1. 4QFY2010 Result Update I Banking
April 28, 2010
Dena Bank BUY
CMP Rs83
Performance Highlights Target Price Rs98
Dena Bank reported a Net Profit growth of 23.3% yoy, ahead of our Investment Period 12 Months
estimates, on account of a higher-than-expected improvement in the NIMs
and better-than-expected income from recoveries, which boosted the Stock Info
non-interest income of the bank. We maintain a Buy rating on the stock.
Sector Banking
Better-than-expected NIMs and Recoveries: Sequential growth in advances (at
Market Cap (Rs cr) 2,379
14.7%) exceeded deposit growth by 7.4%, resulting in a CD ratio of 69.1%
(from 64.6% in 3QFY2010). The reported NIMs of the bank improved to 2.8% Beta 1.0
in 4QFY2010, from 2.5% in 3QFY2010 and 2.4% in 4QFY2009. CASA
52 WK High / Low 93/36
deposits increased by 23.0% yoy to Rs18,320cr at the end of 4QFY2010.
Non-interest income increased by 24.8% yoy to Rs175cr, driven by a strong Avg. Daily Volume 1246665
traction in recoveries in written-off accounts, which stood at Rs70cr (against
Rs28cr in 4QFY2010 and Rs22cr in 3QFY2010). The Gross NPA and Net Face Value (Rs) 10
NPA ratios improved to 1.8% (1.9% in 3QFY2010) and 1.2% (1.2% in BSE Sensex 17,380
3QFY2010), respectively. The NPA provision coverage ratio stood at 78.0%
including technical write-offs. The bank’s CAR stood at 12.7%, with Tier-I Nifty 5,215
capital of 8.2% (forming 65% of the total CAR). During 1HFY2011, the Reuters Code DENA.BO
Government is expected to infuse capital of Rs600cr in the bank, Rs300cr
each in the form of Equity and Preference Capital. The management also Bloomberg Code DBNK@IN
expects to receive Rs700cr from the Government in the form of Preference
Shareholding Pattern (%)
Capital over FY2012-13E.
Promoters 51.2
Outlook and Valuation: Dena Bank, with a strong CASA ratio of 35.7%, is MF/Banks/Indian FIs 13.0
better placed than its peers to protect its NIMs in a rising interest rate
environment. After the proposed capital infusion, the Bank's Tier-I ratio will FII/NRIs/OCBs 16.0
improve to 9.1% by end-FY2011E from 8.2% in FY2010, and will enable it to
Indian Public 19.8
maintain its CAR well above the 12% level till FY2012E. We estimate
Advances to grow at a 17% CAGR over FY2009-12E, driving an Earnings’ Abs (%) 3m 1yr 3yr
CAGR of 16% over the period. At the CMP, the stock is trading at 3.8x
FY2012E EPS of Rs21.9 and 0.7x FY2012E Adjusted Book Value of Rs120.6. Sensex 6.6 58.0 25.0
We have assigned a Target FY2012E P/ABV multiple of 0.8x to Dena Bank,
Dena Bank 62.5 122.7 120.3
(equal to its 5-year median P/ABV multiple) to arrive at a Target Price of Rs98,
translating into an upside of 18.4%. Hence, we maintain a Buy on the stock.
