Vijaya Bank Q3FY13 Result Review

Vijaya Bank posted its Dec 2012 quarter numbers on Jan 24, 2013. The stock moved lower after the Net Interest Income (NII) de-grew by 4.4% to Rs 454 crore while its net profit remained subdued growing by 2% to Rs 127 crore. This was the situation despite a decrease in provision by 38% to Rs 103 crore. The stock, yesterday, closed lower by 3.3% but has rebounded today and is trading higher up by 1.54% to Rs 59.20 per share. The following are the bank’s key financial parameters: 

When most of the PSU banks are facing headwinds on the asset quality front, Vijaya bank showed strength on the same. Gross and Net NPA of the bank decreased by 26 and 19 basis points to 2.91% and 1.71% respectively. Further, its provision coverage ratio also increased by 97 basis points to 62.97%, although it is still well below the RBI guidelines of 70%. 

As on Dec 31, 2012, Capital Adequacy Ratio (CAR) as per Basel II of the bank stood at 11.78%. The bank faced minor headwinds on the margin, as Net Interest Margin declined by 2 basis points to 2.08% on a sequential basis.

However, the management in an interview with one of leading business news channel said that he expects better NIM and NII in the March 2013 quarter. We at DSIJ, also believe that as Interest rate softens during CY2013, banks NIM would improve going ahead.

All the segments of the bank posted muted performance on the revenue front. While on the Profit front, Treasury and Retail banking segment reported losses of Rs 140 crore and Rs 2 crore respectively against a profit of Rs 13 crore and Rs 156 crore in the similar period last year. While it’s wholesale banking business posted robust growth, covering up the losses posted in the above two segments, growing by 386% to Rs 334 crore. 

We have recommended Vijaya bank in our Magazine (Vol No 28, Issue No 1 dated Dec 30, 2012) as low price scrip at Rs 61.85 per share. The current market price of the bank is Rs 59.20 and hence we would advise our investors to hold the counter. Going ahead, we believe that the bank’s financial performance would improve and coupled with the rate cut, it would lead the stock to move northwards. On the valuation front, the bank is currently available at a Price to book value of around 0.7x which is fairly valued. We would advise our investors to hold the counter.