Elusive loan growth to make Q4FY15 challenging one for financial services sector, says Prabhudas Lilladher

1.
April 10, 2015 36
Jan‐Mar 2015 Earnings Preview
Nitin Kumar
nitinkumar@plindia.com
+91‐22‐6632 2236
Pritesh Bumb
priteshbumb@plindia.com
+91‐22‐6632 2232
Top picks
ICICI Bank
HDFC Bank
State Bank of India
Yes Bank
Banking & Financial Services
 It’s a challenging quarter, particularly for PSUs: With loan growth remaining
elusive and asset quality pressures persisting, we believe that it is going to be a
challenging quarter for the financial services sector, especially for the state
owned banks. Several banks have already guided for a spike in fresh
restructuring, while slippages may moderate for PSUs against a high base, but
nevertheless will remain elevated. On the macro front, bond yields have shown
healthy easing, crude price has fallen sharply, inflation trajectory appears under
control but demand/growth environment remains weak. Treasury gains which
helped support earnings in Q3FY15 will also be modest as bond yields have
largely been stable. While we remain constructive on the sector from a one‐year
perspective, we believe that near‐term stock performance would depend more
on an on‐ground recovery.
 We expect modest uptick in credit growth in FY16E as the credit growth to
nominal GDP multiple is most levered to industrial growth, which is likely to
improve only gradually. Also, continued acts of de‐leveraging and credit
substitution will likely affect overall growth. We expect RBI to continue with
calibrated rate easing as there are near‐term risks from recent unseasonal rains
and rising possibility of El‐Nino which can again drive up inflation.
 Earnings growth to improve from H2FY16E: PPOP growth has been slowing for
all banks including private sector and we expect economic recovery to be fairly
gradual. We believe that PSU banks will fully provide for employee provisions
(wage, pension, gratuity & mortality) over H1FY16 as they receive inputs from
the actuaries and will stage a modest recovery over H2FY16E. We also estimate
credit cost to decline by ~25bps each over next two years for SOE banks which
will further aid earnings growth.
 Q4FY15 Preview:
 (1) Private Banks – PPoP growth is likely to moderate further as loan/fee
growth remains soft, while margins are unlikely to expand (except for IIB &
YES). We expect controlled deterioration in asset quality (particularly ICICIBC
which has already guided for elevated trend in stressed asset formation).
However, any negative asset quality shocks are highly unlikely.
 (2) PSUs ‐ Earnings trend to remain muted as revenue progression remains
weak, while elevated opex/credit cost further act as a drag. Margins are
expected to remain stable at current low levels and are likely to remain there
with prospects of rate cut over Q1FY16. Most bank’s guidance (UNBK, PNB,
BOI) on asset quality is concerning on both fresh slippages and the NPL
formation from restructured assets as restructuring deadline ended in
Q4FY15. Treasury gains will also be modest unlike the previous quarter,
given stable bond yields during the quarter.
 (3) NBFCs ‐ Although wholesale rates have eased significantly, loan growth is
yet to pick up meaningfully and will thus delay any material improvement in
margins. LICHF will report some NIM uptick (incremental spreads have
already improved), SHTF’s asset quality will plateau. MMFS to report better
asset quality trends, given a seasonally strong quarter, though macro hasn’t
improved much.

2.
April 10, 2015 37
Jan‐Mar 2015 Earnings Preview
Overall, we expect ~8.4% YoY PAT growth for the sector, with ~14% for Pvt Banks
and ~2% for PSBs.
 Asset quality – pressures to intensify: Pressure on asset quality is expected to
increase as most PSU banks guided for higher restructuring and slippage trend,
particularly from existing pool of restructured assets. Also, this being the last
quarter to avail lower provisioning benefits on fresh restructuring, most banks
will be more forthcoming in restructuring troubled accounts, in our view. PSBs
had resorted to high sale of NPA to ARCs in FY14 which has been lower in
9MFY15; however, we expect some NPAs to be sold in Q4FY15.
Our key stock ideas:
 ICICI Bank (BUY): (+) Like Axis, risk in power/large corporate book low, especially
in asset class with high loss, given default (+) Retail SME portfolio stable despite
significant stress. (+) Subsidiaries are gaining scale and their contribution to
overall profitability is improving. (+) Relaxation in FDI limit in insurance is a
positive trigger. (‐) On a relative basis, asset quality risks appear high due to
lumpy exposure (‐) PPOP moderation to continue despite better fee growth as
there is limited room for further margin expansion.
 HDFC Bank (BUY): (+) Best placed to overcome current slowdown – Both opex
and credit cost flexibility high. (+) Fixed rate book to aid margins, while benign
earning base will help bank generate ~25% earnings CAGR over FY16‐17E (+)
Asset quality holding up (‐) Slowing PAT growth and uptick in credit cost.
