ICICIdirect has recommended 'Hold' on Syndicate Bank after the announcement of company's first quarter results. The stock broker fixed price target to Rs 100.
Commenting on the results, ICICIdirect said, ''Syndicate Bank profits were below estimates, declining 38% YoY to Rs 3.01 billion, due to higher taxes, we estimated PAT at Rs 3.98 billion and higher provisions of Rs 4.81 billion vs.Rs 3.96 billion. Asset quality disappointed in Q1FY16 with QoQ surge in GNPA ratio to 3.72% from 3.13% in Q4FY15. Absolute GNPA increased 17% from Rs 64.42 billion to Rs 75.45 billion QoQ. Slippages were higher QoQ at Rs 19.90 billion vs. Rs 8.31 billion in Q4FY15. Fresh RA was Rs 2.10 billion. Three accounts worth Rs 10 billion were refinanced under the 5/25 scheme. There is a pipeline of Rs 8-9 billion for incremental refinancing. NII increased 4.5% YoY to Rs 14.11 billion vs. our estimate of Rs 13.97 billion. NIMs stood at 2.21% (lowest in last several quarters).''
Commenting on the investment rationale, the stock broker said, ''Driven by MAT credit, FY12 and FY13 return ratios seemed higher with average RoA, RoE at ~0.8%, 17.5%, respectively. However, in FY14, FY15 RoE dropped to 15.2%, 12%, respectively, due to a subdued operational performance (lower margins and enhance d credit cost). We have raised our NPA and accordingly credit cost estimates. Due to this, our FY16E, FY17E PAT estimates stand reduced by 17%, 11%, respectively. We anticipate FY17E RoE at 13.9% vs.15. 1% earlier. We reduce our target price to Rs 100 from Rs 124 earlier as we lower our FY17E ABV estimates and due to a reduction in our target multiple to 0.8x from 0.9x earlier. We have a Hold recommendation.''
