Allahabad Bank - Rs.82.00

Incorporated in 1865, Allahabad Bank (AB) is the oldest public sector bank in India with 1999 branches of which 964 are in rural, 350 in semi-urban, 407 in urban and 278 in metropolitan areas apart from 149 extension counters spread all over India. AB has full managerial autonomy as it fulfills all the criteria of a strong public sector bank as defined by the Ministry of Finance. Interestingly, with its headquarter in Kolkata, AB was the first nationalized bank in Eastern India to launch depository participant (DP) services with its own server attached to NSDL. Presently, 95% of its business is computerised and within the next two months all its branches will be computerised. It has 192 ATMs installed through VISA and National Financial Switch (NFS) connectivity with accessibility from more than 6000 points. It has already introduced 8am to 8pm banking in selected branches and has issued more than 1 lakh VISA international debit-cum-ATM cards. It also boasts of implementing Online Tax Accounting System (OLTAS) in all 168 designated branches.

Apart from various banking and treasury operations, AB offers various types of housing loans, car finance, gold deposits, educational loans and personal loans. It is a member of real time gross settlement (RTGS) with 97 branches offering this facility of instant remittance to both corporate and individual customers. It has tied-up with Wall Street Finance, the primary agent of Western Union Money Transfer, for inward remittances from various foreign countries. To improve its fee-based income, the bank has tied up with NIC and LIC to sell their insurance products and UTI / Principal-PNB mutual funds to sell their mutual fund products through its branches. AB is aggressively turning techno- savy and 900 branches will come under core banking solution. along with 250 more ATMs, 50 Cash Dispensers and 50 touch screen kiosks in the near future. Soon it will also be floating a Joint Venture Insurance Company with M/s Sampo of Japan as it has obtained the approval from RBI. It is also planning to open round-the-clock call centres for customer care. AB is slated to go international in early 2006-07 with a branch at Hong Kong, and a representative office at Shenzhen, China. Meanwhile, the bank will shortly open a branch in co-ordination with Punjab National Bank (PNB) in Kazakhstan. AB is rejuvenating & revamping the operations of its subsidiary AllBank Finance, which is engaged in investment banking, insurance broking, stock broking, wealth management, portfolio advisory, underwriting etc.

AB has no plans of becoming a target for takeovers. In fact, it is looking to acquire smaller banks in South India. It is an efficient and well-managed bank having gross NPA of 3.94% and net NPA of 0.84%, which very few banks can boast of. Due to its FPO last year at Rs.82, the banks capital adequacy ratio is quite healthy at 13.37%. For FY06, its total income grew by 15% to Rs.4374 cr. but its Net Profit jumped 30% to Rs.706 cr. registering an EPS of Rs.16 on equity of Rs.446.70 cr. It declared Rs.4 dividend, which means 25% payout ratio. Currently, its trading-cum-dividend with a yield of nearly 5%, which is good by any standard. For FY07, its estimated revenue may be Rs.5250 cr. and PAT of Rs.800 cr. i.e. EPS of Rs.18. Investors are recommended to buy it at current levels with a price target of Rs.120 in 6~9 months.