 Yes Bank (BUY): (+) Earnings traction to remain strong led by loan growth
recovery and improving margins (higher cut‐off balance limit for 7% SA rate) (+)
Asset quality remains stable with strong coverage ratio (+) Continued traction in
CASA mix and pick‐up in retail loan growth (+) Strongly capitalized to benefit
from economic turnaround. We are rolling forward our valuations to FY17E
with a revised PT of Rs930 (from Rs815), which corresponds to 2.5x FY17E ABV.
 Federal Bank (BUY): (+) Stability in large corporate portfolio as well after steady
performance on SME/Retail (+) Slower branch expansion to aid in cost
optimization (+) Loan growth to improve after an year of consolidation, while
management’s focus on broad‐based fee income yields results (‐) Growth still
below par and hence, leveraging up will take longer.
 PSU banks ‐ Prefer SBI on cleaner Balance sheet and healthy earnings: (+) PPOP
growth likely to improve on pick‐up in loan growth and continued benefits from
cost optimization. (+) Asset quality is showing an improving trend over past two
quarters and we estimate credit cost to decline over FY16‐17E. (+) Strong
liability franchise + reasonable valuations (+) SBI is strongly capitalized and has
lower restructuring levels. (‐) Corporate book riskier v/s private peers. (‐) Under‐
provisioned B/S + limited P&L support in this credit cycle (low
recoveries/upgrades).
 Shriram/LICHF preferred NBFC picks: (+) SHTF: Profitability has bottomed out –
Initial signs of a pick‐up in loan growth, while credit cost likely to inch lower in
H2FY15 (+) Margins likely to expand as funding cost has declined (+) Regulatory
overhang on NPL recognition is now done away with – Recent up‐move limits
risk‐reward though (2) LICHF: Will be beneficiary of lower rates and strong
competitive advantage, given bank’s inability to lend below base rate +
reasonable valuations.

3.
April 10, 2015 38
Jan‐Mar 2015 Earnings Preview
Q4 Results Preview (Rs m) – PPOP trends remain weak; credit cost to increase for both PSU & Pvt Banks
NII QoQ YoY PPOP QoQ YoY PAT QoQ YoY
HDFC Bank 58,289 2.3% 17.7% 46,691 ‐2.3% 23.5% 28,387 1.6% 22.0%
ICICI 49,864 3.6% 14.5% 51,465 2.2% 15.6% 29,086 0.7% 9.7%
Axis 38,480 7.2% 21.6% 38,622 16.5% 18.9% 21,742 14.4% 18.0%
HDFC 24,689 22.4% 15.3% 26,702 26.6% 12.0% 18,350 28.7% 6.5%
SBI 141,211 2.5% 9.4% 106,738 14.8% 0.4% 35,072 20.5% 15.3%
PNB 43,821 3.5% 9.5% 29,336 6.6% ‐7.6% 9,508 22.8% 17.9%
BOI 28,957 4.2% ‐5.0% 18,421 ‐1.2% ‐7.7% 4,901 182.7% ‐12.1%
BOB 33,920 3.2% 8.6% 25,324 8.3% ‐1.8% 8,516 155.0% ‐27.4%
Union 22,103 4.2% 7.7% 14,522 ‐0.9% 10.0% 4,690 55.1% ‐19.0%
Kotak 11,595 9.4% 20.0% 7,618 3.3% 25.5% 5,223 12.4% 28.3%
IDFC 6,504 ‐1.7% ‐2.6% 6,397 ‐18.2% ‐23.3% 4,009 ‐4.5% 55.4%
IndusInd 9,261 7.5% 18.6% 8,578 10.9% 19.3% 4,995 11.7% 26.1%
Yes 9,844 8.3% 36.8% 9,154 6.1% 34.5% 5,659 4.7% 31.5%
SIB 3,738 16.8% 2.5% 2,252 2.7% 9.9% 964 9.6% ‐22.7%
ING 5,222 6.2% 10.8% 3,439 22.8% 37.6% 1,778 22.1% 27.8%
J&K 7,353 15.1% 4.9% 4,636 21.8% ‐3.7% 1,586 51.6% ‐36.7%
Federal 6,407 9.1% 2.5% 3,985 0.3% ‐5.1% 2,297 ‐13.2% ‐17.1%
LIC Housing 6,399 16.7% 20.0% 6,000 13.6% 20.2% 3,927 14.0% 6.1%
