Oriental Bank of Commerce gains on brokerage upgrade

Oriental Bank of Commerce rose 4.44% to Rs 233.95 at 15:03 IST on BSE on reports a foreign brokerage upgraded the stock to 'buy' from 'neutral', citing positive risk reward.

Meanwhile, the BSE Sensex was up 115.54 points, or 0.44%, to 26,412.92.

On BSE, so far 1.33 lakh shares were traded in the counter, compared with an average volume of 1.92 lakh shares in the past one quarter.

The stock hit a high of Rs 234 and a low of Rs 222.30 so far during the day. The stock hit a 52-week high of Rs 377.30 on 29 May 2014. The stock hit a 52-week low of Rs 146.20 on 17 October 2013.

The stock had underperformed the market over the past one month till 10 October 2014, falling 18.17% compared with 2.81% fall in the Sensex. The scrip had also underperformed the market in past one quarter, falling 22.02% as against Sensex's 3.64% rise.

The mid-cap public sector bank has an equity capital of Rs 299.85 crore. Face value per share is Rs 10.

According to reports, the brokerage said that over the last 3 months, Oriental Bank of Commerce (OBC) has underperformed the Sensex and Bank Nifty. However, the return on assets (ROA) differential between OBC and other banks has narrowed over financial year ended March 2012 (FY 2012) to financial year ended March 2014 (FY 2014) from 30 basis points (bps) to 11 bps. The brokerage expects it to narrow further to 4 bps. Over FY 2014 to financial year ending March 2018 (FY 2018) estimates, it expects OBC's ROA to rise 42 bps on the back of decline in credit costs from 1.33% in FY 2014 to 0.9% in FY 2018 estimate; fall in operating ratio from 1.67% in FY 2014 to 1.45% in FY 2018 estimates; and better net interest margins (partly on better asset quality as impaired loans likely to decline from financial year ending March 2016 onwards).

The brokerage sees early signs of macro improvement. As this gathers steam, it will lead to better asset quality and hence better ROA, it said.

OBC's net profit rose 3.2% to Rs 364.54 crore on 6.1% growth in total income to Rs 5576.02 crore in Q1 June 2014 over Q1 June 2013.

The Government of India holds 59.13% stake in OBC (as per the shareholding patterns as on 30 June 2014).

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