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  • 1. Update | August 2012 India Banking 1QFY13 Review  Pressure on asset quality continues Pvt PSU  Pace of restructuring moderates  Mixed performance on margins  Valuations below 10-year average Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); + 9122 3982 5415 Sohail Halai (Sohail.Halai@MotilalOswal.com) / Umang Shah (Umang.Shah@MotilalOswal.com)
  • 2. Contents Summary: Stress levels continue to rise, impacting valuations ……………………………………………….………………………………….3-5 Actual performance v/s estimates…............................................................................................................................. 6 Asset quality…………………………………………………………………………………………………………………..…………………………………7-13 Business growth…………………………………………………………………………………………………………….………………………………………14-19 Key operating parameters…………………………………………………………………………………………………..…………………………………20-31 Valuations…………………………………………………………………………………………………………..…………………………………………………32 2
  • 3. Stress levels continue to rise, impacting valuations Financials: Valuation Matrix 55.9 Rating CMP Mcap (INR) (USDb) HDFCB Neutra l 595 25.0 ICICIBC* Buy 962 19.8 AXSB Buy 1,110 8.2 KMB Neutra l 588 7.8 IIB Buy 333 2.8 YES Buy 360 2.3 FB Buy 437 1.3 VYSB Buy 392 1.1 J&KBK Buy 925 0.8 SIB Buy 23 0.2 Private Aggregate 69.3 SBIN (cons )* Buy 1,896 22.8 BOB Neutra l 636 4.7 PNB Buy 727 4.4 BOI Neutra l 277 2.8 CBK Buy 358 2.8 IDBI Neutra l 87 2.0 UNBK Buy 164 1.6 INBK Buy 171 1.3 OBC Buy 233 1.2 CRPBK Neutra l 391 1.0 IOB Neutra l 73 1.0 ANDB Buy 98 1.0 DBNK Buy 91 0.6 Public Aggregate 47.3 HDFC* Buy 712 18.8 POWF Buy 187 4.4 IDFC Buy 141 3.8 RECL Buy 211 3.7 SHTF Buy 594 2.4 LICHF Buy 250 2.3 MMFS Buy 783 1.4 DEWH Buy 162 0.3 NBFC Aggregate 37.2 P/E (x) FY13 FY14 20.8 16.7 10.8 9.0 9.7 8.4 21.6 19.2 15.6 12.0 10.1 8.4 9.2 7.9 10.9 9.7 5.0 4.5 5.2 4.3 14.8 12.4 6.5 5.4 5.6 4.9 4.7 3.9 5.1 4.3 4.8 4.3 5.5 4.8 3.9 3.4 3.9 3.6 4.8 4.2 3.5 3.3 5.0 4.4 3.7 3.4 3.4 2.9 6.0 5.2 15.8 12.3 6.4 5.8 12.7 10.5 6.1 5.1 9.9 8.4 11.0 7.7 9.9 8.4 4.3 3.2 11.8 9.9 P/BV (x) FY13 FY14 4.0 3.4 1.7 1.5 1.8 1.5 2.9 2.6 2.9 2.4 2.2 1.8 1.2 1.1 1.4 1.2 0.9 0.8 1.1 0.9 2.3 2.0 1.0 0.9 0.9 0.8 0.8 0.7 0.7 0.7 0.7 0.6 0.6 0.5 0.6 0.5 0.7 0.6 0.6 0.5 0.6 0.5 0.5 0.5 0.6 0.6 0.6 0.5 0.9 0.8 4.8 3.8 1.1 0.9 1.5 1.3 1.2 1.1 1.9 1.6 1.9 1.6 2.3 1.9 0.9 0.7 2.1 1.9 Sluggish performance by PSBs; Private Banks shine Asset quality – no relief in the sight  Key highlights for Private Banks: (1) NIMs largely stable/improving QoQ, (2) Asset quality remains strong, with GNPA% stable/ declining QoQ, (3) Healthy loan growth led by continued traction in retail loans (4) Fall in CA float led to pressure on CASA ratio, SA traction remains healthy. New Private Banks gaining market share at cost of mid sized PSBs.  Key highlights for Public Sector Banks (PSBs): (1) Margins fell QoQ – a negative surprise, led by sharp increase in COD and higher slippages (2) No relief on asset quality with slippages remaining at an elevated level and no significant improvement on recoveries and up-gradation (3) Moderation in business growth (4) Decline in CASA ratio continues (5) Lower restructuring during the quarter however, pipeline remains high.  Positive surprises: (1) On margins: ICICIBC, VYSB, YES and HDFCB (2) On asset quality: All Private Banks except FB. ICICIBC, VYSB and YES surprised positively on core profitability. Despite higher stress on asset quality, PNB performance on core profitability was better than peer PSBs.  Negative surprises: (1) On margins: All PSBs surprised negatively, despite benefit of CRR reduction and capital raising, due to higher stress on asset quality. Among the Private Banks, FB was a disappointment (2) On asset quality: Sharp deterioration in asset quality across the board within PSBs. Higher stress witnessed for SBIN, PNB, BOI, UNBK and ANDB. 3
  • 4. Stress levels continue to rise, impacting valuations 10 11 14 OBC INBK 0 VYSB 10 0 YES PNB 0 -1 -7 IIB ANDB -10 CBK* -14 FB -18 -23 BoB AXSB -25 UNBK -32 SBIN BoI -59 ICICIBC Change in bp HDFCB QoQ change in NIMs (BPS) Sharp rise in net slippage ratio – a negative surprise SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB PSBs PSBs (Ex-SBIN) ICICIBC AXSB 4QFY11 3.6 1.4 2.2 0.9 1.2 0.8 2.6 1.5 0.9 2.4 1.8 N.A. 1.0 1QFY12 1.9 1.1 1.9 0.8 3.0 1.5 1.2 0.5 1.3 1.6 1.5 0.6 0.8 Net Slippage Ratio (%) 2QFY12 3QFY12 4QFY12 3.8 3.4 -0.2 0.5 2.4 3.9 1.7 0.7 1.0 0.8 1.3 1.9 5.2 0.3 -1.0 5.0 1.1 1.1 5.8 0.8 3.7 1.6 1.3 5.3 6.4 -0.6 -0.4 3.2 2.0 1.0 2.8 1.1 1.7 0.2 0.4 0.1 1.2 1.3 -0.2 1QFY13 3.9 2.1 1.6 1.7 2.2 3.2 1.1 -0.6 3.6 2.7 1.9 0.8 1.2 Divergent trends on NIMs….  PSBs surprised negatively, despite benefit of CRR fall and capital raising, led by higher stress on asset quality and lag impact of increase in deposit cost. On a lower base PNB, OBC and INBK reported an improvement in margins sequentially.  On the other hand Private Banks surprised positively with stable/improving margins QoQ. AXSB and IIB margin decline QoQ was on expected lines.  ICICIBC and HDFCB surprised positively with stable margins QoQ (unlike historical trend of 1Q margin decline of 10bp QoQ). YES and VYSB margins performance was commendable. … and net slippages ratio; Private Banks shine  Slippages for PSBs increased 50% QoQ (annualized slippage ratio of 3.4%, as against 2.2% a quarter ago). Ex-SBIN slippages increased 10% QoQ. Absolute slippages was higher than those in 2QFY12, which was impacted by system driven NPA recognition.  Seasonality of recoveries and up-gradation for SBIN and partial reversal of sharp increase in slippages of 4QFY12 for PNB and INBK helped to contain GNPA.  Private Banks (ex AXSB) asset quality remained healthy with GNPA and NNPA being largely flattish QoQ. While AXSB slippages were inline with expectation lower upgrades were disappointing. 4
  • 5. Stress levels continue to rise, impacting valuations *C.BANKS: MOSL Coverage Banking index witnessed significant correction 29.8 31.2 AXSB IIB 23.3 PVT.BANKS 21.2 PNB 23.0 19.5 UNBK 22.9 19.4 C.BANKS BoI 19.0 FB BoB 18.9 SBIN 22.9 18.1 PSBs VYSB 16.5 INDUSTRY 21.6 16.4 YES 21.5 16.0 OBC HDFCB 14.4 ANDB ICICIBC 13.8 INBK CBK 4.9 Loan growth of Private Banks remains strong (%) Seasonal moderation in loan growth  Retail focused banks continued to witnessed strong growth across products. Sharp depreciation in rupee led to strong overall growth for SBIN, BOB, BOI, ICICIBC (as share of international loan is high).  AXSB (led by strong loan growth on a lower base) and YES (led by Non SLR investments growth) reported strong customer asset growth. Large corporate and SME segment (+8% QoQ and 34% YoY) remains a key driver of domestic loan growth for ICICIBC.  Sequential decline or moderate growth for PSBs is due to seasonal factors and pressure on liability side to cut bulk deposits (MOF directive of 15% by March 2013). Asset Quality trends will remain key to valuation  Policy logjam, uncertain macroeconomic environment, weak business sentiments and risk aversion from bankers will keep business growth tepid in near term.  Continued comfortable liquidity, government action on some of the key policy decisions and reduction in interest rate could significantly alter the growth and asset quality concerns, which would be positive.  Strong core operations and asset quality is leading to higher preference for Private Banks, despite valuations being attractive for PSBs. Top picks: Private Banks – ICICIBC, PSBs – SBIN (valuations factor in negatives). In midcap space we like YES and OBC. 5