MMFSL 8,073 9.3% 5.8% 5,534 16.0% 1.7% 2,571 88.5% ‐17.3%
Shriram Tran. 8,847 ‐3.7% 38.9% 7,425 ‐5.1% 11.5% 3,160 1.1% 7.1%
Total 525,418 4.4% 11.4% 422,793 7.5% 6.8% 195,662 16.4% 8.6%
Total Private 200,053 5.5% 17.0% 176,442 5.1% 18.9% 101,717 5.5% 15.0%
Total Public 270,011 3.1% 7.5% 194,341 9.7% ‐1.3% 62,688 39.5% 1.8%
Loans (Rs bn) QoQ YoY Margins (%) QoQ YoY Prov/Adv. (%) QoQ YoY
HDFC Bank 3,580 3.1% 18.1% 4.30% ‐0.10% ‐0.10% 0.44% ‐0.21% 0.06%
ICICI Bank 3,859 2.8% 13.9% 3.42% ‐0.04% 0.07% 1.09% 0.04% 0.25%
Axis Bank 2,796 7.3% 21.5% 3.90% 0.02% 0.10% 0.81% 0.03% ‐0.07%
HDFC 2,276 3.5% 15.5% 4.10% 0.17% 0.00% 0.08% 0.00% 0.02%
SBI 12,844 4.2% 6.2% 3.69% 0.38% 0.53% 1.74% 0.04% ‐0.21%
PNB 3,740 3.2% 7.1% 3.24% 0.03% 0.04% 1.64% 0.02% ‐0.81%
BOI 4,079 1.3% 10.0% 2.22% 0.04% ‐0.12% 1.13% ‐0.44% ‐0.54%
BOB 4,157 5.6% 4.7% 2.30% 0.10% 0.01% 1.28% 0.00% 0.12%
Union 2,531 4.8% 10.5% 2.97% 0.45% 0.40% 0.14% ‐1.27% ‐1.46%
Kotak 647 0.1% 22.0% 4.88% 0.25% ‐0.27% 0.14% ‐0.04% 0.19%
IDFC 583 12.1% ‐0.4% 3.90% 0.20% ‐0.01% 1.19% 0.01% ‐2.11%
IndusInd 674 5.6% 22.4% 3.75% ‐0.13% ‐0.09% 0.60% ‐0.02% ‐0.28%
Yes 707 6.2% 27.1% 3.76% 0.14% 0.68% 0.61% 0.19% 0.09%
SIB 397 9.0% 9.5% 2.81% 0.26% ‐0.19% 0.83% ‐0.11% 0.52%
ING 423 4.2% 18.0% 3.47% 0.09% ‐0.11% 0.76% 0.15% 0.30%
J&K 478 7.7% 3.0% 4.09% 0.38% 0.04% 1.94% ‐0.04% 1.42%
Federal 500 2.5% 15.0% 3.21% 0.16% 0.25% 0.85% 0.86% 0.34%
LIC Housing 1,069 4.9% 17.1% 2.24% 0.04% ‐0.16% 0.03% 0.00% 0.13%
MMFSL 382 4.7% 12.0% 8.64% 0.46% ‐0.47% 1.76% ‐1.19% 0.88%
Shriram Tran. 559 ‐2.0% 5.3% 7.31% ‐0.16% 0.46% 1.93% ‐0.36% 0.08%
Total 46,327 4.0% 10.5% 3.46% 0.14% 0.06% 0.72% ‐0.06% ‐0.09%
Source: Company Data, PL Research

4.
April 10, 2015 39
Jan‐Mar 2015 Earnings Preview
Loan growth has come off to sub ~10% as corporate have shifted preference to Bond
funding
8.0%
11.0%
14.0%
17.0%
20.0%
23.0%
26.0%
29.0%
Dec‐07
Mar‐08
Jun‐08
Sep‐08
Dec‐08
Mar‐09
Jun‐09
Sep‐09
Dec‐09
Mar‐10
Jun‐10
Sep‐10
Dec‐10
Mar‐11
Jun‐11
Sep‐11
Dec‐11
Mar‐12
Jun‐12
Sep‐12
Dec‐12
Mar‐13
Jun‐13
Sep‐13
Dec‐13
Mar‐14
Jun‐14
Sep‐14
Dec‐14
Credit growth Deposit growth
Source: RBI, PL Research
Most Banks have cut deposit rates mainly in the longer tenure buckets during the quarter
Cut in peak deposit rate 0‐3M 3‐9M 9‐15M 15‐36M >36M
HDFC Bank 0.00% 0.00% 0.00% 0.00% ‐0.50%
Axis Bank 0.00% 0.00% ‐0.25% ‐0.40% ‐0.40%
ICICI bank 0.00% 0.25% 0.00% 0.00% ‐0.25%
IndusInd bank 0.00% 0.00% ‐0.25% ‐0.15% ‐0.25%
Yes Bank 0.00% ‐0.25% 0.00% ‐0.10% 0.00%
SBI 0.00% 0.00% ‐0.25% ‐0.25% ‐0.50%
Bank of Baroda 0.00% ‐0.10% 0.00% 0.00% ‐0.25%
Bank of India 0.00% 0.00% 0.00% 0.00% ‐0.25%
Punjab National Bank 0.00% 0.00% 0.00% 0.00% ‐0.25%
Union Bank 0.00% 0.00% 0.00% 0.00% 0.00%
Source: Company Data, PL Research *Change over Dec‐14 quarter
SBI has cut its short term deposit rates on high liquidity and lower credit growth
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
9.00
SBI 30D SBI 46D SBI 91D SBI 180D SBI 1Yr SBI 3Yr SBI 5Yr
Current Sep‐14
Source: Bloomberg, SBI
Muted credit off take has brought credit
growth in lower double‐digit which is the
lowest since 2001

5.
