Dena Bank by hedongchenchen

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									                                                                                        4QFY2010 Result Update I Banking
                                                                                                                        April 28, 2010




  Dena Bank                                                                             BUY
                                                                                        CMP                                     Rs83
  Performance Highlights                                                                Target Price                            Rs98
  Dena Bank reported a Net Profit growth of 23.3% yoy, ahead of our                     Investment Period                   12 Months
  estimates, on account of a higher-than-expected improvement in the NIMs
  and better-than-expected income from recoveries, which boosted the                    Stock Info
  non-interest income of the bank. We maintain a Buy rating on the stock.
                                                                                        Sector                                Banking
  Better-than-expected NIMs and Recoveries: Sequential growth in advances (at
                                                                                        Market Cap (Rs cr)                     2,379
  14.7%) exceeded deposit growth by 7.4%, resulting in a CD ratio of 69.1%
  (from 64.6% in 3QFY2010). The reported NIMs of the bank improved to 2.8%              Beta                                      1.0
  in 4QFY2010, from 2.5% in 3QFY2010 and 2.4% in 4QFY2009. CASA
                                                                                        52 WK High / Low                       93/36
  deposits increased by 23.0% yoy to Rs18,320cr at the end of 4QFY2010.
  Non-interest income increased by 24.8% yoy to Rs175cr, driven by a strong             Avg. Daily Volume                    1246665
  traction in recoveries in written-off accounts, which stood at Rs70cr (against
  Rs28cr in 4QFY2010 and Rs22cr in 3QFY2010). The Gross NPA and Net                     Face Value (Rs)                           10
  NPA ratios improved to 1.8% (1.9% in 3QFY2010) and 1.2% (1.2% in                      BSE Sensex                            17,380
  3QFY2010), respectively. The NPA provision coverage ratio stood at 78.0%
  including technical write-offs. The bank’s CAR stood at 12.7%, with Tier-I            Nifty                                  5,215
  capital of 8.2% (forming 65% of the total CAR). During 1HFY2011, the                  Reuters Code                         DENA.BO
  Government is expected to infuse capital of Rs600cr in the bank, Rs300cr
  each in the form of Equity and Preference Capital. The management also                Bloomberg Code                      DBNK@IN
  expects to receive Rs700cr from the Government in the form of Preference
                                                                                        Shareholding Pattern (%)
  Capital over FY2012-13E.
                                                                                        Promoters                                51.2
  Outlook and Valuation: Dena Bank, with a strong CASA ratio of 35.7%, is               MF/Banks/Indian FIs                     13.0
  better placed than its peers to protect its NIMs in a rising interest rate
  environment. After the proposed capital infusion, the Bank's Tier-I ratio will        FII/NRIs/OCBs                            16.0
  improve to 9.1% by end-FY2011E from 8.2% in FY2010, and will enable it to
                                                                                        Indian Public                           19.8
  maintain its CAR well above the 12% level till FY2012E. We estimate
  Advances to grow at a 17% CAGR over FY2009-12E, driving an Earnings’                  Abs (%)             3m        1yr         3yr
  CAGR of 16% over the period. At the CMP, the stock is trading at 3.8x
  FY2012E EPS of Rs21.9 and 0.7x FY2012E Adjusted Book Value of Rs120.6.                Sensex              6.6       58.0       25.0
  We have assigned a Target FY2012E P/ABV multiple of 0.8x to Dena Bank,
                                                                                        Dena Bank         62.5     122.7         120.3
  (equal to its 5-year median P/ABV multiple) to arrive at a Target Price of Rs98,
  translating into an upside of 18.4%. Hence, we maintain a Buy on the stock.