  • 6. Core operations healthy; NII and PAT inline with estimates  For our coverage universe (ex SBIN), NII growth was inline with our expectation. PSBs disappointed whereas, Private Banks reported healthy margin performance. Significant negative surprise on NII came from BOI, CBK, FB and SBIN. Muted fee income growth was witnessed across the board, putting additional pressure on Core PPP.  Pressure on core earning for private banks was contained via moderating cost growth. Higher share of trading profits and recoveries from written off accounts helped ANDB, BOI, OBC and PNB to post better than expected non interest income performance. Higher AS-15 related provisions led to higher opex for PNB and UNBK.  While the stress on asset quality was far higher than expected for PSBs, MTM reversals, compromise on PCR and lower restructuring provisions, led to lower than expected provisions. Lower tax rate came as a respite in some cases. (INR Million) Actual 1QFY13 Coverage Banks Coverage Banks (ex SBIN) Private Banks AXSB FB HDFCB ICICIBC IIB VYSB YES PSBs PSBs (Ex-SBIN) ANDB BoB BoI CBK INBK OBC PNB SBIN UNBK 371,864 260,675 106,480 21,799 4,916 34,841 31,929 4,841 3,433 4,722 265,384 154,195 9,385 27,981 20,436 18,435 11,532 11,258 36,951 111,189 18,217 QoQ (%) YoY (%) Net Interest Income -0.9 17.2 0.4 18.4 2.8 26.0 1.6 26.4 0.1 6.9 2.8 22.3 2.8 32.4 4.2 24.1 7.5 31.0 5.3 33.3 -2.4 14.0 -1.1 13.6 2.7 3.1 0.0 21.8 -18.3 11.0 -9.6 4.2 6.5 12.0 5.4 10.6 11.6 18.6 -4.1 14.6 -2.9 14.6 Var (%) Actual 1QFY13 -2.7 -1.5 2.2 2.4 -5.7 1.4 3.9 0.8 7.1 3.4 -4.6 -3.9 -4.7 -2.8 -12.9 -11.1 0.1 -3.8 2.6 -5.5 -1.1 289,544 207,778 89,216 19,637 3,465 25,809 29,493 4,040 2,175 4,596 200,329 118,562 7,034 22,407 16,736 13,938 8,402 8,965 28,409 81,767 12,671 QoQ (%) YoY (%) Operating Profit -6.2 17.6 -2.3 19.6 -0.5 28.1 -3.6 26.0 -7.0 -2.1 7.0 26.9 -5.2 32.0 6.6 29.6 -1.3 48.1 6.8 41.4 -8.5 13.5 -3.6 13.9 6.4 0.5 9.8 23.2 -16.9 19.9 -6.5 9.7 5.4 7.6 18.9 11.9 -3.2 14.8 -14.8 12.9 -20.7 8.7 Var (%) Actual 1QFY13 -3.8 -2.6 1.0 -0.4 -14.7 1.2 2.4 6.8 2.9 5.0 -5.8 -5.1 0.5 -9.0 -6.2 -14.3 -4.8 2.9 4.0 -6.7 -11.6 147,582 110,066 52,328 11,535 1,904 14,174 18,151 2,363 1,301 2,901 95,254 57,738 3,618 11,389 8,875 7,752 4,617 3,914 12,457 37,516 5,116 QoQ (%) YoY (%) Profit After Tax -7.7 39.6 -7.8 22.4 -4.7 31.0 -9.7 22.4 -19.9 30.2 -2.5 30.6 -4.6 36.3 5.8 31.1 2.1 38.4 6.7 34.3 -9.3 44.8 -10.4 15.6 6.5 -6.2 -25.0 10.3 -6.9 71.5 -6.5 6.8 33.7 13.5 47.8 10.4 -12.5 12.7 -7.4 136.9 -33.8 10.2 Var (%) 5.3 5.8 3.8 3.2 -0.1 0.4 6.5 3.5 13.5 5.4 6.2 7.7 4.8 -1.4 43.3 -4.0 12.3 24.3 9.4 3.9 -10.5 6
  • 7. Asset quality: Pvt banks showing an Impressive performance  Slippages for PSBs increased 50% QoQ (annualized slippage ratio of 3.4% v/s significantly higher than 2.2% a quarter ago), absolute slippages was higher than 2QFY12 levels (which was impacted by system driven NPA recognition) in some cases.  Among PSBs higher stress was seen for SBIN, PNB, BOI, UNBK, CBK and ANDB. SBIN quarterly slippages were higher than whole of FY10 slippages.  Seasonality of recoveries and up-gradation for SBIN and partial reversal of higher slippages of 4QFY12 for PNB and INBK led to lower GNPA increase. SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB PSBs (Ex-SBIN) PSBs ICICIBC HDFCB AXSB YES IIB VYSB FB Private Banks Coverage Banks INRb 472 100 45 53 68 65 34 16 24 380 852 99 21 21 1 4 6 14 169 1,021 Gross NPA QoQ % YoY % 18.9 69.9 14.5 104.1 11.5 24.7 19.1 55.3 14.6 16.6 20.0 74.7 -5.7 66.0 -16.0 92.8 31.2 100.5 11.9 56.5 15.7 63.7 3.6 -1.5 4.3 13.8 15.8 33.0 30.6 95.7 5.2 18.1 4.5 12.9 8.3 8.4 5.8 6.1 13.9 50.2 GNPA % 5.0 3.3 2.0 1.8 2.6 3.8 3.0 1.7 2.7 3.1 1.0 1.1 0.3 1.0 2.0 3.6 INRb 203 49 38 18 44 37 23 10 13 219 423 19 4 6 0.2 1 1 2 35 457  Private Banks (ex AXSB) asset quality remained healthy with GNPA and NNPA being largely flattish QoQ. While AXSB slippages were inline with expectation lower upgrades disappointed.  Going forward restructuring is expected to increase led by restructuring of some large-mid corporate accounts under CDR. Private Banks asset quality is expected to remain healthy due to lower restructured loans, lesser proportion of direct agricultural loans and better risk management. Net NPA QoQ Gr % YoY Gr % 28.5 63.4 10.4 135.2 10.9 30.8 19.5 80.1 20.7 64.1 23.9 97.9 -6.2 117.7 -19.5 129.6 71.1 283.2 6.6 76.1 16.1 69.8 2.5 -17.4 12.4 24.3 28.0 30.8 35.9 N.A. 5.5 19.2 7.4 -32.7 18.7 0.2 9.3 -4.1 15.6 60.5 NNPA % 2.2 1.7 1.7 0.7 1.7 2.2 2.1 1.0 1.5 0.6 0.2 0.3 0.1 0.3 0.2 0.6 Calculated Prov. Cov % 1QFY12 4QFY12 1QFY13 55.2 60.1 56.9 57.3 48.9 50.8 20.4 16.0 16.5 70.1 65.4 65.3 53.6 38.0 34.6 49.4 44.5 42.7 47.9 31.3 31.7 47.9 35.3 38.0 71.3 58.0 45.2 48.7 39.4 42.3 52.2 50.6 50.4 76.6 80.2 80.4 82.6 82.4 81.0 70.6 73.8 71.1 95.2 79.2 78.3 72.9 72.7 72.6 83.9 90.7 90.4 81.9 84.7 83.2 77.3 80.2 79.5 PCR (%) Incl W/off 64.3 62.8 66.5 79.0 60.9 58.9 64.4 75.1 60.4 80.4 81.0 79.0 78.3 72.6 90.4 83.2 7
  • 8. Slippages: Sharp rise QoQ for PSBs 4QFY11 Slippages (INR m) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 4QFY11 Slippage Ratio (%) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 SBIN 56,450 61,220 82,700 81,610 43,830 108,440 3.6 3.7 4.9 4.5 2.3 5.6 PNB 12,490 11,770 9,930 16,830 28,190 27,690 2.7 2.4 1.9 3.0 4.7 4.6 CBK 18,424 13,730 12,360 8,620 11,210 14,970 4.4 3.2 2.8 1.8 2.1 2.8 BoB 6,665 5,848 5,825 9,527 13,233 12,567 1.5 1.3 1.2 1.8 2.3 2.2 BoI 9,993 16,837 28,217 8,696 8,000 17,470 2.3 3.8 6.1 1.8 1.5 3.3 UNBK 4,060 7,660 18,210 5,660 6,070 16,310 1.3 2.5 5.8 1.7 1.6 4.5 OBC 6,490 3,780 15,033 6,988 13,174 7,069 3.1 1.8 6.9 3.1 5.4 2.9 INBK 2,790 1,660 3,790 2,943 10,397 2,310 1.8 1.0 2.2 1.6 5.5 1.1 Andhra 1,924 2,466 11,593 3,809 4,017 8,331 1.4 1.7 7.6 2.3 2.2 4.4 60,912 61,285 93,365 59,264 90,274 98,385 1.9 1.9 2.8 1.7 2.4 2.6 117,362 122,505 176,065 140,874 134,104 206,825 2.3 2.4 3.3 2.5 2.2 3.4 N.A. 7,500 7,900 8,770 6,350 8,680 N.A. 1.6 1.6 1.7 1.2 1.6 2,480 2,960 4,960 5,350 5,140 4,560 1.0 1.1 1.8 1.7 1.4 1.4 IIB 550 730 1,310 680 840 1,090 1.1 1.4 2.2 1.1 1.3 1.5 VYSB 400 160 400 700 468 1,000 0.9 0.3 0.8 1.3 0.8 1.7 2,880 3,440 2,650 3,300 2,700 2,890 4.3 5.1 3.8 4.7 3.4 3.6 PSBs (Ex-SBIN) PSBs ICICIBC AXSB FB 8