April 10, 2015 40
Jan‐Mar 2015 Earnings Preview
Margins in Q4FY15 – Despite selective easing in NIMs for some Banks, we largely expect
stable trends in NIMs
Q4FY14 Q3FY15 Q4FY15E YoY QoQ
HDFC Bank 4.40% 4.40% 4.30% ‐0.10% ‐0.10%
ICICI Bank 3.35% 3.46% 3.42% 0.07% ‐0.04%
Axis Bank 3.80% 3.88% 3.90% 0.10% 0.02%
HDFC 4.10% 3.93% 4.10% 0.00% 0.17%
SBI 3.16% 3.31% 3.69% 0.53% 0.38%
PNB 3.20% 3.21% 3.24% 0.04% 0.03%
BOI 2.34% 2.18% 2.22% ‐0.12% 0.04%
BOB 2.29% 2.20% 2.30% 0.01% 0.10%
Union 2.57% 2.52% 2.97% 0.40% 0.45%
Kotak 5.15% 4.63% 4.88% ‐0.27% 0.25%
IDFC 3.91% 3.70% 3.90% ‐0.01% 0.20%
IndusInd 3.84% 3.88% 3.75% ‐0.09% ‐0.13%
Yes 3.08% 3.62% 3.76% 0.68% 0.14%
SIB 3.00% 2.55% 2.81% ‐0.19% 0.26%
ING 3.57% 3.37% 3.47% ‐0.11% 0.09%
J&K 4.05% 3.71% 4.09% 0.04% 0.38%
Federal 2.96% 3.05% 3.21% 0.25% 0.16%
LIC Housing 2.40% 2.20% 2.24% ‐0.16% 0.04%
MMFSL 9.11% 8.19% 8.64% ‐0.47% 0.46%
Shriram Tran. 6.86% 7.48% 7.31% 0.46% ‐0.16%
Source: Company Data, PL Research
Total provisions Q4FY15 – Credit cost to remain elevated as stressed asset formation trend
has remained high
Q4FY14 Q3FY15 Q4FY15E YoY QoQ
HDFC Bank 0.38% 0.65% 0.44% 0.06% ‐0.21%
ICICI Bank 0.84% 1.04% 1.09% 0.25% 0.04%
Axis Bank 0.88% 0.78% 0.81% ‐0.07% 0.03%
HDFC 0.06% 0.08% 0.08% 0.02% 0.00%
SBI 1.95% 1.70% 1.74% ‐0.21% 0.04%
PNB 2.45% 1.62% 1.64% ‐0.81% 0.02%
BOI 1.67% 1.57% 1.13% ‐0.54% ‐0.44%
BOB 1.16% 1.28% 1.28% 0.12% 0.00%
Union 1.61% 1.41% 1.29% ‐0.31% ‐0.12%
Kotak ‐0.05% 0.19% 0.14% 0.19% ‐0.04%
IDFC 3.30% 1.18% 1.19% ‐2.11% 0.01%
IndusInd 0.88% 0.61% 0.60% ‐0.28% ‐0.02%
Yes 0.52% 0.42% 0.61% 0.09% 0.19%
SIB 0.31% 0.94% 0.83% 0.52% ‐0.11%
ING 0.45% 0.61% 0.76% 0.30% 0.15%
J&K 0.52% 1.99% 1.94% 1.42% ‐0.04%
Federal 0.51% ‐0.01% 0.85% 0.34% 0.86%
LIC Housing ‐0.10% 0.03% 0.03% 0.13% 0.00%
MMFSL 0.88% 2.95% 1.76% 0.88% ‐1.19%
Shriram Tran. 1.85% 2.29% 1.93% 0.08% ‐0.36%
Source: Company Data, PL Research

6.
April 10, 2015 41
Jan‐Mar 2015 Earnings Preview
10 yr G‐Sec has been stable during the quarter, thus, limiting bond gain prospects during the
quarter, unlike previous quarter
6.5
7.0
7.5
8.0
8.5
9.0
9.5
Sep‐10
Dec‐10
Mar‐11
Jun‐11
Sep‐11
Dec‐11
Mar‐12
Jun‐12
Sep‐12
Dec‐12
Mar‐13
Jun‐13
Sep‐13
Dec‐13
Mar‐14
Jun‐14
Sep‐14
Dec‐14
Mar‐15
10Yr G‐sec Yield
Source: Bloomberg
G‐Sec yields have declined across the yield curve
7.00
7.20
7.40
7.60
7.80
8.00
8.20
8.40
8.60
8.80
9.00
9.20
3Month 1Year 5Year 10Year
2QFY15 3QFY15 4QFY15 Current
Source: Bloomberg, PL Research
Liquidity conditions eased in past three months
(2,000)
(1,500)
(1,000)
(500)
‐
500
Nov‐12
Dec‐12
Jan‐13
Feb‐13
Mar‐13
Apr‐13
May‐13
Jun‐13
Jul‐13
Aug‐13
Sep‐13
Oct‐13
Nov‐13
Dec‐13
Jan‐14
Feb‐14
Mar‐14
Apr‐14
May‐14
Jun‐14
Jul‐14
Aug‐14
Sep‐14
Oct‐14
Nov‐14
Dec‐14
(Rs bn)
LAF MSF ECR/Sp Repo Term Repo
Source: Company Data, PL Research

7.