   Key Financials
   Y/E March (Rs cr)             FY2009         FY2010E           FY2011E   FY2012E
   NII                               1,064         1,100            1,295     1,481
   % chg                              19.2            3.3            17.7      14.4
   Net Profit                         423            511             556       629
   % chg                              17.5           21.0             8.8      13.1
   NIM (%)                             2.8            2.4             2.4       2.3   Vaibhav Agrawal
   EPS (Rs)                           14.7           17.8            19.4      21.9   Tel: 022 – 4040 3800 Ext: 333
                                                                                      E-mail: vaibhav.agrawal@angeltrade.com
   P/E (x)                             5.6            4.7             4.3       3.8
   P/ABV (x)                           1.3            1.0             0.8       0.7
                                                                                      Amit Rane
   RoA (%)                             1.0            1.0             0.9       0.9
                                                                                      Tel: 022 – 4040 3800 Ext: 326
   RoE (%)                            21.3           21.2            19.2      18.4
                                                                                      E-mail: amitn.rane@angeltrade.com
   Source: Company, Angel Research



                                                                                                                                        1
Please refer to important disclosures at the end of this report                          Sebi Registration No: INB 010996539
                                                                                                            Dena Bank I 4QFY2010 Result Update




  Exhibit 1: 4QFY2010 Performance
  Y/E March (Rs cr)                4QFY10               3QFY10     % chg (qoq)         4QFY09      % chg (yoy)               FY10                  FY09      % chg
  Interest Earned                    1,063                1,016            4.7            896            18.7               4,010                 3,447        16.3
  Interest Expenses                    737                  733            0.6            657            12.2               2,910                 2,383        22.1
  Net Interest Income                  326                  283           15.2            239            36.5               1,100                 1,064         3.3
  Non-Interest Income                  175                  133           31.3            140            24.9                 589                   430        36.9
  Total Income                         501                  416           20.4            379            32.2               1,689                 1,495        13.0
  Operating Expenses                   221                  218            1.1            191            15.5                 848                   768        10.4
  Pre-Prov Profit                      280                  198           41.7            188            49.2                 841                   726        15.7
  Provisions & Cont.                    82                   29         181.8              51            60.5                 154                   185      (16.8)
  PBT                                  198                  168           17.4            136            44.9                 687                   541        26.8
  Prov. for Taxes                       61                   34           78.8             25           140.2                 176                   119        47.8
  PAT                                  137                  135            1.9            111            23.3                 511                   423        21.0
  EPS (Rs)                              4.8                  4.7           1.9             3.9           23.3                17.8                  14.7        21.0
  Cost to Income (%)                  44.1                 52.5                          50.5                                50.2                  51.4
  Effective Tax Rate (%)              30.7                 20.1                           18.5                                 25.6                21.9
  Net NPA (%)                          1.2                  1.2                              1.1                                   1.2              1.1
 Source: Company, Angel Research


                                              Strong Advances and Deposits Growth

                                              During 4QFY2010, the business growth stood at 20.7% yoy, driven by advances
                                              growth of 22.8% yoy to Rs35,462cr, and deposits growth of 19.3% yoy to
                                              Rs51,344cr. Sequential growth in advances (at 14.7%) exceeded deposit growth by
                                              7.4%, resulting in a CD ratio of 69.1% (from 64.6% in 3QFY2010). The advances
                                              growth was driven by strong growth in Retail (21.6% yoy), SME (18.3% yoy) and
                                              agriculture (25.3% yoy).

                                              Exhibit 2: Rising Trend in Quarterly Advances and Deposits
                                                         60,000
                                                         50,000
                                              (Rs cr)




                                                         40,000
                                                         30,000
                                                         20,000
                                                         10,000
                                                              -
                                                                     Q4FY08


                                                                              Q1FY09


                                                                                         Q2FY09


                                                                                                   Q3FY09


                                                                                                                Q4FY09


                                                                                                                          Q1FY10


                                                                                                                                         Q2FY10


                                                                                                                                                    Q3FY10


                                                                                                                                                             4QFY10




                                                                                              Advances         Deposits

                                              Source: Company, Angel Research


                                              NIM improves

                                              The reported NIM of the bank improved to 2.8% in 4QFY2010, from 2.5% in
                                              3QFY2010 and 2.4% in 4QFY2009. The NIM expansion was aided by an
                                              improvement in the CD ratio, re-pricing of high-cost deposits and a sequentially
                                              stable CASA of 35.7%. CASA deposits increased by 23.0% yoy to Rs18,320cr at the
                                              end of 4QFY2010.




