ING Vysya Bank: Sharp deterioration in asset quality impacts NIM in Q1FY15

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Information about ING Vysya Bank: Sharp deterioration in asset quality impacts NIM in Q1FY15
Economy & Finance
pat

Published on July 24, 2014

Author: IndiaNotes

Source: slideshare.net

Description

ING Vysya Bank’s PAT declined 18% YoY to ~INR1.4b (22% below est.). Sharp deterioration in asset quality not only impacted NIMs (negative impact of 15bp) but also led to higher provisioning of INR1b (61% above estimate). Estimated downgraded, maintain buy.

23 July 2014 1QFY15 Results Update | Sector: Financials ING Vysya Bank Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415 Sohail Halai (Sohail.Halai@MotilalOswal.com); +91 22 39825430 BSE SENSEX S&P CNX CMP: INR600 TP: INR700 Buy26,147 7,796 Bloomberg VYSB IN Equity Shares (m) 189.9 M.Cap. INR b/USD b 114.0/1.9 52-Week Range (INR) 723/406 1, 6, 12 Rel. Per (%) -10/-17/-25 Financials & Valuation (INR Billion) Y/E Mar 2015E 2016E 2017E NII 19.5 22.5 27.0 OP 13.8 16.0 19.8 NP 7.3 8.6 10.6 EPS (INR) 38.9 45.4 55.9 Gr. (%) 11.6 16.7 23.2 BV/Sh 400.4 436.6 481.1 P/E (x) 15.4 13.2 10.7 P/BV (x) 1.5 1.4 1.2 RoE (%) 10.1 10.8 12.2 ROA (%) 1.1 1.2 1.2  ING Vysya Bank’s (VYSB) PAT declined 18% YoY to ~INR1.4b (22% below est.). Sharp deterioration in asset quality not only impacted NIMs (negative impact of 15bp) but also led to higher provisioning of INR1b (61% above estimate).  Slippages for 1QFY15 were at INR5.4b (annualized slippage ratio of 8.2%), of which (1) a large emerging corporate account of INR1b (rice trading company), (2) an account which was already in CDR (seed company – INR1b) and (3) one large account (construction; sold to ARCs) of INR2b slipped into NPA.  High value slippages resulted in GNPAs (in absolute terms) rising 44% QoQ and the bank compromised on PCR which declined 20% QoQ to 64.3%. In percentage terms, GNPAs stood at 2.4% (1.8% in 4QFY14) and NNPAs was up at 0.9% (v/s 0.3%). OSRL loan stood at 1.4% of loans.  Other highlights: (1) customer assets growth was healthy at 16% YoY (+6% QoQ), led by sequential pick-up in wholesale banking segment, (2) core CASA ratio declined to 30% v/s 33.4% in FY14 and (3) fee income growth improved to 19% YoY led by asset related fees (up 80% YoY and 40% QoQ). Valuation and view: Asset quality remains a critical factor for sustenance of RoA’s. While slippages surprised negatively, management remains confident of the better trends going forward. Continued operating leverage will lead to better profitability, though unlikely to be a significant cushion in case of higher asset quality stress. We downgrade earnings estimate by ~4%. Stock has under-performed the Bank Nifty by 33% YTD which factors poor performance in our view. RoA is expected to be 1.1/1.2% and RoE ~10/12% for FY14/17E. Maintain Buy. Investors are advised to refer through disclosures made at the end of the Research Report.

