Lakshmi Vilas Bank

Karur-headquartered Lakshmi Vilas Bank with a focus on core operations, retail banking, corporate banking and banc assurance promises to be an exceptional play with regards to the turnaround growth story. The bank has a predominant presence in southern part of the country, majorly in Tamil Nadu. It has expanded its network across the nation with 274 branches and 188 ATMs spread all over the country.  It plans to open 100 more branches across the country during the current fiscal year. The wide network has helped registering increase in CASA balance which has grown remarkably by 34.80%.The deposits level and the credit portfolio also expanded.

For the quarter ended 30 September’10, the bank reported an operating profit of Rs. 725.5mn, a growth of 81.60% over the corresponding previous quarter. The net profit stood at Rs. 246.8mn, a growth of 12.18%. The bank has grown its asset base over the years, largely driven by robust growth in deposits and strong growth in advances.

Net interest income posted a growth of 14.82%. Overall total Business Mix improved to Rs. 158044.4mn from Rs. 142357.2mn, an increase of 11.02% year on year basis. At present, the Capital Adequacy Ratio stands at 13.52 %, as per Basel II vs 9.73 % as on September 2009. This remarkable increase in CAR has boosted the financial health. On Y-o-Y basis, the bank has managed to reduce its net NPAs and has managed to increase provisions for contingencies.

   

With its expansion plans on board, the bank has opportunity to get back to the high growth phase owing to its smaller base and expected improvement in operating metrics. We recommend a Buy on the scrip. Currently trading at Rs.134, (35x FY11E EPS and 29x FY12E EPS), the stock is expected to reach the levels of `160.