April 10, 2015 42
Jan‐Mar 2015 Earnings Preview
Short‐term CP rates have settled near 9% despite RBI cutting benchmark rates
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Jun‐11
Sep‐11
Dec‐11
Mar‐12
Jun‐12
Sep‐12
Dec‐12
Mar‐13
Jun‐13
Sep‐13
Dec‐13
Mar‐14
Jun‐14
Sep‐14
Dec‐14
Mar‐15
FIMMDA 3 MTH CP FIMMDA 6 MTH CP
Source: Bloomberg, PL Research
‘AAA’ Corporate bond yields have eased by ~75bps from in last 6 months settling at ~8.5%
7.5
8.0
8.5
9.0
9.5
10.0
10.5
Jul‐11
Sep‐11
Nov‐11
Jan‐12
Mar‐12
May‐12
Jul‐12
Sep‐12
Nov‐12
Jan‐13
Mar‐13
May‐13
Jul‐13
Sep‐13
Nov‐13
Jan‐14
Mar‐14
May‐14
Jul‐14
Sep‐14
Nov‐14
Jan‐15
Mar‐15
FIMMDA 3 YR AAA FIMMDA 5 YR AAA
Source: Bloomberg, PL Research
‘A’ rated corporate bond rates have rebounded after bottoming out near ~9%
9.0
9.5
10.0
10.5
11.0
11.5
12.0
Jun‐11
Sep‐11
Dec‐11
Mar‐12
Jun‐12
Sep‐12
Dec‐12
Mar‐13
Jun‐13
Sep‐13
Dec‐13
Mar‐14
Jun‐14
Sep‐14
Dec‐14
Mar‐15
FIMMDA 3 YR A FIMMDA 5 YR A
Source: Company Data, PL Research

8.
April 10, 2015 43
Jan‐Mar 2015 Earnings Preview
Valuation Metrics
Rating
MCap
(Rs B)
CMP
(Rs)
Price
Target (Rs)
Upside
P/E P/B ROE
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Axis BUY 1,346 568 620 9.1 18.3 15.1 12.4 3.2 2.7 2.3 17.7 18.4 19.1
HDFCB BUY 2,613 1,043 1,200 15.1 24.6 20.3 16.4 4.4 3.8 3.2 19.7 19.1 20.2
ICICIB BUY 1,845 318 390 22.5 13.0 10.9 9.3 2.3 2.0 1.8 17.7 18.7 19.3
IIB BUY 500 945 1,000 5.8 27.6 21.3 16.1 5.0 4.2 3.4 19.1 20.9 22.8
Yes BUY 352 843 930 10.4 16.4 14.4 11.8 3.0 2.6 2.2 21.2 19.3 20.3
Kotak Accumulate 1,099 1,422 1,430 0.5 41.2 34.5 28.3 5.5 4.8 4.2 16.9 15.9 14.8
ING Under Review 196 1,020 NA NA 29.7 23.3 19.7 2.6 2.4 2.2 9.0 10.6 11.4
Federal BUY 110 129 165 28.2 11.5 10.0 8.2 1.5 1.3 1.2 13.1 13.7 15.0
J&K Bank Accumulate 50 103 135 30.7 8.9 5.7 4.2 1.0 0.9 0.7 9.6 13.8 16.4
SIB BUY 35 26 35 34.9 8.6 6.2 4.9 1.1 0.9 0.8 12.1 15.1 17.1
BOB BUY 374 174 220 26.3 10.1 7.8 6.6 1.3 1.1 1.0 10.0 11.9 12.7
BOI BUY 146 219 285 30.2 5.0 5.9 4.3 0.8 0.8 0.7 7.7 9.9 11.9
PNB Reduce 296 164 175 7.0 7.8 6.1 4.8 1.3 1.1 0.9 10.2 11.7 13.2
SBI BUY 2,162 286 350 22.5 13.4 11.3 9.1 1.7 1.5 1.3 10.9 12.3 13.7
Union BUY 103 161 255 58.1 5.8 4.3 3.3 0.8 0.7 0.6 13.1 15.1 16.3
IDFC Accumulate 280 176 175 (0.6) 14.2 12.3 12.2 1.4 1.3 1.2 10.5 10.8 10.1
HDFC Accumulate 2,032 1,290 1,360 5.4 25.9 23.7 20.4 6.5 5.5 4.6 20.3 21.1 21.6
LICHF BUY 233 461 490 6.3 15.4 12.4 10.0 2.8 2.3 1.9 18.6 19.5 20.3
MMFS Accumulate 153 269 280 4.2 20.0 14.4 11.3 3.3 3.1 2.8 14.1 17.4 19.4
STFC BUY 258 1,136 1,200 5.6 18.5 15.3 12.8 2.8 2.5 2.3 15.7 16.5 17.1
Source: Company Data, PL Research
Stock Performance (Banks)
1M 3M 6M 12M 1M 3M 6M 12M