April 28, 2010                                                                                                                                                        2
                                                                          Dena Bank I 4QFY2010 Result Update



                 Strong Growth in Non-Interest Income driven by Recoveries

                 Non-interest income increased by 24.8% yoy to Rs175cr, driven by a strong traction
                 in recoveries in written-off accounts, which stood at Rs70cr (against Rs28cr in
                 4QFY2010 and Rs22cr in 3QFY2010). The management expects to recover
                 ~Rs120cr p.a. for the next two years. The core fee income increased by 7.1% to
                 Rs97cr during 4QFY2010, and recorded a 25.0% growth in FY2010.

                 Exhibit 3: Non-Interest Income
                 Period (Rs cr)                       4QFY10             3QFY10             % qoq       4QFY09             % yoy
                 Fee based Income                         97                 83               16.7          91               7.1
                 Income from Recoveries                   70                 22             219.1           28            155.3
                 Profit on Sale of Invest.                 8                 28             (72.3)          22            (64.7)
                 Total Non-Int. income                   175                133               31.5         140             2489
                 Source: Company, Angel Research


                 Asset-quality Stable

                 The absolute Gross NPAs of the bank increased 9.6% sequentially to Rs642cr in
                 4QFY2010. The Gross NPA and Net NPA ratios improved to 1.8% (1.9% in
                 3QFY2010) and 1.2% (1.2% in 3QFY2010), respectively. The NPA provision
                 coverage ratio stood at 78.0% after adjusting for technical write-offs. The bank’s
                 cumulative restructuring stood at Rs1,330cr (Rs1,459cr in 3QFY2010), and formed
                 3.8% of the advances and 51% of the Networth. There was a slippage of Rs110cr
                 during FY2010 from the restructured accounts, taking the slippages from the
                 restructured accounts to 8% for FY2010.


                 Exhibit 4: Trend in Asset Quality

                           700                                                                                            90
                           600                                                                                            80
                           500                                                                                            70




                                                                                                                               (%)
                           400                                                                                            60
                 (Rs cr)




                           300                                                                                            50
                           200                                                                                            40
                           100                                                                                            30
                             0                                                                                            20
                                 Q4FY08


                                           Q1FY09


                                                    Q2FY09


                                                             Q3FY09


                                                                          Q4FY09


                                                                                   Q1FY10


                                                                                               Q2FY10


                                                                                                        Q3FY10


                                                                                                                 4QFY10




                                          Gross NPAs                  Net NPAs              Coverage Ratio (%)

                 Source: Company, Angel Research



                 Details of Investment Book

                 Out of the total investment portfolio of Rs15,760cr, 17% is in AFS and the rest in
                 HTM. The modified duration of AFS stood at 4.7 years and that of HTM was 5.2
                 years exposing the portfolio to rising interest rate risk.




April 28, 2010                                                                                                                 3
                                                                                                                                       Dena Bank I 4QFY2010 Result Update


                 Improved Productivity

                 The total operating expenses increased by 15.5% yoy to Rs221cr, driven by a 10.1%
                 growth in employee costs and a 23.9% growth in other operating expenses. Due to
                 the strong growth in operating income, the cost-to-income ratio of the bank
                 improved to 44.1% in 4QFY2010 (52.5% in 3QFY2010 and 50.5% in 4QFY2009).
                 The total branch network increased by 39 to 1,223 in FY2010; the bank plans to
                 open 80 branches by June 2010 and 400 branches in the next 3 years.

                 Capital Infusion expected in 1QFY2011E

                 The bank’s CAR stood at 12.7%, with Tier-I capital of 8.2% (forming 65% of the total
                 CAR). The government is expected to infuse capital of Rs600cr in the bank, Rs300cr
                 each in the form of Equity and Preference Capital; however, the pricing is not clear
                 yet. The management also expects to receive Rs700cr from the Government in the
                 form of Preference Capital over FY2012-13E. The cost of this capital is expected to
                 be linked to the repo rate, as per the indications of the management. Accordingly,
                 we have assumed the cost of preference capital to be 6.5%. After the proposed
                 capital infusion, the Bank's Tier-I ratio will improve to 9.1% by end-FY2011E from
                 8.2% in FY2010, and will enable it to grow its Advances in line with our expectations
                 of a 16-17% growth for mid-size PSU banks over the next two years.

