Dena Bank: Steady rise

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Improvement in assets quality during the year ended March 2007 has put the stock back in the limelight with a weekly gain of almost 10 per cent.

Around 25.7 million shares were traded on the BSE and the NSE last week, up 19.20 per cent over aggregate turnover of 21.5 million shares during the week ended June 1.

Dena Bank is getting back on the growth track as it has been steadily improving its asset quality, stepping up recoveries and expanding its loan book.

Analyst at Finquest says the stock is trading at a very attractive valuation of 6.7 times of its trailing 12-months earnings per share of Rs 7.01. With a sustainable ROE (Return of Equity) of 22 per cent along with a ROA (Return of Assets) of 1.2 per cent, Dena Bank is well poised for re-rating.

Dena Bank is expected to grow its credit portfolio at CAGR of 22.5 per cent in two years, which would in turn drive its core earnings despite interest margins being under pressure.

Traditionally the bank's growth and profitability have been impaired by its poor asset quality requiring higher provisioning for NPAs. The bank's profitability in FY07 was aided by cash recoveries of Rs 247 crore.

According to the Finquest analyst, the bank is now gradually focusing on expanding its core operations with thrust on advance portfolio to improve its core earnings.