Axis Bank (3.0) 14.8 49.8 88.9 (3.6) 9.6 40.0 61.7
Bank of Baroda (3.1) (17.9) 1.4 10.7 (3.7) (23.0) (8.4) (16.5)
Bank of India (0.2) (25.4) (8.2) (8.0) (0.8) (30.6) (18.0) (35.2)
Federal Bank (7.2) (13.8) 0.2 31.0 (7.8) (18.9) (9.6) 3.9
HDFC Bank (0.9) 6.9 20.2 41.0 (1.5) 1.7 10.4 13.9
ICICI Bank (4.6) (6.9) 9.1 27.6 (5.2) (12.1) (0.7) 0.5
IndusInd Bank 5.4 17.9 51.7 84.5 4.8 12.7 41.8 57.4
ING Vysya Bank 7.3 8.0 65.6 66.7 6.7 2.9 55.8 39.6
Jammu & Kashmir Bank (4.4) (30.1) (23.6) (40.5) (4.9) (35.3) (33.4) (67.7)
Kotak Mahindra Bank 5.5 4.5 41.8 77.1 4.9 (0.7) 32.0 49.9
Punjab National Bank 0.1 (20.8) (9.1) 4.5 (0.5) (26.0) (18.9) (22.6)
South Indian Bank (0.2) (13.6) 3.0 7.9 (0.8) (18.8) (6.8) (19.2)
State Bank of India (0.6) (5.8) 16.6 40.9 (1.2) (10.9) 6.8 13.8
Union Bank of India (5.7) (30.0) (19.8) 6.2 (6.3) (35.2) (29.6) (20.9)
YES Bank 1.8 10.3 47.0 88.6 1.2 5.1 37.2 61.4
Absolute Relative to Sensex
Source: Bloomberg, PL Research

9.
April 10, 2015 44
Jan‐Mar 2015 Earnings Preview
Stock Performance (Financial Services)
1M 3M 6M 12M 1M 3M 6M 12M
HDFC (1.7) 15.9 28.2 39.2 (2.3) 10.7 18.4 12.0
Infrastructure Development Finance Corporation 2.7 14.3 25.8 41.2 2.1 9.1 16.0 14.1
LIC Housing Finance (1.9) (2.6) 47.6 72.3 (2.5) (7.8) 37.8 45.2
Mahindra & Mahindra Financial Services 4.4 (14.7) (5.6) 9.2 3.8 (19.9) (15.4) (17.9)
Shriram Transport Finance (4.7) 7.1 29.6 45.4 (5.2) 1.9 19.8 18.2
Absolute Relative to Sensex
Source: Bloomberg, PL Research
Banking
Summary Financials ‐ Quarterly (Rs m)
Q4FY15E Q4FY14 YoY gr. (%) Q3FY15 QoQ gr. (%) 12MFY15E 12MFY14 YoY gr. (%)
NII 38,480 31,658 21.6 35,896 7.2 147,017 119,516 23.0
PPP 38,622 32,477 18.9 33,146 16.5 140,135 114,561 22.3
NIM Calculated (%) 3.9 3.8 10 bps 3.9 2 bps 3.5 3.3 21 bps
PAT 21,742 18,423 18.0 18,998 14.4 73,109 62,177 17.6
NII 33,920 31,243 8.6 32,861 3.2 130,219 119,653 8.8
PPP 25,324 25,796 (1.8) 23,390 8.3 95,346 92,910 2.6
NIM Calculated (%) 2.3 2.3 1 bps 2.2 10 bps 1.9 2.0 (8)bps
PAT 8,516 11,728 (27.4) 3,340 155.0 37,245 45,411 (18.0)
NII 28,957 30,473 (5.0) 27,802 4.2 115,867 108,305 7.0
PPP 18,421 19,961 (7.7) 18,654 (1.2) 84,389 84,229 0.2
NIM Calculated (%) 2.2 2.3 (12)bps 2.2 4 bps 1.9 2.1 (22)bps
PAT 4,901 5,575 (12.1) 1,734 182.7 23,715 27,293 (13.1)
NII 6,407 6,251 2.5 5,872 9.1 23,979 22,286 7.6
PPP 3,985 4,200 (5.1) 3,974 0.3 15,572 14,804 5.2
NIM Calculated (%) 3.2 3.0 25 bps 3.0 16 bps 3.0 3.1 (3)bps
PAT 2,297 2,773 (17.1) 2,647 (13.2) 9,550 8,389 13.8
NII 58,289 49,526 17.7 56,999 2.3 221,163 184,826 19.7
PPP 46,691 37,793 23.5 47,786 (2.3) 174,508 143,601 21.5
NIM Calculated (%) 4.3 4.4 (10)bps 4.4 (10)bps 4.1 4.1 (3)bps