23 July 2014 2 ING Vysya Bank Quarterly performance: Weak asset quality led to lower than expected earnings (INR m) Y/E MARCH 1QFY15A 1QFY15E Var. (%) Comments NII 4,631 4,777 -3 Rising stress levels and higher cost of funds impacted NIMs; loan growth significantly above expectation% Change (Y-o-Y) 9 12 Other Income 2,276 2,300 -1 Strong fee income performance led by asset related fees Net Income 6,907 7,077 -2 Operating Expenses 3,767 3,758 0 Operating Profit 3,140 3,318 -5 % Change (Y-o-Y) -4 2 Other Provisions 1,008 625 61 Sharp rise in GNPA up 44% QoQ Profit before Tax 2,132 2,693 -21 Tax Provisions 698 862 -19 Net Profit 1,434 1,832 -22 Increase in stress additions impacts profitability % Change (Y-o-Y) -18 5 Source: MOSL, Company Reported NIM impacted by rising stress levels and cost of deposits  NII came in 3% below estimate at INR4.6b (9% YoY) led by lower than expected NIMs of 3.4% (drop of 37bp v/s expectation of stable NIMs QoQ) even as customer asset growth of 6% QoQ and 16% YoY was above expectation.  During the quarter bank had an interest income reversals of INR205m (negative impact of 15bp on NIMs). Further, cost of deposits increased 19bp QoQ to 7.4% as bank had raised (1) high cost deposits at the end of 4QFY14 and (2) average daily CASA ratio declined QoQ, which accentuated the decline in NIMs. Asset quality deteriorates QoQ; PCR down to 64%  Gross slippages for the quarter stood at INR5.4b (annualized slippage ratio of 8.2%) as compared to INR850m in 4QFY14, led by slippage of 1) large emerging corporate account of INR1b (Rice trading company) and (2) account which was already in CDR (seed company – INR1b) and (3) one large account (construction company) of INR2b slipped into NPA (which was consequently sold to ARCs at 30% haircut) impacting overall asset quality performance.  During the quarter upgrades and recoveries were at INR2b and bank wrote-off INR670m during the quarter.  GNPA (in absolute terms) was up 44% QoQ and in % terms stood at 2.4% (1.8% in 4QFY14). NNPA increased to 0.9% (v/s 0.3% in 4QFY14) as PCR declined by ~20% QoQ to 64.3%.  During the quarter restructured loans of INR300m and outstanding restructured loan portfolio stood at INR5.2b (1.4% of loans). Strong growth in wholesale segment drives customer asset growth  Customer assets grew 6% QoQ and 16% YoY led by strong growth of 21% QoQ and 10% YoY in wholesale segment (formed 39% of overall customer assets as compared to 32% in FY14). Strong growth in wholesale banking is partially driven by one large telecom company – which was a one-off opportunity.  SME segment which formed 35% of overall customer assets also witnessed robust growth of 22% YoY.  Consumer banking segment grew 4% YoY (flat QoQ) led by (1) moderation in mortgage portfolio (+6% YoY and flat QoQ) (2) sequential decline in CV whereas Reported as well as adjusted NIMs decline QoQ NNPA increased to 0.9% (v/s 0.3% in 4QFY14) and PCR declined significantly to 64.3% Increased contribution from wholesale banking which formed 39% of overall customer assets as compared to 32% in FY14.