  • 9. Recoveries and up gradations disappointed Recoveries and up-gradation: Performance not very strong Recoveries & Upgradation (INR b) Some banks resorting to write offs to keep GNPA (%) lower Write-offs (INR b) As a % of Opening GNPA (ann.) SBIN FY12 FY13 1Q 2Q 3Q 4Q 1Q 1Q 30.8 17.7 19.7 47.2 32.8 48.6 FY12 2Q 3Q 25.5 23.2 6.5 7.2 3.6 4.8 14.7 59.6 58.8 27.9 29.5 67.3 CBK 5.7 5.0 5.5 6.1 6.6 73.7 55.2 57.7 61.4 65.2 BoB 2.0 1.9 3.0 2.3 2.6 25.0 21.9 35.8 23.3 23.2 BoI 3.6 4.4 7.5 13.2 5.5 29.7 30.7 45.7 82.7 37.6 UNBK 3.0 2.3 2.1 2.0 4.6 33.6 24.8 16.0 15.1 33.8 INBK 0.8 1.0 0.6 0.4 3.5 44.9 48.6 22.8 12.9 OBC 1.2 2.4 5.1 4.3 4.3 25.3 47.4 66.1 53.0 ANDB 0.6 1.9 4.8 4.8 1.4 34.8 ICICIBC 4.8 6.7 7.0 5.8 4.0 AXSB 0.9 1.6 1.2 5.9 0.6 FY13 FY12 FY13 4Q 1Q 47.1 33.1 PNB As a % to Op GNPA (ann.) FY13 FY12 1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q SBIN 6.0 3.2 0.4 0.8 0.8 9.5 4.6 0.5 0.8 0.8 PNB 0.1 0.2 0.3 0.7 0.3 1.0 1.5 2.4 4.1 1.6 CBK 2.9 5.4 1.1 5.2 3.8 37.2 60.2 11.5 51.8 37.3 BoB 1.1 4.2 1.6 5.3 2.0 14.6 48.9 18.3 54.1 17.5 BoI 1.5 16.0 2.6 2.1 3.1 12.5 110.2 16.1 13.3 20.8 UNBK INBK 3.4 2.0 2.9 1.7 0.8 37.5 21.1 22.5 12.9 76.1 0.2 0.4 0.9 3.4 1.8 9.4 48.0 OBC 1.4 1.9 0.6 5.4 4.8 29.7 36.5 8.2 67.0 53.6 93.8 184.3 161.6 30.8 ANDB 0.0 1.6 0.0 0.1 1.3 0.8 79.3 0.5 2.4 28.1 19.4 26.2 27.2 ICICIBC 3.2 0.8 4.8 3.1 1.2 12.7 3.2 18.7 12.2 4.8 27.4 47.9 32.6 148.3 15.8 AXSB 2.3 1.6 2.4 0.3 1.1 68.6 47.6 65.5 22.7 15.9 5.8 19.6 35.0 114.6 38.0 7.5 27.5 Credit cost (annualized) remains high (%) SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB ICICIBC AXSB 1QFY10 0.9 0.4 0.6 0.9 0.5 1.0 0.6 0.1 0.3 2QFY10 0.7 0.1 0.7 0.5 1.3 0.4 0.2 0.3 0.4 3QFY10 0.3 0.8 1.0 0.6 1.2 0.2 0.2 0.2 0.4 4QFY10 1.4 1.0 1.5 0.6 1.6 1.1 1.7 2.2 1.3 1QFY11 1.1 1.1 0.3 0.6 0.7 0.3 0.7 2.5 0.1 2QFY11 1.3 0.7 0.5 0.3 0.6 2.0 1.0 0.6 0.6 3QFY11 0.9 1.0 0.3 0.4 0.3 1.1 0.8 0.2 1.0 4QFY11 1.8 0.9 1.1 0.8 0.7 0.3 1.7 0.9 1.2 1QFY12 0.6 0.9 0.5 0.2 0.7 1.0 0.6 0.6 0.6 2QFY12 1.2 0.5 0.9 0.5 1.5 1.4 1.3 0.5 1.2 3QFY12 1.5 0.9 0.3 0.8 0.6 1.1 0.4 0.5 0.2 4QFY12 1.3 1.4 0.7 1.4 0.8 0.5 1.8 2.1 0.5 1QFY13 1.3 1.2 0.8 1.1 0.9 1.0 1.5 0.4 0.7 2.5 1.7 2.2 2.4 2.2 1.5 2.2 0.8 1.7 1.1 1.4 1.2 0.9 0.8 0.7 0.3 0.8 0.4 0.6 0.7 0.6 0.9 0.8 0.3 0.7 0.6 9
  • 10. Net slippages (ex SBIN) stable QoQ Net Slippages (INR b) Net Slippage Ratio (%) 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 SBIN 56.5 30.5 65.0 61.9 -3.4 75.6 3.6 1.9 3.8 3.4 -0.2 3.9 PNB 8.4 5.3 2.7 13.2 23.4 13.0 1.4 1.1 0.5 2.4 3.9 2.1 CBK 11.7 8.0 7.4 3.2 5.1 8.4 2.2 1.9 1.7 0.7 1.0 1.6 BoB 5.1 3.9 4.0 6.5 11.0 10.0 0.9 0.8 0.8 1.3 1.9 1.7 BoI 6.4 13.3 23.8 1.2 -5.2 11.9 1.2 3.0 5.2 0.3 -1.0 2.2 UNBK 3.0 4.6 15.9 3.6 4.1 11.7 0.8 1.5 5.0 1.1 1.1 3.2 OBC 6.2 2.6 12.6 1.8 8.9 2.8 2.6 1.2 5.8 0.8 3.7 1.1 INBK 2.8 0.8 2.8 2.3 10.0 -1.2 1.5 0.5 1.6 1.3 5.3 -0.6 ANDB 1.6 1.8 9.7 -1.0 -0.8 6.9 0.9 1.3 6.4 -0.6 -0.4 3.6 101.6 70.7 143.9 92.8 53.1 139.1 2.4 1.6 3.2 2.0 1.0 2.7 PSBs (Ex-SBIN) 45.1 40.3 78.9 30.9 56.5 63.5 1.8 1.5 2.8 1.1 1.7 1.9 ICICIBC N.A. 2.7 1.2 1.8 0.6 4.7 N.A. 0.6 0.2 0.4 0.1 0.8 2.5 2.0 3.3 4.1 -0.8 3.9 1.0 0.8 1.2 1.3 -0.2 1.2 PSBs AXSB 10
  • 11. Pace of restructuring moderated (INR b) SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB OSRL 295 255 130 180 176 84 110 99 68 % of Loa n 3.2 8.7 5.7 6.3 6.6 4.8 9.6 10.6 7.8 AI and SEB 13 93 70 44 58 30 57 30 21 % of Loa n 0.1 3.1 3.1 1.5 2.2 1.7 5.0 3.2 2.4 13 23 15 24 30 16 8 6 55 20 29 41 22 15 Of which Ai r Indi a - SEB - 70 OSRL (ex-AI and SEB) 283 163 60 136 117 54 52 69 47 % of Loa n 3.1 5.5 2.6 4.8 4.4 3.1 4.6 7.3 5.4 Restructured in FY12 93 153 45 89 92 75 66 34 39 Res tructured i n 4QFY12 51 86 28 53 38 34 34 33 23 6 12 60 8 41 16 20 15 8 0.1 0.4 2.7 0.3 1.5 0.9 1.8 1.6 0.9 6 12 5 8 9 4 8 4 8 0.1 0.4 0.2 0.3 0.4 0.3 0.7 0.5 0.9 Restructured in 1QFY13 % of Loan Restructured in 1QFY13 Ex- AI and SEB % of Loan 30 OSRL is Outstanding Standard Restructured Loans CBK and UNBK report restructured loans facility wise and rest of the banks report borrower wise 11
  • 12. Net Stress Loans lowest for SBIN; OBC’s inflated led by SEBs NSL (including AI and SEB) for SBIN flat – an exception v/s increase of 40-220bp (%) NNPA OSRL 9.8 9.4 8.4 6.9 6.5 5.4 5.4 6.9 6.7 11.4 11.7 11.2 9.3 8.3 6.9 8.2 7.9 11.8 10.7 6.2 5.2 9.7 8.5 9.9 9.9 10.6 8.4 6.0 3.6 3.2 1.8 2.2 1.5 1.7 4QFY12 1QFY13 4QFY12 1QFY13 SBIN 6.3 5.4 0.5 4QFY12 0.6 1.5 1.7 1.7 2.2 2.2 2.1 1.3 1.0 0.9 1.5 1QFY13 4QFY12 1QFY13 4QFY12 1QFY13 4QFY12 1QFY13 4QFY12 1QFY13 4QFY12 1QFY13 PNB BoB BoI UNBK OBC INBK ANDB NSL (excluding AI and SEB) declines QoQ for INBK, flat for SBIN; others report an increase (%) OSRL (ex-AI and SEB) NNPA 7.5 7.0 5.3 5.3 9.1 5.4 5.0 5.8 5.5 3.4 3.1 1.8 2.2 1.5 1.7 4QFY12 1QFY13 4QFY12 1QFY13 5.8 6.2 4.3 4.5 6.6 4.2 6.7 4.4 5.9 4.5 4.6 SBIN PNB 4.8 0.5 0.6 1.5 1.7 1.7 2.2 2.2 2.1 4QFY12 1QFY13 4QFY12 1QFY13 4QFY12 1QFY13 4QFY12 1QFY13 BoB BoI UNBK 6.8 6.7 4.4 OBC 9.0 8.5 7.8 7.5 7.4 5.8 1.3 1.0 0.9 1.5 4QFY12 1QFY13 4QFY12 1QFY13 INBK ANDB OSRL is Outstanding Standard Restructured Loans For both charts, ANDB and UNBK facility wise reported nos. adjusted to borrower wise for like to like comparison 12
  • 13. SBIN – only bank to report fall in OSRL Addition of net stress (Net slippages + Net additions to Addition of net stress loan (ex-AI and SEB) as a %age of OSRL) as % age of loan during the quarter loans during the quarter FY12 FY13 FY12 FY13 (bp) 2Q 3Q 4Q 1Q (bp) 2Q 3Q 4Q 1Q SBIN 66 76 55 65 SBIN 66 76 40 65 PNB 104 119 336 78 PNB 104 53 157 78 BOB 42 95 229 64 BOB 42 95 76 64 BOI 96 91 117 202 BOI 96 91 8 84 UNBK 102 154 272 138 UNBK 102 154 171 68 OBC 164 196 385 153 OBC 164 196 -13 39 INBK 19 78 479 96 INBK 19 78 275 -19 ANDB 145 143 344 253 ANDB 145 109 125 253 Incremental OSRL in the year as a %age of loans (bp) Incremental OSRL in the quarter as a %age of loans Change in OSRL (in bp) Others AI and SEB AI and SEB Others 85 32 33 113 115 8 15 36 109 221 238 PNB -37 70 20 118 BOI 110 154 77 14 -40 154 509 230 313 381 245 175 ANDB OBC INBK UNBK BOB SBIN ANDB BOI OBC UNBK INBK BOB PNB SBIN -43 OSRL is Outstanding Standard Restructured Loans 13
