Monthly Call
Andhra Bank is a mid-sized PSU bank with strong presence in southern India and a network of 1,930 distribution channels giving it an asset size of Rs 49,000 crore. The bank reported net interest margin (NIM) of 3.47% for Q1FY08, a slight decline due to pressure on cost of funds. The bank continues to sustain strong credit growth at 26% for the March 07 quarter and 27% for the June 08 quarter, and is expected to grow at 25% in FY08 with margins expected to be maintained. Its Q1FY08 net profit grew 21% y-o-y to Rs 141 crore on account of lower provision expenses. The bank's cost-to-income ratio has improved from 55% in FY06 to 50% in FY07. With net NPAs at 0.17% and robust credit growth, we believe the stock is available at attractive valuation of 1.2x its FY09E ABV and 7.1x its FY09E EPS.
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