23 July 2014 3 ING Vysya Bank (3) Personal loan grew 27% QoQ and 74% YoY. Agriculture segment grew 1% QoQ (53% YoY). Core CASA ratio declines; SA deposit growth continues  SA deposits grew 14% YoY (down 4% QoQ) however CA deposits declined ~12% QoQ and 8% YoY. Resultantly, overall CASA deposits grew just 2% on a YoY and declined 8% QoQ.  Core CASA ratio declined to 30% v/s 33.4% in 4QFY14. Proportion of CDs to overall deposits reduced to 13% as compared to 15% in 4QFY14. Fee income driven by one-off income opportunity  Core fee income grew 19% YoY (+12% QoQ) led by healthy growth in asset related fees (up 80% YoY and 40% QoQ), which was aided by strong growth in wholesale banking assets.  Liability related (up 9% YoY and 2% QoQ). Forex income declined 22% YoY and 30% QoQ. Trading income declined 21% YoY whereas increased QoQ (low base of INR97m in 4QFY14) to INR215m. VYSB Conference Call highlights:  Of one large account (Construction Company) of slippage of INR2b bank took a haircut of 30% and sold it to ARCs. Outstanding securities receipts are INR1.45b.  OSRL portfolio stood at INR5.17b. During the quarter bank restructured loan of INR300m. Restructuring pipeline continues to be there however the fresh proposals are coming down.  Management does not expect similar amount of slippages in coming quarters and the current quarter was a blip. Net stress loans as of end of 1QFY15 stood at 2.2%, and in the worst case it could increase by 30-40bp over next few quarters.  Management expects trend in loan growth to remain strong.  For FY15, bank would start phased increase in branches (40-50). Bank targets to drive cost to income ratio to 50% over the medium term.  Consumer finance growth moderated on account of run-off in housing loans (run-off of INR1.9b during the quarter); partially on account of foreclosures. Bank intends to focus on LAP (growth run-rates continues to be strong at INR1.5b per quarter)  Core NIMs remains healthy at 3.52%.  Provisions Break-up: (1) INR880m towards loan loss provisions and (2) INR375m for un-hedged forex exposure  Data points: RWA INR515b Of the current mortgage portfolio, 44% is LAP. Core CASA ratio declined by 340bp to 30% and Proportion of CDs declined to 13% v/s 15% in 4QFY14.

23 July 2014 4 ING Vysya Bank Valuation and view  Asset quality has remained one of key aspect of earnings for the bank and has provided boost to RoA (+ve impact of 0.5% over FY10/14). However, weak current quarter performance reduced the earning cushion with sharp drop in PCR.  Continued operating leverage will lead to better profitability, though unlikely to be a significant cushion in case of higher asset quality stress. We downgrade our earnings by ~4%. Stock has under-performed bank nifty by 33% in last one month which factors poor performance in our view. RoA is expected to be 1.1/1.2% and RoE to be ~10/12% for FY14/17E. Buy We downgrade our earnings estimates by 3 to 4% INR B Old Est. Revised Est. % Change FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 NII 20.1 23.7 28.2 19.5 22.5 27.0 -2.8 -4.9 -4.4 Other Income 10.2 11.9 14.1 10.4 12.0 14.1 2.8 1.2 0.3 Total Income 30.2 35.6 42.3 29.9 34.6 41.1 -1.0 -2.9 -2.8 Operating Expenses 16.4 19.2 22.6 16.1 18.6 21.3 -1.7 -3.2 -5.6 Operating Profits 13.8 16.4 19.7 13.8 16.0 19.8 -0.2 -2.5 0.4 Provisions 2.7 3.2 4.0 2.8 3.2 4.0 7.4 0.0 0.0 PBT 11.2 13.2 15.7 11.0 12.8 15.8 -2.0 -3.1 0.5 Tax 3.6 4.2 5.0 3.6 4.2 5.2 1.1 -0.1 3.7 PAT 7.6 9.0 10.7 7.3 8.6 10.6 -3.4 -4.6 -0.9 Margins (%) 3.41 3.45 3.40 3.32 3.28 3.25 Credit Cost (%) 0.60 0.60 0.60 0.65 0.60 0.60 RoA (%) 1.19 1.21 1.19 1.15 1.15 1.18 RoE (%) 10.45 11.31 12.23 10.11 10.85 12.19 Source: MOSL, Company One year forward P/BV 1.4 2.3 1.3 0.4 0.0 0.5 1.0 1.5 2.0 2.5 Jul-04 Oct-05 Jan-07 Apr-08 Jul-09 Oct-10 Jan-12 Apr-13 Jul-14 PB (x) Peak(x) Avg(x) Min(x) Source: MOSL, Company One year forward P/E 13.9 28.2 13.1 6.7 5 13 21 29 37 Jul-04 Oct-05 Jan-07 Apr-08 Jul-09 Oct-10 Jan-12 Apr-13 Jul-14 PE (x) Peak(x) Avg(x) Min(x) Negative Earnings Cycle Source: MOSL, Company RoA is expected to be at 1.2% and RoE to be 10/11% over FY14/16E. Buy with a target price of INR700 (1.6x FY16 BV