  • 14. Loans: Healthy growth in retail; Corporate growth slowing down  Retail focused banks continued to witnessed strong growth across products. While HDFCB retail loan growth was healthy at 4% QoQ and 33% YoY, short term lending opportunities led to strong growth (15% QoQ) in corporate segment. HDFCB reported robust growth (~55%) in CV loans. Credit card and PL grew 35% +. AXSB retail loans growth was also strong at 8% QoQ and 50% YoY led by secured products.  Sharp depreciation in currency led to strong loan growth for SBIN, BOB, BOI, ICICIBC (higher international loan share). International loan growth for these banks stood at 21% QoQ and 48% YoY, 5% QoQ and 41% YoY, 10% QoQ and 51% YoY and 8% QoQ and 35% YoY respectively. Domestic loan growth for the all above mentioned banks stood at 15-17% YoY.  AXSB and YES reported strong customer asset growth of 3% QoQ and 31% YoY and 7% QoQ and 32% YoY. Robust growth in vehicle finance portfolio (8% QoQ, ~45% YoY) is led to strong loan growth for IIB.  Large corporate and SME segment (+8% QoQ and 34% YoY) remains a key driver of domestic loan growth for ICICIBC. ~80% of the incremental growth in TTM was driven by corporate in domestic segments.  Sequential decline or moderate growth for PSBs is due to seasonal factors and pressure on liability side to cut bulk deposits (MOF directive of 15% by March 13). Private Banks continue to outpace PSBs PSBs grapple with asset quality issues Loans 1QFY13 (INR b) 1QFY13 (Gr %) 4QFY12 (Gr %) 1QFY12 (Gr %) QoQ YoY QoQ YoY QoQ YoY SBIN 9,168 5.7 18.9 2.5 14.7 1.9 18.0 PNB 2,945 0.2 21.2 11.9 21.3 0.3 23.4 CBK 2,256 -3.0 4.9 6.0 10.0 1.8 23.7 BoB* 2,858 -0.5 23.0 10.2 25.7 1.6 25.2 BoI* 2,642 5.0 22.9 7.9 16.3 -0.6 21.6 UNBK 1,739 -3.9 19.5 15.9 18.3 -4.9 16.7 OBC 1,139 0.7 16.0 2.1 16.7 1.4 14.1 INBK 939 3.0 13.8 3.6 20.4 9.0 21.3 ANDB 866 2.3 14.4 7.0 17.4 4.9 32.5 PSBs (Ex-SBIN) 15,383 0.2 17.7 8.9 18.5 0.9 22.3 PSBs 24,552 2.2 18.1 6.5 17.1 1.2 20.7 ICICIBC* 2,684 5.8 21.6 3.1 17.3 2.0 19.7 HDFCB 2,133 9.2 21.5 0.6 22.2 9.7 20.0 AXSB 1,711 0.8 29.8 14.1 19.2 -7.4 21.4 YES 385 1.4 16.4 5.9 10.5 -3.7 26.1 IIB 372 6.2 31.2 8.1 34.0 8.5 31.4 VYSB 293 1.9 22.9 9.3 21.8 0.9 25.5 FB 380 0.8 19.0 13.7 18.2 0.1 17.8 Private Banks 7,960 5.0 23.3 5.8 19.5 1.7 21.0 Coverage Banks 32,512 2.8 19.4 6.3 17.6 1.3 20.7 Industry 47,608 1.2 16.5 7.8 19.5 3.7 20.1 14
  • 15. Deposits: Restriction on bulk deposit to act as a constraint  In a stressed liquidity and muted deposits growth environment, borrowings remained one of the key source of funding. In TTM, banks have actively used RBI refinance window i.e., refinancing of some of the Priority sector loans etc. Borrowings remain one of the key source of funding Private Banks continue to outpace PSBs 1QFY13 (Gr %) 4QFY12 (Gr %) 1QFY12 (Gr %) QoQ YoY QoQ YoY QoQ YoY 11,029 5.7 16.1 4.3 11.7 1.7 16.5 PNB 3,854 1.5 18.9 6.5 21.3 3.6 26.9 CBK 3,346 2.3 11.5 3.7 11.5 2.3 25.7 BoB 3,827 -0.6 22.3 10.2 26.0 2.5 22.9  Domestic deposit growth remained moderate for PSBs (ex BOI and INBK), which in our view, to an extent was triggered by GOI directive to reduce the bulk deposits proportion to less than 15% by end March 2013. BoI 3,390 6.5 15.7 3.6 6.5 -1.9 25.4 UNBK 2,221 -0.3 11.5 8.5 10.1 -1.6 16.4 OBC 1,582 1.4 9.4 -0.1 12.2 4.0 17.5 INBK 1,270 5.1 15.0 1.5 14.2 4.4 21.3  Large PSBs like PNB, BOB and CBK has shed at-least 200bp of bulk deposits. CBK and OBC continued its strategy to moderate the balance sheet growth to improve balance sheet profile. ANDB 1,077 1.7 18.5 7.3 14.9 -1.4 21.7 PSBs (Ex-SBIN) 20,567 2.1 15.8 5.6 15.1 1.4 23.1 PSBs 31,596 3.3 15.9 5.2 14.0 1.5 20.7 ICICIBC 2,678 4.8 16.1 -2.0 13.3 2.2 14.8 HDFCB 2,575 4.4 22.0 6.1 18.3 1.2 15.4 AXSB 2,226 1.1 21.3 5.5 16.3 -3.0 24.5 YES 502 2.1 15.2 4.7 7.0 -5.1 44.1 IIB 451 6.4 27.8 4.4 23.3 2.6 28.8 VYSB 359 1.9 14.6 11.2 16.6 3.7 29.4 FB 506 3.3 17.8 4.7 13.8 -0.2 22.7 Private Banks 9,297 3.5 19.4 3.5 15.6 0.2 20.1 Coverage Banks 40,893 3.3 16.7 4.8 14.3 1.2 20.6 Industry 62,292 1.9 13.5 5.4 17.4 5.5 18.5  Banks under our coverage grew faster than industry. Private Banks continue to outpace industry deposit growth on a QoQ basis, led by strong loan growth.  BOI post period of consolidation grew aggressively with domestic deposits growing 7% QoQ though growth on a YoY basis remains moderate at 9%.  Within Private Banks strong deposits growth was witnessed for ICICIBC and IIB. FB built up excess liquidity, as CD ratio declined ~200bp QoQ. Deposits 1QFY13 (INR b) SBIN 15
  • 16. CD ratio: Moderated QoQ - a seasonal phenomenon YoY Loan Growth (%) CD Ratio (%) 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 SBIN* 19.0 21.3 19.8 18.0 16.1 16.5 14.7 18.9 74.7 77.2 76.3 76.7 75.8 78.6 78.5 77.8 PNB 27.6 29.8 29.7 23.4 19.3 18.7 21.3 21.2 76.4 76.6 77.4 74.9 72.9 73.7 77.4 76.4 CBK 20.2 28.8 24.8 23.7 23.8 15.5 10.0 4.9 70.7 72.1 72.0 71.6 69.7 69.5 71.1 67.4 BOB* 29.6 32.7 30.6 25.2 23.9 25.8 25.7 23.0 68.8 70.6 72.6 71.3 69.1 70.7 72.1 70.5 BOI* 22.7 22.8 26.2 21.6 17.7 20.9 16.3 22.9 70.6 70.3 65.3 65.6 64.6 67.2 71.5 68.5 UNBK 27.1 25.6 26.2 16.7 16.5 16.8 18.3 19.5 71.1 71.7 75.6 73.1 75.3 76.1 81.2 78.3 OBC 14.3 15.6 15.0 14.1 20.8 21.9 16.7 16.0 69.6 70.2 69.6 67.9 70.7 70.9 72.5 72.0 INBK 29.8 28.6 20.9 21.3 23.4 19.1 20.4 13.8 71.4 73.2 71.6 74.7 74.3 74.0 75.5 73.9 ANDB 26.6 27.7 27.7 32.5 22.1 20.7 17.4 14.4 77.6 79.9 78.3 83.3 78.9 80.2 80.0 80.4 PSBs (Ex- SBIN) 24.8 27.1 26.2 22.3 20.8 20.0 18.5 17.7 73.1 74.1 74.0 73.6 72.7 73.9 76.2 74.8 PSBs 22.5 24.8 23.7 20.7 19.0 18.6 17.1 18.1 75.5 77.2 76.5 76.2 75.7 77.6 78.5 77.7 ICICIBC* 1.8 15.3 19.4 19.7 20.5 19.1 17.3 21.6 68.0 75.0 75.0 75.5 72.3 71.1 76.1 76.6 HDFCB 38.2 33.1 27.1 20.0 20.0 22.1 22.2 21.5 80.4 82.8 76.7 83.1 81.7 83.6 79.2 82.8 AXSB 36.5 45.7 36.5 21.4 26.7 20.4 19.2 29.8 70.5 79.3 75.3 71.8 72.0 71.3 77.1 76.9 YES 86.2 66.3 54.8 26.1 12.7 15.3 10.5 16.4 75.8 78.9 74.8 76.0 77.6 76.4 77.3 76.7 IIB 33.4 31.0 27.3 31.4 28.5 29.7 34.0 31.2 75.0 81.5 76.1 80.5 78.5 79.9 82.8 82.6 VYSB 23.5 22.5 27.5 25.5 22.8 22.6 21.8 22.9 77.6 78.7 78.2 76.1 80.9 83.1 81.6 81.6 FB 7.2 8.5 18.6 17.8 21.6 17.6 18.2 19.0 76.5 76.5 74.3 74.5 71.1 71.0 77.2 75.2 Private Banks 22.1 28.0 27.1 21.0 21.6 20.5 19.5 23.3 79.5 85.0 81.7 82.9 82.5 82.6 84.5 85.6 Coverage Banks 22.4 25.6 24.5 20.7 19.6 19.1 17.6 19.4 76.4 78.9 77.7 77.7 77.2 78.7 79.9 79.5 Industry 19.1 24.6 21.5 20.1 21.2 16.0 19.5 16.5 72.7 75.7 75.7 74.5 73.8 75.3 77.0 76.4 * Domestic CD ratio 16
  • 17. 78.5 SBIN* 71.5 CBK BOB* BOI* UNBK OBC INBK ANDB AXSB YES IIB VYSB 77.2 81.6 77.3 HDFCB 82.8 77.1 ICICIBC* 79.2 76.1 76.9 76.1 75.2 74.5 82.8 81.6 82.6 80.5 76.7 76.0 71.8 76.6 83.1 80.4 83.3 1QFY13 75.5 73.9 74.7 72.0 67.9 78.3 13.8 4.9 16.0 16.4 16.5 18.1 18.9 19.0 19.4 19.5 ANDB OBC YES INDUSTRY PSBs SBIN FB C.BANKS UNBK 21.2 ICICIBC 23.0 22.9 11.5 UNBK 13.5 CBK 15.0 VYSB 15.9 16.1 SBIN 17.8 C.BANKS PNB 19.4 18.9 ANDB 22.0 AXSB 22.3 27.8 HDFCB 21.3 PVT.BANKS 18.5 FB 16.7 ICICIBC 16.1 PSBs 15.7 YES BoI 15.2 INBK 14.6 INDUSTRY 11.5 OBC IIB BoB IIB 31.2 29.8 PVT.BANKS AXSB 23.3 BoB BoI 22.9 21.6 HDFCB VYSB 21.5 PNB 9.4 14.4 INBK CBK Strong growth for Private Banks; PSBs lag (%) 80.0 75.5 72.5 73.1 68.5 65.6 70.5 71.3 67.4 4QFY12 81.2 72.1 PNB 71.6 76.4 1QFY12 71.1 77.4 74.9 77.8 76.7 Healthy loan growth; Cap on bulk deposit can act as constraint Deposit growth remains healthy (%) *C.BANKS: MOSL Coverage Though CD ratio has moderated, it remains at an elevated level (%) FB *Domestic CD ratio 17