Key Financials
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
NII 1,064 1,100 1,295 1,481
% chg 19.2 3.3 17.7 14.4
Net Profit 423 511 556 629
% chg 17.5 21.0 8.8 13.1
NIM (%) 2.8 2.4 2.4 2.3 Vaibhav Agrawal
EPS (Rs) 14.7 17.8 19.4 21.9 Tel: 022 – 4040 3800 Ext: 333
E-mail: vaibhav.agrawal@angeltrade.com
P/E (x) 5.6 4.7 4.3 3.8
P/ABV (x) 1.3 1.0 0.8 0.7
Amit Rane
RoA (%) 1.0 1.0 0.9 0.9
Tel: 022 – 4040 3800 Ext: 326
RoE (%) 21.3 21.2 19.2 18.4
E-mail: amitn.rane@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Dena Bank I 4QFY2010 Result Update
Exhibit 1: 4QFY2010 Performance
Y/E March (Rs cr) 4QFY10 3QFY10 % chg (qoq) 4QFY09 % chg (yoy) FY10 FY09 % chg
Interest Earned 1,063 1,016 4.7 896 18.7 4,010 3,447 16.3
Interest Expenses 737 733 0.6 657 12.2 2,910 2,383 22.1
Net Interest Income 326 283 15.2 239 36.5 1,100 1,064 3.3
Non-Interest Income 175 133 31.3 140 24.9 589 430 36.9
Total Income 501 416 20.4 379 32.2 1,689 1,495 13.0
Operating Expenses 221 218 1.1 191 15.5 848 768 10.4
Pre-Prov Profit 280 198 41.7 188 49.2 841 726 15.7
Provisions & Cont. 82 29 181.8 51 60.5 154 185 (16.8)
PBT 198 168 17.4 136 44.9 687 541 26.8
Prov. for Taxes 61 34 78.8 25 140.2 176 119 47.8
PAT 137 135 1.9 111 23.3 511 423 21.0
EPS (Rs) 4.8 4.7 1.9 3.9 23.3 17.8 14.7 21.0
Cost to Income (%) 44.1 52.5 50.5 50.2 51.4
Effective Tax Rate (%) 30.7 20.1 18.5 25.6 21.9
Net NPA (%) 1.2 1.2 1.1 1.2 1.1
Source: Company, Angel Research
Strong Advances and Deposits Growth
During 4QFY2010, the business growth stood at 20.7% yoy, driven by advances
growth of 22.8% yoy to Rs35,462cr, and deposits growth of 19.3% yoy to
Rs51,344cr. Sequential growth in advances (at 14.7%) exceeded deposit growth by
7.4%, resulting in a CD ratio of 69.1% (from 64.6% in 3QFY2010). The advances
growth was driven by strong growth in Retail (21.6% yoy), SME (18.3% yoy) and
agriculture (25.3% yoy).
Exhibit 2: Rising Trend in Quarterly Advances and Deposits
60,000
50,000
(Rs cr)
40,000
30,000
20,000
10,000
-
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
4QFY10
Advances Deposits
Source: Company, Angel Research
NIM improves
The reported NIM of the bank improved to 2.8% in 4QFY2010, from 2.5% in
3QFY2010 and 2.4% in 4QFY2009. The NIM expansion was aided by an
improvement in the CD ratio, re-pricing of high-cost deposits and a sequentially
stable CASA of 35.7%. CASA deposits increased by 23.0% yoy to Rs18,320cr at the
end of 4QFY2010.
April 28, 2010 2

3. Dena Bank I 4QFY2010 Result Update
Strong Growth in Non-Interest Income driven by Recoveries
Non-interest income increased by 24.8% yoy to Rs175cr, driven by a strong traction
in recoveries in written-off accounts, which stood at Rs70cr (against Rs28cr in
4QFY2010 and Rs22cr in 3QFY2010). The management expects to recover
~Rs120cr p.a. for the next two years. The core fee income increased by 7.1% to
Rs97cr during 4QFY2010, and recorded a 25.0% growth in FY2010.
Exhibit 3: Non-Interest Income
Period (Rs cr) 4QFY10 3QFY10 % qoq 4QFY09 % yoy
Fee based Income 97 83 16.7 91 7.1
Income from Recoveries 70 22 219.1 28 155.3
Profit on Sale of Invest. 8 28 (72.3) 22 (64.7)
Total Non-Int. income 175 133 31.5 140 2489
Source: Company, Angel Research
Asset-quality Stable
The absolute Gross NPAs of the bank increased 9.6% sequentially to Rs642cr in
4QFY2010. The Gross NPA and Net NPA ratios improved to 1.8% (1.9% in
3QFY2010) and 1.2% (1.2% in 3QFY2010), respectively. The NPA provision
coverage ratio stood at 78.0% after adjusting for technical write-offs. The bank’s
cumulative restructuring stood at Rs1,330cr (Rs1,459cr in 3QFY2010), and formed
3.8% of the advances and 51% of the Networth. There was a slippage of Rs110cr
during FY2010 from the restructured accounts, taking the slippages from the
restructured accounts to 8% for FY2010.