23 July 2014 5 ING Vysya Bank DuPont Analysis: Weak asset quality leading to stable ROA despite operating leverage playing out and fees pick up (%) Y/E March FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Net Interest Income 2.99 2.47 2.22 2.26 2.52 2.76 2.81 3.02 3.04 3.05 3.04 3.02 Core Fee Income 0.83 0.98 1.49 1.53 1.20 1.21 1.13 1.01 0.95 1.07 1.09 1.11 Fee to core Income (%) 21.42 24.25 36.40 36.78 27.25 26.48 25.81 22.76 21.00 22.92 23.47 24.02 Core Income 3.82 3.46 3.71 3.80 3.73 3.97 3.94 4.03 4.00 4.12 4.13 4.13 Operating Expenses 3.23 2.80 2.72 2.69 2.46 2.82 2.58 2.50 2.59 2.52 2.50 2.39 Cost to Core Income (%) 84.49 81.07 73.24 70.87 65.96 70.94 65.57 61.96 64.81 61.20 60.52 57.91 Employee cost 1.46 1.26 1.35 1.37 1.30 1.66 1.51 1.47 1.57 1.48 1.47 1.41 Employee to total exp (%) 45.14 45.00 49.61 50.77 53.07 59.03 58.64 58.98 60.46 58.85 58.85 58.85 Others 1.77 1.54 1.37 1.32 1.15 1.15 1.07 1.03 1.02 1.04 1.03 0.98 Core operating Profits 0.59 0.65 0.99 1.11 1.27 1.15 1.36 1.53 1.41 1.60 1.63 1.74 Non Interest income 0.87 1.59 1.87 1.91 1.89 1.80 1.56 1.43 1.50 1.63 1.62 1.58 Trading and others 0.04 0.60 0.38 0.37 0.68 0.59 0.43 0.41 0.55 0.56 0.53 0.48 Operating Profits 0.63 1.26 1.37 1.48 1.95 1.74 1.79 1.95 1.96 2.16 2.16 2.22 Provisions 0.50 0.55 0.25 0.45 0.82 0.42 0.26 0.18 0.26 0.44 0.44 0.45 NPA 0.33 0.39 0.16 0.37 0.70 0.43 0.19 0.17 0.17 0.40 0.39 0.39 Others 0.16 0.16 0.09 0.08 0.12 -0.01 0.08 0.01 0.09 0.04 0.05 0.06 PBT 0.14 0.71 1.12 1.03 1.13 1.33 1.52 1.77 1.70 1.71 1.72 1.76 Tax 0.08 0.21 0.42 0.37 0.39 0.45 0.46 0.57 0.56 0.56 0.57 0.58 Tax Rate (%) 58.77 30.34 37.59 35.93 34.80 34.15 30.25 32.00 32.72 33.00 33.00 33.00 Extra Ordinary 0.00 0.12 0.06 0.00 0.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 RoA Adjusted 0.06 0.37 0.64 0.66 0.68 0.87 1.06 1.20 1.14 1.15 1.15 1.18 Leverage (x) 19.70 18.97 18.53 19.01 17.22 15.37 13.45 12.12 10.03 8.82 9.40 10.31 RoE 1.11 7.03 11.86 12.50 11.63 13.43 14.27 14.59 11.45 10.11 10.85 12.19 Source: Company, MOSL