  • 18. CASA: Decline in CA; Mid size Private Banks outpace in SA  Better cash management by corporate, advance technology, and increased competition in CA deposits segment is leading to structural decline in CA share in overall deposits across banks. Large Private Banks continue to show healthy performance on SA front however, decline in CA share is leading to overall moderation in CASA ratio .  Continued decline in CASA ratio despite moderation in balance sheet growth (especially for PNB and CBK) is a worrying factor for PSBs. Aggressive new Private Banks are gaining market share on cost of PSBs. SBIN performance on SA is commendable (+8% QoQ).  YES, IIB and KMB witnessed strong traction in SA deposits. Post deregulation of saving deposit rate, over last 3 quarter share of SA in overall deposits increased by 250-400bp for these banks. CA Dep Growth (%) SA Dep Growth (%) CASA Dep Growth (%) CASA ratio (%) (INR b) QoQ YoY (INR b) QoQ YoY (INR b) QoQ YoY 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 SBIN 835 -15.0 -2.9 3,904 8.5 13.4 4,739 3.4 10.1 47.9 47.6 47.5 46.6 46.1 PNB 257 -9.7 -2.5 1,074 1.7 13.2 1,331 -0.7 9.8 37.4 36.3 35.3 35.3 34.6 CBK 114 -23.1 -25.0 665 2.6 9.2 779 -2.1 2.4 25.4 25.8 23.9 24.3 23.3 BoB 242 -16.3 12.3 756 1.3 15.1 998 -3.6 14.4 33.9 34.0 34.1 33.2 32.2 BoI 159 6.4 3.9 673 1.4 14.4 832 2.3 12.2 30.5 31.6 32.4 34.3 32.0 UNBK 182 -5.7 4.6 506 0.3 11.3 687 -1.4 9.5 31.5 32.1 32.5 31.3 30.9 OBC 99 5.6 11.5 281 -0.6 12.9 380 1.0 12.5 23.4 22.9 22.3 24.1 24.0 INBK 63 -9.1 n.a. 309 3.3 n.a. 372 1.0 10.4 30.5 29.8 30.2 30.5 29.3 ANDB 63 -1.6 12.3 225 4.2 14.0 288 3.1 13.9 27.8 26.1 26.6 26.4 26.8 PSBs (Ex-SBIN) 1,179 -8.7 6.9 4,489 1.6 21.2 5,668 -0.7 10.2 PSBs 2,014 -11.4 2.6 8,393 4.7 17.4 10,407 1.2 10.2 ICICIBC 308 -12.1 3.3 779 2.5 16.6 1,087 -2.1 12.5 40.0 38.3 39.0 39.0 39.1 HDFCB 417 -8.2 7.4 767 3.6 18.4 1,184 -0.9 14.2 49.1 47.3 48.6 48.4 46.0 AXSB 36.0 342 -14.1 8.4 528 2.1 23.0 869 -4.9 16.8 37.0 38.3 37.0 38.0 YES 52 5.7 25.7 30 19.9 359.2 82 10.5 71.5 10.9 11.0 12.6 15.0 16.3 IIB 74 8.0 10.4 51 9.5 59.2 126 8.6 26.3 28.2 27.7 26.5 27.3 27.9 VYSB 66 2.9 19.4 53 -5.3 5.5 119 -0.9 12.7 33.8 32.6 32.6 34.2 33.3 FB 25 -1.3 11.9 120 9.6 26.7 145 7.5 23.9 27.2 26.4 28.7 27.5 28.7 1,283 -8.9 8.1 2,328 3.3 20.7 3,611 -1.4 15.9 Private Banks 18
  • 19. 9.5 9.8 10.1 10.2 10.4 12.2 12.5 12.5 12.7 13.9 14.2 14.4 15.9 16.8 UNBK PNB SBIN PSBs INBK BoI ICICIBC OBC VYSB ANDB HDFCB BoB PVT. BANKS AXSB 27.5 30.5 34.3 33.2 34.2 35.3 38.0 39.0 FB INBK BoI BoB VYSB PNB AXSB ICICIBC 46.6 27.3 IIB 49.1 46.1 47.9 46.0 39.1 40.0 36.0 37.0 34.6 37.4 33.3 33.8 32.2 33.9 32.0 30.5 29.3 30.5 28.7 27.2 27.9 28.2 26.8 27.8 1QFY13 SBIN 26.4 ANDB 24.0 23.4 4QFY12 48.4 24.1 OBC 25.4 23.3 1QFY12 HDFCB 24.3 CBK 16.3 … leading to moderation in CASA growth (% YoY) 10.9 13.4 14.0 14.4 15.1 16.6 17.4 18.4 UNBK OBC PNB SBIN ANDB BoI BoB ICICIBC PSBs HDFCB PVT. BANKS AXSB -2.9 -25.0 359.2 59.2 PNB 3.3 7.4 HDFCB 11.9 11.5 10.4 YES VYSB 25.7 19.4 12.3 BoB ANDB 12.3 FB OBC IIB AXSB 8.4 4.6 UNBK PVT.BANKS 3.9 BoI 8.1 2.6 ICICIBC PSBs -2.5 SBIN CBK YES IIB 26.7 13.2 CBK FB 12.9 23.0 9.2 11.3 20.7 5.5 VYSB PSBs lag in savings deposit growth... YES 30.0 26.3 IIB YES 23.9 FB 15.0 2.4 CBK CASA: Growth moderated for system led by CA float decline …and so do on current account deposits … CASA ratio – strong growth for midsize Private Banks (%) 19
  • 20. NIMs: PSBs disappoint; Private Banks fare well  Despite lower base (due to FITL, higher slippages) of previous quarter and benefit of capital infusion and CRR reduction, PSBs disappointed with dismal margin performance on a sequential basis.  Lag impact of higher bulk deposits taken during tight liquidity conditions in 4QFY12, continued asset quality deterioration and moral suasion to reduce lending rates marred the PSBs NIM performance.  Sharp increase in slippages led to high 30bp+ QoQ decline in margins for SBIN. Strong margins were one of the key strength for SBIN to counter higher credit cost so far. CBK, BOI and ANDB also disappointed. Net Interest Margins (%) SBIN PNB CBK* BoB BoI UNBK OBC INBK ANDB Private Banks ICICIBC HDFCB AXSB YES IIB VYSB FB * Cumul a ti ve  Benign asset quality, continued strong growth in high yielding products helped Private Banks to report better than expected margin performance.  After the sharp (+30bp QoQ) improvement in NIM in 4QFY12, flattish NIM QoQ for ICICIBC was a positive surprise. AXSB margin decline was on expected lines.  HDFCB, VYSB and YES surprised positively with stable to improving margins QoQ. FB was one of the key disappointment where NIM contracted sharply QoQ.  As PSBs are not expected to be aggressive, Private Banks having higher reliance on bulk deposits likely to be key beneficiaries in a falling interest rate. 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 3.2 3.9 3.0 2.9 2.9 3.0 3.3 3.7 3.7 3.4 4.1 3.2 3.0 2.8 3.4 3.3 3.8 3.9 3.6 4.1 3.6 3.2 3.1 3.4 3.1 3.8 3.9 3.1 3.9 3.1 3.1 2.9 3.4 3.0 3.9 3.7 3.6 3.8 2.4 2.9 2.2 3.1 2.9 3.4 3.8 3.8 4.0 2.5 3.1 2.4 3.2 2.6 3.8 3.8 4.1 3.9 2.5 3.0 2.6 3.3 2.9 3.6 3.8 3.9 3.5 2.5 3.0 2.9 3.3 2.7 3.2 3.3 3.6 3.6 2.4 2.7 2.3 3.0 2.8 3.3 3.3 2.5 4.3 3.7 3.1 3.3 3.3 4.2 2.6 4.2 3.7 3.0 3.4 3.3 4.4 2.6 4.2 3.8 2.8 3.6 3.1 4.3 2.7 4.2 3.4 2.8 3.5 3.3 4.0 2.6 4.2 3.3 2.8 3.4 3.0 3.9 2.6 4.1 3.8 2.9 3.4 3.4 3.8 2.7 4.1 3.8 2.8 3.3 3.5 3.9 3.0 4.2 3.6 2.8 3.3 3.3 3.6 3.0 4.3 3.4 2.8 3.2 3.3 3.4 Change in (bp) QoQ -32 10 -10 -23 -59 -25 11 14 -1 0 10 -18 0 -7 0 -14 YoY -5 -24 -2 -14 8 -9 -15 -13 -44 40 10 9 0 -19 27 -45 20
  • 21. Lending Yields: Largely stable to marginal improvement  On a QoQ basis, Private Banks showed improvement in yield on loans (YOL) due to higher retail loan growth.  PSBs YOL fell QoQ due to continued deterioration in asset quality and cut in lending rates.  Sharp improvement of ~40bp in YOL for INBK was on lower base (4QFY12 significant interest reversals happened) Most of the banks reduced lending rate in 1QFY13 (%) (%) SBIN PNB CBK* BoB BoI UNBK* OBC INBK ANDB Private Banks ICICIBC* HDFCB* AXSB* YES IIB VYSB FB * Qua rterl y Ca l cul a ted 10.8 10.5 10.8 10.5 UNBK BoI INBK PNB BoB CBK 10.0 9.8 ICICIBC 10.8 10.5 10.0 9.8 HDFCB 10.8 10.5 10.0 10.0 SBIN 10.8 10.5 1QFY13 10.7 10.5 4QFY12 1QFY11 9.3 10.2 9.4 8.2 8.4 9.0 10.0 10.1 10.9 2QFY11 9.7 10.6 9.9 8.4 8.5 9.0 10.3 10.2 11.0 3QFY11 9.7 10.6 9.8 8.6 8.8 9.6 10.3 10.4 11.1 4QFY11 9.5 10.8 9.9 8.7 8.8 9.8 10.8 10.6 11.6 1QFY12 10.4 11.4 10.5 9.1 8.9 10.2 11.6 11.1 12.2 2QFY12 11.1 11.9 10.9 9.6 9.4 10.7 11.7 11.5 12.5 3QFY12 11.2 12.0 11.1 9.5 9.5 10.8 12.2 11.7 12.8 4QFY12 11.4 11.4 11.2 9.3 9.7 10.6 12.3 10.9 12.3 1QFY13 10.9 11.5 11.1 9.1 8.9 10.8 12.4 11.3 12.1 Chg. QoQ -55 12 -5 -25 -88 27 4 39 -25 Chg. YoY 43 14 62 -3 -4 65 76 15 -15 8.3 9.7 8.7 9.6 12.2 9.6 10.8 8.3 9.7 8.9 9.5 12.1 9.8 11.2 8.3 10.0 8.9 10.0 12.3 10.1 11.1 8.6 10.4 9.2 10.7 12.9 10.7 11.2 9.0 10.8 10.1 11.6 13.5 11.1 12.0 9.5 11.0 10.8 12.2 13.8 11.4 12.7 9.5 11.3 11.0 12.4 13.8 11.7 12.9 9.8 11.5 10.7 12.5 13.9 11.8 12.5 9.9 11.9 10.9 12.4 14.0 12.0 12.5 8 35 16 -10 4 19 0 86 110 73 80 43 88 54 21