Exhibit 4: Trend in Asset Quality
700 90
600 80
500 70
(%)
400 60
(Rs cr)
300 50
200 40
100 30
0 20
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
4QFY10
Gross NPAs Net NPAs Coverage Ratio (%)
Source: Company, Angel Research
Details of Investment Book
Out of the total investment portfolio of Rs15,760cr, 17% is in AFS and the rest in
HTM. The modified duration of AFS stood at 4.7 years and that of HTM was 5.2
years exposing the portfolio to rising interest rate risk.
April 28, 2010 3

4. Dena Bank I 4QFY2010 Result Update
Improved Productivity
The total operating expenses increased by 15.5% yoy to Rs221cr, driven by a 10.1%
growth in employee costs and a 23.9% growth in other operating expenses. Due to
the strong growth in operating income, the cost-to-income ratio of the bank
improved to 44.1% in 4QFY2010 (52.5% in 3QFY2010 and 50.5% in 4QFY2009).
The total branch network increased by 39 to 1,223 in FY2010; the bank plans to
open 80 branches by June 2010 and 400 branches in the next 3 years.
Capital Infusion expected in 1QFY2011E
The bank’s CAR stood at 12.7%, with Tier-I capital of 8.2% (forming 65% of the total
CAR). The government is expected to infuse capital of Rs600cr in the bank, Rs300cr
each in the form of Equity and Preference Capital; however, the pricing is not clear
yet. The management also expects to receive Rs700cr from the Government in the
form of Preference Capital over FY2012-13E. The cost of this capital is expected to
be linked to the repo rate, as per the indications of the management. Accordingly,
we have assumed the cost of preference capital to be 6.5%. After the proposed
capital infusion, the Bank's Tier-I ratio will improve to 9.1% by end-FY2011E from
8.2% in FY2010, and will enable it to grow its Advances in line with our expectations
of a 16-17% growth for mid-size PSU banks over the next two years.
Outlook and Valuation
Dena Bank, with a strong CASA ratio of 35.7%, is better placed than its peers to
protect its NIMs in a rising interest rate environment. After the proposed capital
infusion, the Bank's Tier-I ratio will improve to 9.1% by end-FY2011E from 8.2% in
FY2010, and will enable it to maintain its CAR well above the 12% level till FY2012E.
We estimate Advances to grow at a 17% CAGR over FY2009-12E, driving an
Earnings’ CAGR of 16% over the period. At the CMP, the stock is trading at 3.8x
FY2012E EPS of Rs21.9 and 0.7x FY2012E Adjusted Book Value of Rs120.6. We
have assigned a Target FY2012E P/ABV multiple of 0.8x to Dena Bank, (equal to its
5-year median P/ABV multiple) to arrive at a Target Price of Rs98, translating into an
upside of 18.4%. Hence, we maintain a Buy on the stock.
