Q4FY15

Q1FY16

Q2FY16

Slippage (INR bn)

Q3FY16

Q4FY16

Q1FY17

Slippage Ratio (RHS)

Strong traction in CASA; expected to reach ~39% by FY18

1000

40%
35%

750

30%
25%

500

20%
15%

250

10%
5%

0
FY13

FY14

FY15

CASA Deposit (LHS) (INR bn)

CASA Ratio

FY16

FY17E

FY18E

CASA Deposit Growth

BFSI

Financials
Key Ratios

Income StatementY
Y/E March (INR mn)
Interest income
Growth

FY15

FY16

FY17E

FY18E

Y/E March (INR mn)

FY15

FY16

FY17E

FY18E

197161

188849

203350

228244

Per Share Data (INR)

10.87

-12.11

2.14

14.60

BVPS

206.41

185.99

169.58

161.51

ABVPS*

107.40

51.81

28.40

72.77

1.66

0.00

0.00

0.00

10.92% 10.02%

9.84%

10.00%

5.17%

-4.22%

7.68%

12.24%

135382

129865

136540

150700

61779

58985

66810

77544

16.32%

-4.52%

13.27%

16.07%

Other Income

19962

19101

23362

25726

Net Income

81741

78086

90172

103270

Operating Expenditure

37141

36746

41172

45166

Operating Income

44600

41340

48999

58104

Provisions & Contingencies

28567

52532

46794

40754

Cost of Deposits

7.11%

6.62%

6.22%

6.21%

PBT

16033

(11192)

2205

17350

Net Interest Margin

2.89%

2.70%

2.77%

2.89%

Tax

9822

(3760)

655

3470

RoA

0.31%

NA

0.07%

0.57%

PAT

6212

(7432)

1549

13880

APAT

6212

(7432)

1549

13880

RoE

5.27%

NA

1.26%

9.04%

-46.96%

PL

LP

795.79%

Balance Sheet Ratios

10.87

(12.11)

2.14

14.60

Credit/Deposit Ratio

77.49% 75.94% 77.50%

79.21%

Investment/Deposit Ratio

29.20% 27.74% 27.62%

27.62%

CASA Ratio

33.56% 35.90% 38.93%

39.37%

Capital Adequacy Ratio (CAR)

10.45% 11.24%

Interest Expended
Net interest income
Growth

Growth
EPS (INR)

EPS

DPS
Profitability Ratios
Yield on Advances

Balance Sheet
Y/E March (INR mn)

FY15

FY16

FY17E

FY18E

5714

6138

7230

9509

Reserves

120714

134502

141860

155740

Asset Quality Ratios

Total Shareholders Funds

126428

140640

149090

165248

1934241 2006444

9.35%

9.92%

7.00%

7.83%

Gross NPA

5.58% 10.10% 10.13%

7.79%

Net NPA

3.99%

7.37%

5.64%

51.50% 48.22% 45.24%

45.45%

SOURCES OF FUNDS
Equity Share Capital

Total Deposits
Growth
Borrowings
Other Liabilities & Provisions
Total Liabilities

2187145

2397006

1.35%

3.73%

9.01%

9.60%

143159

148070

204925

237179

67137

63129

58957

65003

2270965 2358284

2600117

2864437

Tier I

Provision Coverage Ratio

Slippage Ratio

7.71%

3.35%

8.63%

6.76%

8.48%

3.50%

1.00%

Cost to Income Ratio

45.44% 47.06% 45.66%

43.74%

Business per Employee (in INR mn)

125.60

124.96

131.16

138.79

0.23

NA

0.05

0.45

P/E

9.00

NA

36.47

5.35

P/ABV

0.91

1.06

2.75

1.07

1.70%

0.00%

0.00%

0.00%

Efficiency Ratios

APPLICATION OF FUNDS
Current Assets

171337

198562

215671

234978

Investments

564787

556579

604135

662103

1498768 1523721

1695139

1898556

Advances
Growth

8.60%

1.66%

11.25%

12.00%

Fixed Assets

14054

32558

34080

35602

Other Assets

22018

46864

51092

33198

2270965 2358284

2600117

2864437

Total Assets

Profit per Employee (in INR mn)

Valuation Ratios

Dividend Yield

* For calculating ABVPS, we have included 45% of the revaluation reserve.

BFSI
Sharad Avasthi

Head - Equity Research

sharad.avasthi@spagroupindia.com

Tel.: +91-33-4011 4800

Ext.832

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