23 July 2014 6 ING Vysya Bank Story in charts Reported NIMs decline QoQ (%) 3.0 3.4 3.5 3.3 3.3 3.5 3.6 3.7 3.6 3.5 3.4 3.7 3.4 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 Source: MOSL, Company Strong fee income gr helped by better asset related fees 963 1,110 1,285 1,280 1,155 1,165 1,213 1,207 1,286 1,206 1,301 1,364 1,524 1.0 1.1 1.2 1.1 1.0 1.0 1.0 0.9 0.9 0.9 0.9 0.9 1.0 1QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 Fee Income (INR b) Fee Income to avg assets (%) Source: MOSL, Company Loan growth improves led by strong growth in wholesale seg. 238 249 263 287 293 300 316 318 330 329 340 358 382 26 23 23 22 23 21 20 11 13 9 8 13 16 1QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 Loan(INR b) GrowthYoY % Source: MOSL, Company Core CASA ratio declines QoQ (%)33.8 32.6 32.6 33.4 32.0 32.8 31.7 31.8 30.2 32.5 31.7 33.4 30.0 1QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 Source: MOSL, Company Cost/ Core decline led by normalization of employee exp (%) 71.4 66.7 62.4 66.1 64.7 63.9 62.2 62.4 61.9 62.2 65.3 73.2 61.2 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 Source: MOSL, Company Asset quality deteriorates; PCR down 20% QoQ 2.2 2.0 2.0 1.9 2.0 1.9 1.8 1.8 1.8 1.7 1.7 1.8 2.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0.0 0.2 0.2 0.2 0.3 0.984 85 85 91 90 93 97 98 89 89 87 84 64 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 Gross NPA% Net NPA % PCR % Source: MOSL, Company

23 July 2014 7 ING Vysya Bank Quarterly Snapshot FY13 FY14 FY15 Variation (%) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q QoQ YoY Profit and Loss (INR m) Net Interest Income 3,433 3,688 4,029 4,237 4,254 4,403 4,161 4,713 4,631 -2 9 Other Income 1,710 1,689 1,866 2,004 2,445 1,847 2,146 2,234 2,276 2 -7 Treasury 58 44 145 63 273 -46 237 97 215 122 -21 Exchange Profits 348 354 370 608 555 577 494 617 435 -29 -22 Recovery 43 15 29 33 246 22 21 77 13 -83 -95 Fee Income 1,155 1,165 1,213 1,207 1,286 1,206 1,301 1,364 1,524 12 19 Others 106 111 109 93 85 88 93 79 89 13 5 Total Income 5,142 5,377 5,895 6,241 6,699 6,250 6,307 