  • 22. Cost of Deposits: Increased further, putting pressure on NIMs  Higher intake of bulk deposits in a stressed liquidity situation in 4QFY12 and moderation in low cost deposits growth led to pressure on cost of deposits in 1QFY13.  Among large PSBs (except for BoB and BoI – who have large intl. ops.), SBIN enjoys the lowest cost of funds on the back of its strong CASA base.  Healthy growth in SA deposits for Private Banks partially negated the impact of higher cost of term deposits. YES managed to keep cost of funds stable QoQ despite higher share of corporate liabilities which is commendable. IIB reported sharp increase in cost of deposits impacting the margins during the quarter.  Improving liquidity situation, moderation in credit growth, lowering of SLR limit, GOI directive (for PSBs) of capping bulk proportion etc will lead to lowering of cost of deposits in the coming quarters. (%) Change in (bp) QoQ 14 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 SBIN 5.3 5.2 5.1 5.4 5.7 6.0 6.0 6.1 6.2 PNB CBK* 5.0 5.7 5.0 5.7 5.2 5.6 5.6 6.2 6.3 7.1 6.5 7.2 6.7 7.6 6.8 7.6 7.0 7.9 18 30 70 84 BoB BoI UNBK* 4.4 4.8 5.0 4.5 5.0 5.1 4.5 5.0 5.2 4.8 5.3 5.5 5.4 6.0 6.2 5.6 6.1 6.3 5.7 6.0 6.4 5.8 6.0 6.5 5.9 5.9 6.5 8 -4 0 53 -7 38 OBC INBK 5.6 5.3 5.9 5.4 6.1 5.4 6.5 5.6 7.2 6.4 7.6 6.6 7.9 6.9 8.0 6.8 8.0 7.0 -1 23 79 60 ANDB Private Banks ICICIBC** 5.5 5.7 5.8 6.5 7.0 7.5 7.6 7.9 7.7 -20 72 5.2 5.3 5.5 5.7 6.1 6.4 6.3 6.2 6.4 11 22 HDFCB** 4.3 4.5 4.7 4.9 5.5 6.2 6.4 6.1 6.5 46 104 AXSB YES IIB VYSB 4.6 6.3 6.0 4.7 4.8 6.7 6.0 4.9 4.8 7.1 6.2 5.4 5.6 7.8 7.0 6.0 6.1 8.5 7.7 6.8 6.2 8.6 8.2 6.9 6.3 8.9 8.2 6.9 6.5 9.0 8.3 7.3 6.7 9.0 8.9 7.5 25 0 59 26 57 50 115 74 FB 5.8 5.9 6.0 6.2 7.0 7.4 7.6 7.6 7.6 0 53 YoY 58 * Reported ** Ca l cul a ted CoF 22
  • 23. BoI Change in bp 19 8 12 16 0 4 4 -25 -25 27 -88 -55 59 35 39 46 YoL impacted due to higher slippages -10 -5 8 11 14 18 23 25 26 30 Margins surprise negatively for PSBs 0 0 0 14 11 10 10 BoI CBK* BoB OBC YES UNBK ICICIBC IIB VYSB INBK ANDB AXSB FB SBIN PNB HDFCB ANDB CBK FB OBC BoI INBK PSBs (Ex- SBIN) PSBs UNBK SBIN C.BANKS PNB BoB HDFCB IIB PVT. BANKS AXSB VYSB ICICIBC YES 2.3 2.4 2.7 2.8 2.8 3.0 3.0 3.2 3.3 3.3 3.3 3.4 3.4 3.6 3.6 YoY Gr. (%) 4.3 3.1 4.2 6.9 10.6 11.0 12.0 13.6 14.0 14.6 14.6 17.2 18.6 21.8 22.3 24.1 26.0 26.4 31.0 32.4 33.3 0.0 0.1 1.6 2.7 2.8 2.8 2.8 4.2 5.3 5.4 6.5 7.5 11.6 Healthy NII growth YoY (%) ANDB -20 BoI -4 OBC -1 UNBK YES FB BoB ICICIBC SBIN PNB INBK AXSB VYSB CBK HDFCB IIB 0 0 0 BoI -18.3 CBK -9.6 -4.1 SBIN UNBK -2.9 -2.4 PSBs PSBs (Ex-SBIN) -1.1 C.BANKS -0.9 BoB FB AXSB ANDB PVT. BANKS HDFCB ICICIBC IIB YES OBC INBK VYSB PNB QoQ NII growth muted (%) BoI SBIN BoB ANDB YES CBK FB OBC IIB ICICIBC* PNB AXSB* VYSB UNBK* HDFCB* INBK INBK OBC PNB -1 -7 -10 -14 -18 -25 -23 -32 Change in bp HDFCB VYSB YES ICICIBC ANDB IIB CBK* -59 QoQ Gr. (%) FB AXSB BoB UNBK SBIN Margins surprised negatively for PSBs NIMs decline from an elevated level (%) *C.BANKS: MOSL Coverage QoQ Change bp for NIM, YOL and COD CoD continues to rise 23
  • 24. NII: Pressure on margins leading to moderate growth  Higher deposit cost and significantly higher slippages led to pressure on margins of PNB, BoI, CBK and SBIN’s. Strong NII growth for PNB and INBK was on a lower base (due to elevated slippages in 4Q).  IIB reported moderation in NIMs, but strong volume growth partially offset the impact. YES and VYSB NIM performance was commendable. AXSB NIMs decline QoQ was on expected lines. QoQ Growth (%) YoY Growth (%) 1QFY13 (INR M) 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 SBIN 111,189 -11.0 20.4 8.1 9.9 0.6 -4.1 19.9 32.8 29.2 27.3 43.8 14.6 PNB 36,951 -5.4 2.8 10.8 2.4 -6.4 11.6 22.4 19.9 16.0 10.4 9.3 18.6 CBK 18,435 -7.0 -9.0 10.9 -2.2 6.3 -9.6 21.7 4.4 -0.5 -8.2 5.0 4.2 BoB 27,981 14.0 -12.1 11.7 3.5 5.3 0.0 49.8 23.6 25.9 15.8 7.0 21.8 BoI 20,436 16.1 -20.2 3.4 8.6 21.0 -18.3 48.7 5.8 7.2 4.1 8.4 11.0 UNBK 18,217 6.2 -7.4 4.5 7.2 5.4 -2.9 22.9 18.0 8.2 10.2 9.3 14.6 OBC 11,258 -1.6 0.5 -2.8 15.2 -6.3 5.4 2.4 -3.7 -8.1 10.7 5.4 10.6 INBK 11,532 7.1 -7.3 10.2 3.1 -7.5 6.5 21.8 13.9 15.5 12.8 -2.6 12.0 ANDB 9,385 2.6 5.7 4.5 3.4 -7.1 2.7 31.3 23.7 21.4 17.1 6.1 3.1 PSBs (Ex-SBIN) 154,195 3.6 -7.0 7.7 4.3 2.2 -1.1 28.9 13.7 11.3 8.2 6.8 13.6 PSBs 265,384 -2.1 2.7 7.9 6.6 1.5 -2.4 25.6 20.9 18.1 15.7 20.0 14.0 ICICIBC 31,929 8.6 -3.9 4.0 8.2 14.5 2.8 23.3 21.1 13.7 17.3 23.7 32.4 HDFCB 34,841 2.3 0.3 3.4 5.8 8.7 2.8 20.8 18.6 16.6 12.2 19.3 22.3 AXSB 21,799 -1.9 1.4 16.4 6.6 0.3 1.6 16.5 13.9 24.3 23.5 26.2 26.4 YES 4,722 7.8 1.6 8.9 10.9 4.8 5.3 42.7 35.1 23.1 32.3 28.6 33.3 IIB 4,841 6.9 0.5 7.5 2.7 7.8 4.2 42.2 31.9 27.1 18.6 19.7 24.1 VYSB 3,433 9.1 -2.4 15.9 6.6 -1.4 7.5 8.6 10.1 19.4 31.6 18.9 31.0 FB 4,916 0.1 2.7 3.2 11.3 -7.0 0.1 9.3 11.2 8.2 18.1 9.7 6.9 Private Banks 106,480 3.7 -0.6 7.0 7.0 7.1 2.8 21.1 18.7 17.7 18.0 21.9 26.0 Coverage Banks 371,864 -0.6 1.8 7.6 6.7 3.0 -0.9 24.3 20.4 18.0 16.3 20.5 17.2 Coverage Banks (Ex-SBIN) 260,675 3.6 -4.7 7.5 5.4 4.1 0.4 25.9 15.6 13.6 11.8 12.4 18.4 24
  • 25. Fee income: Dismal growth – led by lower economic activities  On a QoQ basis, fee income dropped sharply due to seasonal factors. Lower sanctions, fall in third party distribution related fees, lower economic growth is leading to muted fee income growth on a YoY basis.  HDFCB, YES and IIB continue to surprise positively on the fee income whereas, AXSB, FB and ICICIBC disappointed on fees. SBIN PNB CBK BoB BoI UNBK OBC 1QFY13 (INR m) 26,027 7,310 4,171 4,142 4,104 2,952 1,850 1QFY12 -29.4 4.3 -12.4 -17.4 -21.0 -24.0 -7.4 2QFY12 -1.2 -16.5 -7.0 14.3 21.3 0.4 17.4  Lower loan processing fees, lowering of account maintenance charges and lower transaction banking fees impacted SBINs fee income growth.  Muted loan growth, macro economic uncertainty, changes in the charges for government business and higher focus on asset quality (rather than revenue) will lead to moderation in fee income growth in FY13. QoQ Growth (%) 3QFY12 4QFY12 1.6 59.6 11.1 15.3 3.6 -1.7 -0.6 8.7 4.4 13.1 27.7 24.8 -6.8 27.8 1QFY13 -38.3 2.1 -6.3 -15.7 -23.0 -26.8 -19.9 1QFY12 9.3 27.9 28.4 27.8 16.9 65.8 5.3 2QFY12 -11.7 4.4 11.3 13.2 10.9 -11.8 15.5 YoY Growth (%) 3QFY12 4QFY12 6.6 13.0 23.9 11.5 31.2 -17.1 18.1 2.0 19.0 13.1 16.4 21.7 20.1 29.5 1QFY13 -1.1 9.2 -11.3 4.0 10.3 17.2 12.0 INBK 1,663 -15.2 29.5 -32.8 44.2 -28.9 -27.5 8.4 -18.4 6.4 -10.8 ANDB PSBs (Ex- SBIN) PSBs ICICIBC HDFCB AXSB YES IIB VYSB FB Private Banks Coverage Banks 1,410 27,601 53,629 16,469 11,482 11,540 1,936 2,690 1,155 667 45,939 99,568 -26.1 -13.0 -22.0 -11.9 -7.0 -14.2 -13.6 13.5 -19.1 -6.5 -10.7 -17.5 7.8 3.3 1.0 7.7 6.8 6.1 23.1 14.8 15.3 10.7 8.2 4.1 23.7 3.9 2.8 0.1 14.2 9.0 -5.7 16.5 16.2 -4.9 6.5 4.4 0.8 13.8 35.9 1.6 9.0 8.6 21.1 5.4 -0.8 18.4 6.3 22.3 -22.1 -14.7 -28.0 -4.7 -7.3 -13.0 -2.0 1.9 -9.8 -15.9 -7.4 -19.8 3.0 19.5 14.2 11.6 16.8 40.2 16.0 44.4 8.2 3.7 20.4 16.8 5.0 7.2 -2.9 6.9 15.6 31.9 48.0 31.7 9.9 1.6 16.9 5.1 12.2 17.8 12.2 4.7 20.7 26.3 35.2 45.7 22.9 -2.9 16.7 14.2 -0.6 6.3 10.0 -3.5 23.6 7.7 21.4 60.1 7.6 16.5 9.3 9.7 4.7 4.2 1.5 4.4 23.3 9.3 37.7 43.8 19.9 4.8 13.4 6.7 25
