Beyond Our Expectations

Allahabad Bank (ABL) formed a part of our recommendations in the Low Priced Scrip column in Issue 16 dated July 20-August 2, 2009 at a price of Rs 76.50. Since our recommendation the scrip has continuously moved up and touched a high of Rs 118, at which it yielded an overall appreciation of 54.24 per cent. At its CMP of Rs 116.45, the scrip is still providing strong appreciation of 52 per cent. This certainly looks good when we compare it with the Sensex which, during the same period, has appreciated only by 11 per cent. Thus, Allahabad Bank has outperformed the Sensex by quite a mile. The reason we recommended ABL was due to the fact that despite a weaker start to fiscal FY09, the bank posted an impressive performance every sequential quarter after that.

In fact it was the belief that the bank could post better results in Q1FY10 that also prompted us to recommend it. That apart, decent performance in both credit and deposit growth in FY09, CASA deposit ratio at 35 per cent, improving asset quality, increasing NIIs and the fact that the management has set an aggressive growth target of achieving a total business of Rs 1,75,000 crore (which would be 21 per cent growth over FY09) as also the low valuations led us to give ABL a thumb up sign. ABL has certainly gone beyond our expectations as it has appreciated 52 per cent in a matter of just two months. With this appreciation in place and overall market valuations getting stretched, it would be better if investors book profits in the scrip and make money.