6,947 6,907 -1 3 Operating Expenses 2,967 3,100 3,263 3,398 3,430 3,487 3,564 4,447 3,767 -15 10 Employee 1,768 1,823 1,912 2,005 2,025 2,069 2,145 2,796 2,233 -20 10 Others 1,200 1,277 1,351 1,394 1,405 1,418 1,420 1,651 1,534 -7 9 Operating Profits 2,175 2,276 2,633 2,843 3,269 2,764 2,743 2,500 3,140 26 -4 Provisions 267 64 246 336 681 181 230 406 1,008 148 48 PBT 1,908 2,213 2,387 2,507 2,588 2,583 2,513 2,094 2,132 2 -18 Taxes 607 710 764 804 837 820 839 703 698 -1 -17 PAT 1,301 1,502 1,623 1,703 1,751 1,763 1,673 1,391 1,434 3 -18 Asset Quality GNPA 5,880 5,809 5,705 5,702 5,891 5,738 5,827 6,442 9,287 44 58 NNPA 564 398 159 91 644 623 731 1,020 3,316 225 415 GNPA (%) 2.0 1.9 1.8 1.8 1.8 1.7 1.7 1.8 2.4 62 64 NNPA (%) 0.2 0.1 0.1 0.0 0.2 0.2 0.2 0.3 0.9 59 68 PCR (Calculated, %) 90.4 93.1 97.2 98.4 89.1 89.1 87.4 84.2 64.3 -1,988 -2,477 Ratios (%) Fees to Total Income 22.5 21.7 20.6 19.3 19.2 19.3 20.6 19.6 22.1 Cost to Core Income 64.7 63.9 62.2 62.4 61.9 62.2 65.3 73.2 61.2 Tax Rate 31.8 32.1 32.0 32.1 32.3 31.7 33.4 33.6 32.7 CASA (Reported) 32.0 32.8 31.7 31.8 30.2 32.5 31.7 33.4 30.0 Loan/Deposit 81.5 83.0 83.8 76.9 80.7 82.1 87.4 86.9 90.3 340 958 CAR 13.4 13.0 12.5 13.2 12.8 16.8 16.9 16.8 15.2 RoA (Reported) 1.1 1.3 1.3 1.3 1.3 1.3 1.2 1.0 1.0 RoE (Reported) 12.9 14.2 14.7 15.0 14.9 10.4 9.5 7.9 8.0 Margins (%) - Reported Yield on loans 12.0 11.9 11.8 11.9 11.7 11.7 11.5 11.7 11.5 -22 -21 Cost of deposits 7.5 7.3 7.1 7.1 7.2 7.3 7.3 7.2 7.4 19 23 Margins 3.3 3.5 3.6 3.7 3.6 3.5 3.4 3.7 3.4 -37 -19 Balance Sheet (INR B) Loans 293 300 316 318 330 329 340 358 382 7 16 Investments 138 135 143 183 166 176 168 167 179 7 8 Deposits 359 362 377 413 409 400 390 412 423 3 3 CASA Deposits 120 119 119 134 123 130 135 138 126 -8 2 of which Savings 53 55 54 61 56 61 61 68 64 -5 14 Current 66 63 65 73 67 69 74 70 62 -12 -8 Borrowings 64 55 64 65 66 66 86 97 100 3 51 Total Assets 487 480 507 548 545 554 568 604 616 2 13 Franchise Branches (Excl Extn Counters) 527 527 532 542 547 549 551 553 563 ATM 446 447 453 500 542 618 628 638 640 Source: MOSL, Company