  • 26. Treasury income: Contribution remains muted G-sec Yield (%) 30-Jun-11 30-Sep-11 1 year 8.1 8.3 5 year 8.4 8.3 10 year 8.3 8.4 31-Dec-11 8.5 8.4 8.6 31-Ma r-12 8.2 8.6 8.5 30-Jun-12 16-Aug-12 8.0 8.0 8.2 8.2 8.2 8.3 SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB PSBs (Ex- SBIN) PSBs ICICIBC HDFCB AXSB YES IIB VYSB FB Private Banks Coverage Banks 4QFY11 302 310 -310 863 1,188 980 -521 256 649 3,415 3,717 -1,960 86 -229 241 192 30 13 -1,627 2,090 Net Investment Gains (INR m) 1QFY12 2QFY12 3QFY12 -8,791 -4,302 -2,205 -860 -840 -560 -865 827 -280 -645 -1,550 1,614 197 34 -478 430 180 280 -619 -618 -538 -220 -750 -359 333 194 -28 -2,249 -2,523 -348 -11,040 -6,825 -2,553 -250 -800 -650 -413 -13 -818 332 -520 750 247 410 483 278 239 131 6 30 50 7 72 -76 207 -582 -130 -10,832 -7,407 -2,683 4QFY12 -537 3,610 2,020 4,083 -35 2,350 624 253 -137 12,768 12,231 1,580 -715 2,480 688 274 30 464 4,801 17,032  Despite the fall in yields across maturities banks have reported muted contribution of Investment profits (incl. MTM) to PBT. CBK, BOI and OBC are the only banks which have reported more than 20% trading profits contribution.  BOB has reported muted contribution after reporting significantly higher contribution in 4QFY12.  Among the Private Banks except AXSB, IIB, and FB others have reported muted trading profits. 1QFY13 7,416 1,930 3,038 55 2,360 -110 1,185 197 107 8,763 16,179 -210 665 2,170 945 497 58 468 4,592 20,771 4QFY11 2 1.7 -2.7 6.4 16.3 13.7 -18.4 3.3 15.9 4.7 4.1 -10.2 0.5 -1.5 7.9 7.5 2.2 0.5 -2.7 1 Net Investment Gains as a % to PBT 1QFY12 2QFY12 3QFY12 4QFY12 -28 -11 -5 -1 -5.4 -4.6 -3.2 18.9 -9.3 7.9 -2.6 19.6 -4.5 -9.4 9.2 34.1 2.4 0.9 -4.6 -0.3 5.8 3.1 9.0 21.7 -12.7 -22.6 -12.1 28.4 -3.6 -10.7 -5.3 10.7 6.4 4.5 -0.6 -3.3 -3.2 -3.7 -0.5 17.3 -10.8 -6.2 -2.1 8.8 -1.4 -3.9 -2.8 6.0 -2.6 -0.1 -4.0 -3.4 2.4 -3.8 4.6 13.1 7.6 11.8 12.8 17.1 10.4 8.4 4.3 8.2 0.4 1.7 2.8 1.8 0.3 2.5 -2.5 13.0 0.4 -0.9 -0.2 6.1 -7 -4 -1 8 1QFY13 13.0 10.7 31.2 0.4 19.6 -1.5 21.0 2.8 2.2 11.2 11.9 -0.8 3.2 12.7 22.0 14.2 3.0 16.5 6.1 10 26
  • 27. Fee income moderates; Non core income contribution – a mixed bag -6.3 -4.7 CBK ICICIBC 2.1 PNB -7.3 HDFCB IIB -7.4 PVT.BANKS YES -9.8 -13.0 AXSB VYSB -13.2 PSBs (Ex-SBIN) -15.7 BoB -19.9 -19.4 OBC C.BANKS -15.9 -22.1 ANDB FB -23.0 -26.8 UNBK BoI -27.4 PSBs -2.0 43.8 -28.9 PVT.BANKS INBK OBC SBIN -38.3 12.0 BoI IIB 10.3 AXSB 37.7 9.3 PNB YES 9.2 C.BANKS 23.3 7.2 PSBs (Ex- SBIN) HDFCB 6.0 FB 19.9 4.8 ANDB VYSB 4.7 ICICIBC 17.2 4.4 BoB UNBK 4.0 13.4 2.5 PSBs SBIN -1.1 INBK-10.8 CBK-11.3 1.9 Fee income declines (QoQ, %) - seasonal in nature Fee income growth moderates (YoY, %) *C.BANKS: MOSL Coverage Recoveries from written-off accounts remains healthy 34.1 Net trading income to PBT remains stable / improve (%) 1QFY13 21.7 10.7 2.8 1.8 3.0 -3.4 3.2 4.8 5.2 18.9 10.7 17.3 11.2 8.8 11.3 13.1 12.7 -0.8 13.0 8.2 14.2 13.0 16.5 -0.3 19.6 28.4 21.0 17.1 22.0 19.6 31.2 4QFY12 PNB Recoveries (INR m) 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2,210 1,090 680 920 2,410 870 CBK YES OBC BoI FB IIB SBIN AXSB PSBs PSBs (Ex-SBIN) PNB PVT.BANKS HDFCB VYSB INBK ANDB 0.4 -3.3 2.2 BoB 6.0 -0.8 ICICIBC -1.5 3,270 617 1,350 BoB 859 288 1,220 711 1,064 830 6.2 BoI 919 312 876 1,858 1,906 2,367 19.7 UNBK 980 590 420 900 1,620 580 7.7 OBC UNBK 980 468 4.8 CBK 574 390 260 299 301 1,967 34.9 INBK 110 180 400 1,030 460 341 4.9 ANDB 178 45 41 86 200 450 9.1 9,100 3,512 5,247 6,484 8,941 7,874 5.8 PSBs (Ex-SBIN) 680 % of PBT 4.8 27
  • 28. Opex: Private Banks focusing on cutting the flab  Private Banks opex growth was largely on the expected lines. Most of the mgmt commented of restricting opex growth to counter expected moderation in top-line growth. For, AXSB, YES, KMB and ICICIBC on a growing retail business cutting cost will be difficult in our view.  ICICIBCs’ opex grew 17% YoY (-5% QoQ), led by moderation in other opex (up just 5% YoY and flat QoQ). Sharp drop of 11% QoQ in employee expenses was on a higher base. SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB PSBs (Ex- SBIN) PSBs ICICIBC HDFCB AXSB YES IIB VYSB FB Private Banks Coverage Banks  PNB made higher AS 15 related provisioning leading to strong QoQ growth of 22%. Sharp drop of 25% QoQ in employee expense led to overall decline for BOB.  AXSB opex was one of the key factor for higher than expected profitability. However, on a growing retail business sustainability remains a question.  YES opex increased sharply with aggressive branch expansion and top level recruitment for retail branch expansion. QoQ Growth (%) YoY Growth (%) Cost to core Income ratio (%) 1QFY13 (INR m) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 64,410 -11.8 6.4 -0.7 16.4 -12.6 23.3 10.6 13.1 8.5 7.5 48.6 48.7 44.7 46.6 46.9 20,203 3.5 5.1 0.0 -9.1 22.5 23.9 13.7 6.1 -1.0 17.1 45.6 45.2 43.6 41.0 45.6 11,424 -13.3 12.9 -5.4 17.7 -13.4 7.3 9.0 -1.9 8.9 8.8 46.9 49.4 47.3 53.1 50.5 13,281 -25.5 4.9 3.0 36.8 -19.8 18.2 10.5 8.3 10.1 18.6 41.5 38.9 38.9 50.3 41.3 12,109 -42.6 8.1 -0.5 22.4 -16.7 20.7 21.7 -4.7 -24.5 9.6 49.9 50.7 46.8 47.9 49.3 10,459 -37.2 5.4 13.8 -5.1 1.2 22.9 4.6 28.4 -28.6 15.1 49.3 50.0 51.8 45.3 49.4 6,377 15.0 -5.9 19.5 8.2 -3.1 20.3 4.8 24.8 39.9 17.9 45.7 43.0 46.0 50.6 48.6 5,356 3.9 11.8 -3.1 9.7 -9.6 12.1 5.5 13.7 23.5 7.5 41.0 40.4 40.5 45.0 40.6 4,708 -4.8 3.4 2.1 6.9 -2.5 -1.5 7.9 9.6 7.5 10.1 40.9 40.3 38.8 44.1 43.6 83,916 -19.4 6.2 2.4 10.3 -5.1 17.0 10.9 7.8 -3.4 13.8 45.5 45.1 44.3 47.0 46.2 148,326 -16.2 6.3 1.0 13.0 -8.5 19.8 10.8 10.1 1.7 11.0 46.8 46.7 44.5 46.8 46.5 21,235 -1.4 4.0 1.3 15.9 -4.4 22.7 20.5 11.6 20.4 16.7 45.6 45.0 43.4 46.0 43.9 24,326 -3.2 4.9 6.3 14.3 -1.4 17.8 20.9 17.8 23.5 25.7 51.2 51.5 50.7 53.3 52.5 15,517 0.2 10.0 3.0 12.3 -8.5 25.3 26.2 23.6 27.5 16.4 48.0 46.9 45.0 48.9 46.5 3,007 4.2 10.0 12.4 18.3 5.8 23.8 31.3 38.4 52.4 54.7 39.3 38.3 40.7 44.0 45.2 3,989 8.1 10.8 6.5 8.9 5.7 29.9 33.9 29.4 38.9 35.8 50.9 51.3 50.9 51.8 53.0 2,967 -13.5 8.2 2.0 4.8 0.3 19.6 5.1 11.4 0.0 16.1 71.4 66.7 62.4 66.1 64.7 2,695 -6.7 3.4 7.4 13.0 -3.5 18.5 16.5 16.5 17.1 21.1 42.5 42.2 41.6 49.0 48.3 73,736 -1.8 6.3 4.1 13.7 -3.3 21.7 21.9 18.0 23.6 21.8 48.4 47.9 46.7 49.7 48.4 222,062 -12.2 6.3 2.0 13.2 -6.8 20.4 14.0 12.5 7.8 14.3 47.3 47.1 45.2 47.7 47.1 28