PAT 28,387 23,265 22.0 27,945 1.6 103,313 84,784 21.9
NII 49,864 43,565 14.5 48,117 3.6 198,759 164,756 20.6
PPP 51,465 44,535 15.6 50,370 2.2 197,507 165,946 19.0
NIM Calculated (%) 3.4 3.4 7 bps 3.5 (4)bps 3.1 2.9 16 bps
PAT 29,086 26,520 9.7 28,897 0.7 113,652 98,105 15.8
NII 9,261 7,812 18.6 8,614 7.5 35,388 28,907 22.4
PPP 8,578 7,191 19.3 7,738 10.9 32,286 25,960 24.4
NIM Calculated (%) 3.7 3.8 (9)bps 3.9 (13)bps 3.6 3.6 1 bps
PAT 4,995 3,961 26.1 4,472 11.7 18,015 14,080 27.9
ICICI Bank
Axis Bank
Bank of Baroda
Bank of India
Federal Bank
HDFC Bank
IndusInd Bank
Source: Company Data, PL Research

10.
April 10, 2015 45
Jan‐Mar 2015 Earnings Preview
Summary Financials ‐ Quarterly (Rs m)
Q4FY15E Q4FY14 YoY gr. (%) Q3FY15 QoQ gr. (%) 12MFY15E 12MFY14 YoY gr. (%)
NII 5,222 4,713 10.8 4,917 6.2 19,738 17,532 12.6
PPP 3,439 2,500 37.6 2,801 22.8 12,576 11,275 11.5
NIM Calculated (%) 3.5 3.6 (11)bps 3.4 9 bps 3.1 3.0 1 bps
PAT 1,778 1,391 27.8 1,457 22.1 6,470 6,579 (1.6)
NII 7,353 7,012 4.9 6,387 15.1 27,036 26,845 0.7
PPP 4,636 4,814 (3.7) 3,805 21.8 17,240 18,998 (9.3)
NIM Calculated (%) 4.1 4.0 4 bps 3.7 38 bps 3.4 3.6 (19)bps
PAT 1,586 2,506 (36.7) 1,046 51.6 5,656 11,825 (52.2)
NII 11,595 9,665 20.0 10,594 9.4 53,244 48,382 10.0
PPP 7,618 6,071 25.5 7,376 3.3 41,949 37,669 11.4
NIM Calculated (%) 4.9 5.2 (27)bps 4.6 25 bps 4.4 4.5 (7)bps
PAT 5,223 4,072 28.3 4,645 12.4 27,211 22,859 19.0
NII 43,821 40,018 9.5 42,331 3.5 168,899 161,460 4.6
PPP 29,336 31,734 (7.6) 27,507 6.6 115,618 113,845 1.6
NIM Calculated (%) 3.2 3.2 4 bps 3.2 3 bps 2.9 3.1 (25)bps
PAT 9,508 8,064 17.9 7,746 22.8 38,195 33,426 14.3
NII 3,738 3,647 2.5 3,199 16.8 13,929 13,988 (0.4)
PPP 2,252 2,049 9.9 2,194 2.7 9,199 8,843 4.0
NIM Calculated (%) 2.8 3.0 (19)bps 2.5 26 bps 2.4 2.7 (26)bps
PAT 964 1,246 (22.7) 879 9.6 3,872 5,075 (23.7)
NII 141,211 129,028 9.4 137,766 2.5 542,852 492,822 10.2
PPP 106,738 106,278 0.4 92,945 14.8 363,438 321,092 13.2
NIM Calculated (%) 3.7 3.2 53 bps 3.3 38 bps 2.8 2.9 (9)bps
PAT 35,072 30,407 15.3 29,101 20.5 134,992 108,912 23.9
NII 22,103 20,522 7.7 21,212 4.2 88,809 78,793 12.7
PPP 14,522 13,198 10.0 14,653 (0.9) 55,959 52,181 7.2
NIM Calculated (%) 3.0 2.6 40 bps 2.5 45 bps 2.4 2.4 0 bps
PAT 4,690 5,790 (19.0) 3,024 55.1 23,679 16,962 39.6
NII 9,844 7,196 36.8 9,090 8.3 34,913 27,163 28.5
PPP 9,154 6,804 34.5 8,627 6.1 33,478 26,880 24.5
NIM Calculated (%) 3.8 3.1 68 bps 3.6 14 bps 2.9 2.6 34 bps
PAT 5,659 4,302 31.5 5,403 4.7 19,906 16,178 23.0
Union Bank of
India
YES Bank
South Indian Bank
State Bank of India
ING Vysya Bank
Jammu & Kashmir
Bank
Kotak Mahindra
Bank
Punjab National
Bank
Source: Company Data, PL Research

11.