23 July 2014 8 ING Vysya Bank EPS: MOSL forecast v/s consensus (INR) MOSL Consensus Variation Forecast Forecast (%) FY15 38.9 44.4 -12.3 FY16 45.4 53.9 -15.8 Shareholding pattern (%) Jun-14 Mar-14 Jun-13 Promoter 42.9 43.1 41.9 DII 15.0 14.8 12.3 FII 28.2 28.7 30.2 Others 14.0 13.4 15.6 Note: FII Includes depository receipts Stock performance (1-year)

23 July 2014 9 ING Vysya Bank Financials and valuation Income Statements (INR Billion) Y/E March 2014 2015E 2016E 2017E Interest Income 52.1 59.3 67.8 81.7 Interest Expense 34.5 39.7 45.2 54.7 Net Interest Income 17.5 19.5 22.5 27.0 Change (%) 13.9 11.3 15.6 19.6 Non Interest Income 8.7 10.4 12.0 14.1 Net Income 26.2 29.9 34.6 41.1 Change (%) 15.7 14.3 15.5 18.9 Operating Expenses 14.9 16.1 18.6 21.3 Pre Provision Profits 11.3 13.8 16.0 19.8 Change (%) 13.6 22.4 16.1 23.4 Provisions (excl tax) 1.5 2.8 3.2 4.0 PBT 9.8 11.0 12.8 15.8 Tax 3.2 3.6 4.2 5.2 Tax Rate (%) 32.7 33.0 33.0 33.0 Profits for Equity SH 6.6 7.3 8.6 10.6 Change (%) 7.3 11.6 16.7 23.2 Equity Dividend (Incl tax) 1.3 1.5 1.7 2.2 Core PPP* 10.1 12.3 14.3 18.0 Change (%) 10.1 21.9 16.5 26.3 Balance Sheet (INR Billion) Y/E March 2014 2015E 2016E 2017E Equity Share Capital 1.9 1.9 1.9 1.9 Reserves & Surplus 68.8 74.7 81.5 89.9 Net Worth 70.7 76.6 83.4 91.8 Deposits 412.2 474.0 578.3 717.1 Change (%) -0.3 15.0 22.0 24.0 of which CASA Dep 137.6 155.5 176.8 207.6 Change (%) 2.4 13.0 13.7 17.4 Borrowings 96.7 97.7 113.3 131.6 Other Liabilities & Prov. 24.6 28.3 32.6 37.7 Total Liabilities 604.1 676.5 807.5 978.1 Current Assets 58.3 32.8 37.6 43.6 Investments 167.2 190.6 219.2 254.3 Change (%) -8.5 14.0 15.0 16.0 Loans 358.3 429.9 524.5 650.4 Change (%) 12.8 20.0 22.0 24.0 Fixed Assets 5.2 5.7 6.2 6.7 Other Assets 15.1 17.4 20.0 23.0 Total Assets 604.1 676.5 807.5 978.1 Asset Quality (INR Billion) Y/E March 2014 2015E 2016E 2017E GNPA 2.6 6.2 5.6 6.8 NNPA 1.0 2.5 1.8 2.2 GNPA Ratio 0.7 1.4 1.1 1.0 NNPA Ratio 0.3 0.6 0.3 0.3 PCR (Excl Tech. write off) 61.2 59.2 68.1 67.2 PCR (Incl Tech. Write off) 84.2 75.7 85.2 85.5 Ratios Y/E March 2014 2015E 2016E 2017E Spreads Analysis (%) Avg. Yield-Earning Assets 9.8 10.1 9.9 9.8 Avg. Yield on loans 11.2 11.2 10.7 10.6 Avg. Yield on Investments 8.0 8.4 8.0 8.0 Avg. Cost-Int. Bear. Liab. 7.0 7.4 7.2 7.1 Avg. Cost of Deposits 6.6 7.1 6.9 7.0 Interest Spread 2.8 2.7 2.7 2.7 Net Interest Margin 3.3 3.3 3.3 3.2 Profitability Ratios (%) RoE 11.4 10.1 10.8 12.2 RoA 1.1 1.1 1.2 1.2 Int. Expense/Int.Income 66.3 67.1 66.7 67.0 Fee Income/Net Income 31.0 32.5 32.5 32.4 Non Int. Inc./Net Income 33.1 34.8 34.8 34.4 Efficiency Ratios (%) Cost/Income* 57.0 53.9 53.7 51.9 Empl. Cost/Op. Exps. 60.5 58.9 58.9 58.9 Busi. per Empl. (Rs m) 75.8 79.3 88.8 104.9 NP per Empl. (Rs lac) 0.7 0.7 0.8 0.9 Asset-Liabilty Profile (%) Loans/Deposit Ratio 86.9 90.7 90.7 90.7 CASA Ratio 33.4 32.8 30.6 29.0 Investment/Deposit Ratio 40.6 40.2 37.9 35.5 G-Sec/Investment Ratio 62.8 62.2 65.9 70.5 CAR 16.8 16.1 14.5 13.0 Tier 1 14.6 14.0 12.6 11.4 Valuation Y/E March 2014 2015E 2016E 2017E Book Value (INR) 369.5 400.4 436.6 481.1 Change (%) 26.5 8.4 9.0 10.2 Price-BV (x) 1.6 1.5 1.4 1.2 Adjusted BV (INR) 365.7 391.0 430.0 472.9 Price-ABV (x) 1.6 1.5 1.4 1.3 EPS (INR) 34.9 38.9 45.4 55.9 Change (%) -11.9 11.6 16.7 23.2 Price-Earnings (x) 17.2 15.4 13.2 10.7 Dividend Per Share (INR) 6.1 6.8 7.9 9.8 Dividend Yield (%) 1.0 1.1 1.3 1.6

23 July 2014 10 ING Vysya Bank Disclosures This research report has been prepared by MOSt to provide information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its affiliated company(ies). This report is for personal information of the select recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. 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