Allahabad Bank, established in 1865 by a group of Europeans and nationalized in 1969, has today a strong retail network with over 2,400 branches, all of them with Core Banking Solution (CBS). With headquarters in Kolkata, it has a large presence in the eastern part of the country. This is a safe and secured investment with chances of appreciation. Just consider:
- In times of uncertainty, ALBK is a good value buy as the bank is expected to pay a dividend of 70 per cent for 2011-12, giving a dividend yield of 4.1 per cent at the current market price.
- The bank is now expanding its presence in other parts of the country to diversify the loan book and de-risk its exposure to concentrated sectors. It is also trying to bridge the technology gap and enrich the asset mix to enhance margins and operational efficiency. The management plans to increase the number of branches to 3000 and ATMs to 2000 by FY2015.
- The bank has already launched its first mobile branch in New Delhi. It has entered into a strategic alliance with Aditya Birla Money Ltd. for providing online trading facility to the Demat customers of the bank. It has also started Online retail processing and sanction facility to all internet customers.
- Net Interest Income (NII) of the bank grew at a CAGR of about 23 per cent over 2006-11. The bank is expected to gain market share in both deposit and credit as it continuously outperforms the industry. ALBK has one of the leanest cost structures (cost-income ratio of around 42 per cent in September 2011 quarter) due to its increased thrust on technology and high business productivity per branch.
- For September 2011 quarter, ALBK reported a 36 per cent jump in the net interest income to Rs. 1320 crore. Non-interest income also reported a healthy growth of 32 per cent growth in fee income. The net profit came in at Rs. 488 crore, compared with Rs. 402.47 crore in the same quarter last year.
- The proportion of CASA deposits has declined to 30.6 per cent, but the planned expansion in the branch network is expected to improve the ratio. Provisioning remains high due to higher write offs and the NPAs have worsened from 0.7 per cent in the June quarter to 1.5 per cent in the September quarter. Lower growth rate in the eastern region is directly proportionate to higher NPA levels. However, recoveries and upgradations have been significantly higher.
- In 2011-12, we expect ALBK to register EPS of Rs. 36.2. The share trades at Rs. 166, which gives P/E of 4.6. Book value (BV) is expected to be at 189.70 in 2011-12, which is lower than the current price.
| Year | Net | Net | EPS | Div | BV | RONW | |
|---|---|---|---|---|---|---|---|
| sales | profit | (Rs) | (%) | (Rs) | (%) | ||
| 2009-10 | 2650.48 | 1206.33 | 25.3 | 55.00 | 131.73 | 22.21 | |
| 2010-11 | 4022.47 | 1423.11 | 29.9 | 60.00 | 160.50 | 21.04 | |
| 2011-12 (E) | 5349.89 | 1721.96 | 36.2 | 70.00 | 189.70 | 21.26 |
Rupees is given in Crores
Stock Information
BSE ticker code: 532480
NSE ticker code: ALBK
Major activity: Banks - PSU
Chairman J P Dua
Equity capital: Rs. 476.22 crore; FV Rs. 10
52 week high/low: Rs. 271/139
CMP: Rs. 166
Market Capitalisation: Rs. 7905.25 crore
Recommendation: Buy
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