[T.S.R:16117] Vijaya Bank-If You Dont Own A Banking Stock You Might As Well Forget BSE

Vijaya Bank's Q2 Net Profit rose 33.1%.  Robust net interest income (NII) growth of 33.6% yoy and stable productivity aided net profit growth. Vijaya Bank is likely to register 23.4% earnings CAGR over FY10-13e, driven by higher NIM and greater productivity. n        Subdued business growth, higher margins. Despite a subdued 7% yoy business growth (advances grew 5.8% yoy, deposits 7.8%) the bank reported healthy NII growth owing to the sharply improved reported margin by 77bp yoy to 3.16%, fuelled by a rising CASA share of 25.7% compared with 23.5% in 2QFY10. n        Stable productivity, lower treasury profits. Cost-to-income was stable at 51.1% compared with 51.7% in 2QFY10, despite higher provisioning of `0.7bn owing to higher gratuity and pension. Non-interest income stood 1.5% lower yoy due to a 25% yoy decline in treasury income. n        Improving asset quality. Gross NPAs marginally decreased 0.3% qoq. The bank has shored up its NPA coverage, including technical write-offs, by 400bp to 68.8% and secured an extension to reach 70% coverage till Mar '11. n        Valuation. At our target price, the stock would trade at 1.5x FY12 and 1.2x FY13 estimated ABV. Risks: Slow economic growth leading to credit growth being lower than estimated and higher NPAs. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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