                 Outlook and Valuation

                 Dena Bank, with a strong CASA ratio of 35.7%, is better placed than its peers to
                 protect its NIMs in a rising interest rate environment. After the proposed capital
                 infusion, the Bank's Tier-I ratio will improve to 9.1% by end-FY2011E from 8.2% in
                 FY2010, and will enable it to maintain its CAR well above the 12% level till FY2012E.
                 We estimate Advances to grow at a 17% CAGR over FY2009-12E, driving an
                 Earnings’ CAGR of 16% over the period. At the CMP, the stock is trading at 3.8x
                 FY2012E EPS of Rs21.9 and 0.7x FY2012E Adjusted Book Value of Rs120.6. We
                 have assigned a Target FY2012E P/ABV multiple of 0.8x to Dena Bank, (equal to its
                 5-year median P/ABV multiple) to arrive at a Target Price of Rs98, translating into an
                 upside of 18.4%. Hence, we maintain a Buy on the stock.



                 Exhibit 5: P/ABV Band –Dena Bank

                         180
                         160
                         140
                         120
                         100
                  (Rs)




                          80
                          60
                          40
                          20
                           0
                               Mar-02
                                        Jul-02
                                                 Dec-02
                                                          Apr-03
                                                                   Aug-03
                                                                            Dec-03
                                                                                     Apr-04
                                                                                              Aug-04
                                                                                                       Dec-04
                                                                                                                Apr-05
                                                                                                                         Aug-05
                                                                                                                                  Dec-05
                                                                                                                                           Apr-06
                                                                                                                                                    Aug-06
                                                                                                                                                             Dec-06
                                                                                                                                                                      Apr-07
                                                                                                                                                                               Aug-07
                                                                                                                                                                                        Dec-07
                                                                                                                                                                                                 Apr-08
                                                                                                                                                                                                          Aug-08
                                                                                                                                                                                                                   Dec-08
                                                                                                                                                                                                                            Apr-09
                                                                                                                                                                                                                                     Aug-09
                                                                                                                                                                                                                                              Dec-09
                                                                                                                                                                                                                                                       Apr-10




                                                          Price                               0.4x                          0.7x                             1x                         1.3x                            1.6x

                 Source: Company, Angel Research




April 28, 2010                                                                                                                                                                                                                                                  4
                                                                                                  Dena Bank I 4QFY2010 Result Update




Income Statement (Rs cr)                                               Ratio Analysis
Y/E March                FY2009      FY2010E     FY2011E    FY2012E    Y/E March                       FY2009   FY2010E   FY2011E   FY2012E

Net Interest Income        1,064       1,100       1,295      1,481    Profitability ratios (%)
YoY Growth (%)              19.2         3.3        17.7       14.4
                                                                       NIMs                               2.8       2.4       2.4       2.3
Other Income                 430        589         535        567
                                                                       Cost to Income ratio              51.4      50.2      51.0      51.9
YoY Growth (%)              (3.1)       36.9        (9.1)       5.8
Operating Income           1,495       1,689       1,830      2,048    RoA                                1.0       1.0       0.9       0.9

YoY Growth (%)              11.8        13.0         8.4       11.9    RoE                               21.3      21.2      19.2      18.4
Operating Expenses           768        848         933       1,063    B/S ratios (%)
YoY Growth (%)              18.1        10.4        10.0       14.0
                                                                       CASA ratio                        36.0      35.7      35.1      34.5
Pre - Provision Profit       726        841         897        984
YoY Growth (%)               5.8        15.7         6.7        9.7    Credit/Deposit ratio              67.1      69.1      69.7      70.3