Exhibit 5: P/ABV Band –Dena Bank
180
160
140
120
100
(Rs)
80
60
40
20
0
Mar-02
Jul-02
Dec-02
Apr-03
Aug-03
Dec-03
Apr-04
Aug-04
Dec-04
Apr-05
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Price 0.4x 0.7x 1x 1.3x 1.6x
Source: Company, Angel Research
April 28, 2010 4

5. Dena Bank I 4QFY2010 Result Update
Income Statement (Rs cr) Ratio Analysis
Y/E March FY2009 FY2010E FY2011E FY2012E Y/E March FY2009 FY2010E FY2011E FY2012E
Net Interest Income 1,064 1,100 1,295 1,481 Profitability ratios (%)
YoY Growth (%) 19.2 3.3 17.7 14.4
NIMs 2.8 2.4 2.4 2.3
Other Income 430 589 535 567
Cost to Income ratio 51.4 50.2 51.0 51.9
YoY Growth (%) (3.1) 36.9 (9.1) 5.8
Operating Income 1,495 1,689 1,830 2,048 RoA 1.0 1.0 0.9 0.9
YoY Growth (%) 11.8 13.0 8.4 11.9 RoE 21.3 21.2 19.2 18.4
Operating Expenses 768 848 933 1,063 B/S ratios (%)
YoY Growth (%) 18.1 10.4 10.0 14.0
CASA ratio 36.0 35.7 35.1 34.5
Pre - Provision Profit 726 841 897 984
YoY Growth (%) 5.8 15.7 6.7 9.7 Credit/Deposit ratio 67.1 69.1 69.7 70.3
Prov. & Cont. 185 154 155 145 CAR 12.1 12.7 13.6 13.5
YoY Growth (%) (49.9) (16.8) 1.0 (6.4) - Tier I 6.8 8.2 9.1 9.2
Profit Before Tax 541 687 742 839
Asset Quality (%)
YoY Growth (%) 70.5 26.8 8.0 13.1
Gross NPAs 2.1 1.8 1.7 1.5
Prov. for Taxation 119 176 185 210
as a % of PBT 21.9 25.6 25.0 25.0 Net NPAs 1.1 0.9 0.8 0.5
PAT 423 511 556 629 Slippages 2.9 2.2 2.2 2.0
- YoY Growth (%) 17.5 21.0 8.8 13.1 NPA prov. / avg.
0.5 0.2 0.1 0.1
assets
Provision coverage 49.5 85.4 85.2 86.0
Per Share Data (Rs)
EPS 14.7 17.8 19.4 21.9
ABVPS (75% Cover.) 62.0 84.9 102.1 120.6
DPS 1.2 0.8 1.9 2.9
Balance Sheet (Rs cr)
Y/E March FY2009 FY2010E FY2011E FY2012E Valuation Ratios
Share Capital 287 287 887 887 P/E (x) 5.6 4.7 4.3 3.8
- Equity 287 287 287 287 P/ABVPS (x) 1.3 1.0 0.8 0.7
- Pref. - - 600 600 Dividend Yield 1.4 1.0 2.3 3.5
Reserve & Surplus 1,884 2,368 2,862 3,395
DuPont Analysis
Deposits 43,051 51,344 59,559 69,089
NII 2.4 2.1 2.1 2.0
Growth (%) 26.8 19.3 16.0 16.0
(-) Prov. Exp. 0.4 0.3 0.2 0.2
Borrowings 52 1,562 1,640 1,722
Adj. NII 2.0 1.8 1.8 1.8
Tier 2 Capital 1,391 1,523 1,723 1,923
Other Liab. & Prov. 1,796 556 668 826 Treasury 0.1 0.3 0.1 0.1
Total Liabilities 48,460 57,640 67,339 77,842 Int. Sens. Inc. 2.1 2.1 1.9 1.9
Cash balances 4,982 4,355 5,003 6,287 Other Inc. 0.9 0.8 0.8 0.7
Bank balances 875 813 2,203 1,550 Op. Inc. 3.0 2.9 2.7 2.6
Investments 12,473 15,694 17,272 20,036
Opex 1.8 1.6 1.5 1.5
Advances 28,878 35,462 41,491 48,544
PBT 1.2 1.3 1.2 1.2
Growth (%) 25.4 22.8 17.0 17.0
Taxes 0.3 0.3 0.3 0.3
Fixed Assets 405 407 415 424
RoA 1.0 1.0 0.9 0.9
Other Assets 847 908 954 1,001
Total Assets 48,461 57,640 67,339 77,842 Leverage 21.9 22.0 21.5 21.3
Growth (%) 25.4 18.9 16.8 15.6 RoE 21.3 21.2 19.2 18.4
April 28, 2010 5

6. Dena Bank I 4QFY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Dena Bank
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
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Tel : (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
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April 28, 2010 6