April 10, 2015 46
Jan‐Mar 2015 Earnings Preview
Financial Services
Summary Financials ‐ Quarterly (Rs m)
Q4FY15E Q4FY14 YoY gr. (%) Q3FY15 QoQ gr. (%) 12MFY15E 12MFY14 YoY gr. (%)
NII 24,689 21,410 15.3 20,166 22.4 80,014 70,030 14.3
PPP 26,702 23,831 12.0 21,095 26.6 76,865 66,701 15.2
PAT 18,350 17,231 6.5 14,255 28.7 59,776 54,402 9.9
NII 6,504 6,680 (2.6) 6,620 (1.7) 26,434 27,040 (2.2)
PPP 6,397 8,340 (23.3) 7,820 (18.2) 31,920 31,912 0.0
PAT 4,009 2,580 55.4 4,200 (4.5) 17,259 18,022 (4.2)
NII 6,399 5,331 20.0 5,486 16.7 22,219 19,158 16.0
PPP 6,000 4,993 20.2 5,283 13.6 19,877 17,106 16.2
PAT 3,927 3,700 6.1 3,443 14.0 15,156 13,172 15.1
NII 8,073 7,627 5.8 7,388 9.3 29,632 27,336 8.4
PPP 5,534 5,439 1.7 4,771 16.0 19,915 18,516 7.6
PAT 2,571 3,107 (17.3) 1,364 88.5 7,558 8,872 (14.8)
NII 8,847 6,368 38.9 9,183 (3.7) 37,290 34,226 9.0
PPP 7,425 6,658 11.5 7,822 (5.1) 30,552 28,574 6.9
PAT 3,160 2,950 7.1 3,125 1.1 12,370 12,642 (2.2)
HDFC
Infrastructure
Development
Finance
Corporation
LIC Housing
Finance
Mahindra &
Mahindra
Financial Services
Shriram Transport
Finance
Source: Company Data, PL Research
Consolidated Sectoral Data (Banks)
Quarterly Table (Rs m)
Jan‐Mar'15 Jan‐Mar'14 YoY gr. (%) Oct‐Dec'14 QoQ gr. (%)
NII 470,064 422,329 11.3 451,657 4.1
PPP 370,783 345,401 7.3 344,967 7.5
PAT 164,405 150,023 9.6 141,333 16.3
Consolidated Sectoral Data (Financial Services)
Quarterly Table (Rs m)
Jan‐Mar'15 Jan‐Mar'14 YoY gr. (%) Oct‐Dec'14 QoQ gr. (%)
NII 54,513 47,417 15.0 48,842 11.6
PPP 52,057 49,261 5.7 46,792 11.3
PAT 32,016 29,568 8.3 26,387 21.3
Note: NII, PPP and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector.
Key Figures (Rs m)
2015E 2016E 2017E
NII 1,821,812 2,125,786 2,511,529
Growth (%) 12.8 16.7 18.1
PPP 1,389,199 1,641,892 1,969,076
Growth (%) 12.7 18.2 19.9
PAT 638,580 792,094 972,908
Growth (%) 13.6 24.0 22.8
PE (x) 17.2 13.8 11.3
Key Figures (Rs m)
2015E 2016E 2017E
NII 195,589 232,446 274,874
Growth (%) 10.0 18.8 18.3
PPP 179,129 210,448 248,965
Margin (%) 91.6 90.5 90.6
PAT 112,119 135,141 158,534
Growth (%) 4.7 20.5 17.3
PE (x) 26.2 21.8 18.6

12.
Jan‐Mar 2015 Earnings Preview
April 10, 2015 134
Prabhudas Lilladher Pvt. Ltd.
3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai‐400 018, India
Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
Rating Distribution of Research Coverage PL’s Recommendation Nomenclature
44.6%
39.1%
16.3%
0.0%
0%
10%
20%
30%
40%
50%
BUY Accumulate Reduce Sell
% of Total Coverage
BUY : Over 15% Outperformance to Sensex over 12‐months
Accumulate : Outperformance to Sensex over 12‐months
Reduce : Underperformance to Sensex over 12‐months
Sell : Over 15% underperformance to Sensex over 12‐months
Trading Buy : Over 10% absolute upside in 1‐month
Trading Sell : Over 10% absolute decline in 1‐month
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly
DISCLAIMER/DISCLOSURES
ANALYST CERTIFICATION
We/I, Mr. R Sreesankar (B.Sc), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject
issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
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