Prov. & Cont.                185        154         155        145     CAR                               12.1      12.7      13.6      13.5
YoY Growth (%)             (49.9)      (16.8)        1.0       (6.4)   - Tier I                           6.8       8.2       9.1       9.2
Profit Before Tax            541        687         742        839
                                                                       Asset Quality (%)
YoY Growth (%)              70.5        26.8         8.0       13.1
                                                                       Gross NPAs                         2.1       1.8       1.7       1.5
Prov. for Taxation         119         176         185         210
as a % of PBT               21.9        25.6        25.0       25.0    Net NPAs                           1.1       0.9       0.8       0.5
PAT                          423        511         556        629     Slippages                          2.9       2.2       2.2       2.0
- YoY Growth (%)            17.5        21.0         8.8       13.1    NPA prov. / avg.
                                                                                                          0.5       0.2       0.1       0.1
                                                                       assets
                                                                       Provision coverage                49.5      85.4      85.2      86.0

                                                                       Per Share Data (Rs)

                                                                       EPS                               14.7      17.8      19.4      21.9

                                                                       ABVPS (75% Cover.)                62.0      84.9     102.1     120.6

                                                                       DPS                                1.2       0.8       1.9       2.9
Balance Sheet (Rs cr)
Y/E March                FY2009      FY2010E     FY2011E     FY2012E   Valuation Ratios

Share Capital                287         287         887         887   P/E (x)                            5.6       4.7       4.3       3.8

-     Equity                 287         287         287         287   P/ABVPS (x)                        1.3       1.0       0.8       0.7
-     Pref.                      -           -       600         600   Dividend Yield                     1.4       1.0       2.3       3.5
Reserve & Surplus           1,884      2,368       2,862       3,395
                                                                       DuPont Analysis
Deposits                   43,051     51,344      59,559      69,089
                                                                       NII                                2.4       2.1       2.1       2.0
Growth (%)                   26.8       19.3        16.0        16.0
                                                                       (-) Prov. Exp.                     0.4       0.3       0.2       0.2
Borrowings                    52       1,562       1,640       1,722
                                                                       Adj. NII                           2.0       1.8       1.8       1.8
Tier 2 Capital              1,391      1,523       1,723       1,923
Other Liab. & Prov.         1,796        556         668         826   Treasury                           0.1       0.3       0.1       0.1

Total Liabilities          48,460     57,640      67,339      77,842   Int. Sens. Inc.                    2.1       2.1       1.9       1.9

Cash balances               4,982      4,355       5,003       6,287   Other Inc.                         0.9       0.8       0.8       0.7
Bank balances                875         813       2,203       1,550   Op. Inc.                           3.0       2.9       2.7       2.6
Investments                12,473     15,694      17,272      20,036
                                                                       Opex                               1.8       1.6       1.5       1.5
Advances                   28,878     35,462      41,491      48,544
                                                                       PBT                                1.2       1.3       1.2       1.2
Growth (%)                   25.4       22.8        17.0        17.0
                                                                       Taxes                              0.3       0.3       0.3       0.3
Fixed Assets                 405         407         415         424
                                                                       RoA                                1.0       1.0       0.9       0.9
Other Assets                 847         908         954       1,001
Total Assets               48,461     57,640      67,339      77,842   Leverage                          21.9      22.0      21.5      21.3

Growth (%)                   25.4       18.9        16.8        15.6   RoE                               21.3      21.2      19.2      18.4

April 28, 2010                                                                                                                           5
                                                                                                                              Dena Bank I 4QFY2010 Result Update




Research Team Tel: 022-4040 3800                                          E-mail: research@angeltrade.com                                       Website: www.angeltrade.com


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 Disclosure of Interest Statement                                                          Dena Bank
 1.    Analyst ownership of the stock                                                           No
 2.    Angel and its Group companies ownership of the stock                                     No
 3.    Angel and its Group companies’ Directors ownership of the stock                          No
 4.    Broking relationship with company covered                                                No
 Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.




                                Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
                                                                    Tel : (022) 3952 4568 / 4040 3800



    Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
    INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
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April 28, 2010                                                                                                                                                                              6

								
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