  • 29. Core operating profit: Private Banks leading the pack  Strong margin performance and control over opex led to healthy core PPP growth for Private Banks.  Pressure on asset quality, moderation in loan growth and higher opex pressure led to moderation in Core PPP growth for PSBs.  Growth for SBIN moderated led by sharp moderation in margins and muted fee income growth. SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB PSBs (Ex- SBIN) PSBs ICICIBC HDFCB AXSB YES IIB VYSB FB Private Banks Coverage Banks 1QFY13 (INR m) 72,806 24,059 11,183 18,841 12,431 10,711 6,732 7,838 6,087 97,880 170,686 27,163 21,996 17,822 3,651 3,543 1,620 2,889 78,684 249,370 4QFY11 -15.7 0.5 -1.7 2.3 -24.9 -42.5 4.1 11.7 1.1 -6.4 -10.1 10.7 -2.3 8.4 20.1 5.3 -6.1 -8.9 5.4 -5.4 QoQ Growth (%) 1QFY12 2QFY12 26.9 5.8 2.8 6.7 -6.3 2.1 -1.1 17.3 29.8 4.8 55.5 2.5 -10.9 5.0 -15.6 14.2 3.8 6.0 4.2 7.7 12.6 6.9 -11.7 6.7 0.1 3.5 -9.7 14.8 -7.5 14.8 0.8 8.9 11.9 34.5 8.6 4.6 -6.2 8.4 6.3 7.4 3QFY12 16.7 6.6 3.0 2.7 16.3 6.1 5.6 -3.4 8.8 5.8 10.3 7.9 9.7 11.4 1.6 8.4 23.5 10.5 9.4 10.0  Healthy margins and lower opex growth led to strong core PPP growth for AXSB and ICICIBC despite moderation in fee income. IIB and VYSB continue to demonstrate healthy performance.  Sequentially strong Core PPP growth for BOB is on account of higher opex base of 4QFY12. 4QFY12 7.8 1.4 -6.7 -13.9 17.0 22.8 -10.0 -8.6 -14.0 -0.9 2.9 4.6 3.1 -4.0 3.1 4.9 -11.1 -16.3 0.8 2.2 1QFY13 -13.7 1.3 -4.2 15.3 -21.3 -14.1 5.0 8.3 -0.6 -1.9 -7.3 4.0 1.9 0.4 1.0 0.9 7.0 -0.8 2.2 -4.5 4QFY11 19.8 7.3 13.0 33.1 -13.6 -35.9 4.8 10.8 35.2 6.0 10.7 21.0 18.0 30.3 54.5 55.9 -29.4 -3.4 22.2 14.3 1QFY12 30.6 19.1 10.0 28.9 -3.1 22.8 -15.9 0.2 42.6 12.7 19.5 12.9 18.6 20.3 32.7 42.2 -9.4 4.9 17.1 18.8 YoY Growth (%) 2QFY12 3QFY12 26.6 32.1 14.6 17.5 -5.0 -3.2 34.1 21.8 -3.4 18.9 5.4 -2.9 -11.2 2.8 20.9 4.0 27.9 21.1 10.4 11.1 16.5 19.4 4.0 12.5 11.8 11.0 27.5 25.2 29.0 29.7 23.5 25.2 50.1 74.5 1.4 14.4 13.6 17.2 15.6 18.7 4QFY12 68.9 18.5 -8.1 2.6 85.2 107.6 -11.1 -14.9 2.9 17.6 36.6 6.4 17.2 10.9 11.4 24.8 65.2 5.1 12.1 28.3 1QFY13 14.8 16.8 -6.0 19.6 12.2 14.7 4.7 9.1 -1.4 10.7 12.4 25.2 19.3 23.2 21.5 25.0 57.9 -4.0 22.0 15.3 Core operating profits = NII + Fees (ex forex) -Opex 29
  • 30. PAT: Qualitatively wide divergence in PSBs and Private Banks  Private Banks profits were largely inline with est. and positive surprise came from ICICIBC and VYSB. NIM and healthy asset quality were the key drivers in both banks. Dividend income from ICICI Canadian subsidiary also boosted profitability.  For PSBs lower than expected margins had put pressure on operating profits, however, lower provisions (led by lower restructuring and MTM reversals) led to inline PBT. Lower tax rate for certain banks came as a relief. PAT SBIN PNB CBK BoB BoI UNBK OBC INBK ANDB PSBs PSBs (Ex-SBIN) ICICIBC HDFCB AXSB YES IIB VYSB FB Private Banks Coverage Banks Coverage Banks (Ex-SBIN) 1QFY13 (INR m) 37,516 12,457 7,752 11,389 8,875 5,116 3,914 4,617 3,618 95,254 57,738 18,151 14,174 11,535 2,901 2,363 1,301 1,904 52,328 147,582 110,066 1QFY12 N.A. -8.0 -19.3 -20.2 4.8 -22.3 6.3 -7.3 23.3 17.6 -10.4 -8.3 -2.7 -7.6 6.2 5.0 3.0 -14.9 -5.4 7.7 -8.2 2QFY12 77.5 9.0 17.4 12.9 -5.1 -24.1 -52.7 15.2 -18.0 19.1 0.5 12.9 10.5 -2.3 8.8 7.2 22.7 30.8 9.1 15.3 4.3  Within PSBs large divergence was witnessed. BOI (lower provisions despite higher stress) and OBC (one off incomes) posted significant outperformance, while BOB (lower trading profits and higher opex) and UNBK (higher stress on asset quality) disappointed.  PNB disappointed on asset quality, however positive surprise on other income provided cushion. Despite weaker than expected core operating income, PAT was higher than expected for SBIN led by compromise on PCR and write-back on investment. QoQ Growth (%) 3QFY12 4QFY12 16.1 24.1 -4.6 23.8 2.7 -5.3 10.6 17.7 45.8 33.0 -44.1 292.5 111.2 -25.2 12.2 -34.3 -4.1 12.0 10.8 21.0 7.8 19.1 15.0 10.0 19.2 1.6 19.8 15.9 8.1 7.0 6.7 8.5 3.6 6.6 5.6 17.7 15.7 8.9 12.5 16.6 11.5 14.2 1QFY13 -7.4 -12.5 -6.5 -25.0 -6.9 -33.8 47.8 33.7 6.5 -9.3 -10.4 -4.6 -2.5 -9.7 6.7 5.8 2.1 -19.9 -4.7 -7.7 -7.8 1QFY12 -45.7 3.4 -28.4 20.2 -28.6 -22.8 -2.4 10.5 20.4 -20.1 -6.1 29.8 33.7 27.0 38.2 52.0 36.1 10.8 30.8 -6.3 7.3 2QFY12 12.4 12.1 -15.4 14.4 -20.4 16.2 -57.8 12.7 4.3 2.5 -2.3 21.6 31.5 25.2 33.3 45.0 53.3 36.2 27.8 10.3 9.7 YoY Growth (%) 3QFY12 4QFY12 15.4 N.A. 5.5 18.6 -20.8 -7.8 20.7 17.3 9.7 93.0 -66.0 29.4 -13.2 -20.6 7.0 -21.3 -8.4 8.6 1.4 87.7 -5.5 15.7 20.3 31.0 31.4 30.4 23.7 25.2 32.9 33.6 33.9 30.1 44.0 39.5 41.1 38.4 26.4 30.0 9.4 62.9 7.6 21.9 1QFY13 136.9 12.7 6.8 10.3 71.5 10.2 10.4 13.5 -6.2 44.8 15.6 36.3 30.6 22.4 34.3 31.1 38.4 30.2 31.0 39.6 22.4 30
  • 31. 47.2 2.6 -6.2 22.1 PSBs (Ex SBIN) 10.4 12.7 13.5 15.6 OBC PNB INBK PSBs (ex- SBIN) 31.0 31.1 34.3 36.3 38.4 39.6 PVT.BANKS IIB YES ICICIBC VYSB C.BANKS SBIN BoI 136.9 71.5 44.8 30.6 HDFCB PSBs 30.2 FB 22.4 10.3 BoB AXSB 10.2 UNBK 6.8 Write back on MTM and lower provision on restructured loan helps contain provisions CBK 7.5 16.1 16.4 16.7 17.1 17.9 18.6 C.BANKS UNBK VYSB AXSB ICICIBC PNB OBC BoB FB PVT.BANKS ANDB VYSB ICICIBC 57.9 25.2 25.0 23.2 AXSB IIB 22.0 PVT.BANKS 16.8 PNB 21.5 15.5 C.BANKS YES 14.8 SBIN 19.6 14.7 UNBK BoB 12.7 PSBs 19.3 12.2 BoI 54.7 HDFCB 11.2 9.1 35.8 PSBs (Ex- SBIN) INBK 4.7 -1.4 FB OBC -4.0 CBK YES IIB -6.0 15.1 PSBs (Ex- SBIN) 25.7 14.3 PSBs HDFCB 13.8 21.8 11.0 21.1 10.1 9.6 BoI ANDB 8.8 INBK CBK 7.5 SBIN Opex for Private Banks increase due to expansion ANDB 60.0 21.5 CBK VYSB 21.0 UNBK 50.0 20.0 IIB BoB 16.7 ANDB AXSB 15.6 9.9 PVT.BANKS PNB 9.8 HDFCB -9.7 C.BANKS 5.7 -13.1 PSBs OBC -16.7 BoI ICICIBC -17.7 INBK SBIN -40.9 FB -53.2 Profitability impacted due to higher provisions Core operating profitability moderates for PSBs Private Banks profitability remains robust *C.BANKS: MOSL Coverage 31
  • 32. PSBs trading at/significant discount to 10 year average P/BV P/B (x) Min(x) 2.9 1.7 1.6 0.7 P/B (x) 6.2 5.0 3.8 2.6 1.4 Avg(x) Peak(x) Avg(x) Peak(x) 1.7 1.1 0.3 0.6 Aug-12 Aug-12 Min(x) Jul-11 0.6 Jul-11 Jun-10 Dec-02 0.4 P/B (x) 2.0 1.5 1.0 0.5 0.0 May-10 1.0 HDFCB above average valuation Peak(x) Aug-02 May-03 Feb-04 Oct-04 Jul-05 Mar-06 Dec-06 Aug-07 May-08 Jan-09 Oct-09 Jun-10 Mar-11 Dec-11 Aug-12 4.0 3.0 2.0 1.0 0.0 Avg(x) Min(x) 1.7 Apr-09 2.0 1.5 1.0 0.5 0.0 Aug-02 May-03 Feb-04 Oct-04 Jul-05 Mar-06 Dec-06 Aug-07 May-08 Jan-09 Oct-09 Jun-10 Mar-11 Dec-11 Aug-12 ICICIBC near average valuation Peak(x) May-09 0.7 0.3 Avg(x) May-08 1.0 P/B (x) Apr-07 Min(x) 1.8 Mar-06 Peak(x) Feb-05 Avg(x) 0.8 0.3 UNBK at significant discount to LPA CBK at 35%+ discount to LPA Jan-04 P/B (x) 2.0 1.5 1.0 0.5 0.0 Min(x) 1.8 Mar-08 BoI at 30%+ discount to LPA 0.8 0.3 Peak(x) 1.0 Feb-07 Aug-02 May-03 Feb-04 Oct-04 Jul-05 Mar-06 Dec-06 Aug-07 May-08 Jan-09 Oct-09 Jun-10 Mar-11 Dec-11 Aug-12 1.0 Avg(x) Jan-06 0.4 1.2 P/B (x) 2.4 1.8 1.2 0.6 0.0 Dec-04 1.2 1.8 Nov-03 2.3 2.0 1.5 1.0 0.5 0.0 Min(x) Aug-02 May-03 Feb-04 Oct-04 Jul-05 Mar-06 Dec-06 Aug-07 May-08 Jan-09 Oct-09 Jun-10 Mar-11 Dec-11 Aug-12 Min(x) BoB at 15% discount to LPA Peak(x) Sep-02 Peak(x) Avg(x) Aug-02 May-03 Feb-04 Oct-04 Jul-05 Mar-06 Dec-06 Aug-07 May-08 Jan-09 Oct-09 Jun-10 Mar-11 Dec-11 Aug-12 Avg(x) P/B (x) AXSB ~15% discount to LPA Min(x) 5.0 3.7 3.2 1.9 Aug-02 May-03 Feb-04 Oct-04 Jul-05 Mar-06 Dec-06 Aug-07 May-08 Jan-09 Oct-09 Jun-10 Mar-11 Dec-11 Aug-12 P/B (x) 3.0 2.3 1.5 0.8 0.0 PNB at 35%+ discount to LPA 4.8 3.6 2.4 1.2 0.0 P/B (x) Avg(x) Peak(x) Min(x) 4.0 2.0 0.8 1.6 Aug-02 May-03 Feb-04 Oct-04 Jul-05 Mar-06 Dec-06 Aug-07 May-08 Jan-09 Oct-09 Jun-10 Mar-11 Dec-11 Aug-12 SBIN trading at 15% disc to LPA 32
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