Bank of Maharashtra: Keeping the faith

ANALYSTS' CORNER

Fortis Securities, initiating coverage on Bank of Maharashtra, rates it as an Outperformer. The public sector bank has a larger presence in Maharashtra and has a network of 1291 branches.

The bank witnessed a 42 per cent y-o-y decline in net profit in FY05. But advances grew by 11 per cent and deposits registered a growth of nine per cent. Net NPAs stood at 2.81 per cent of net advances at the end of FY05.

Its capital adequacy ratio stood at 12.7 per cent, which was much ahead of the required nine per cent. The bank is in no need to raise capital in near future and can focus on asset growth. Its investments are also subject to lesser interest rate risk.

It has an improving ratio of current and saving deposits to total deposits and an improving credit-deposit ratio. But overall, its performance has been comparatively poor, as compared to other public sector banks. The stock trades at a P/E of 6.5x FY06E and 4.6x FY07E.

Bharti Tele: undisputed leader

Motilal Oswal recommends a Buy on Bharti Tele-Ventures. The company has shown strong performance in the cellular industry, according to the report.

The wireless industry added 27.3 lakh subscribers in August 2005, the highest additions ever. The total subscriber base crossed six crore at the end of August, total GSM subscribers at 4.9 crore.

Bharti maintained its leadership in the cellular industry, adding six lakh subscribers, the highest ever by the company. The company has improved its market share to 21.7 per cent. However, competition is stiff. Even CDMA operators have improved their market share to 21 per cent after March 2005, when Reliance Infocom churned out over eight lakh subscribers. Tata Teleservices notched up its highest subscriber additions by adding two lakh subscribers for the month of August.

ICICI Bank: funding issues

ABN Amro Research has downgraded its rating on ICICI Bank from Hold to Reduce. The report states that its time to take profit. It believes that a tougher operating environment and fresh capital requirements will limit the upside for the bank's EPS and ROE over the next 12 months. The bank's NIMs showed a significant improvement between FY03 and FY05, but the pace is expected to be slow due to rapid loan growth limiting the potential to cut funding costs aggressively, an unfavourable asset-liability profile affecting funding costs adversely and the need for more scale in distribution to build up the low-cost deposit base of the bank.

A modest increase in NIMs is likely in the near term, while the medium-term outlook is highly sensitive to changes in the operating environment. There is a need to build distribution scale limits efficiency improvements. Its distribution network fails to match the size of its balance sheet.

While the bank has six per cent share of deposits in the domestic banking segment, its distribution network accounts for just one per cent of total bank branches in India.