INSTITUTIONAL RESEARCH

BANK NAVIGATOR
PVT Banks persistent, PSBs at attractive valuations

Darpin Shah darpin.shah@hdfcsec.com

Vishal Modi vishal.modi@hdfcsec.com +91-22-6171-7324

Sameer Narang sameer.narang@hdfcsec.com +91-22-6171-7327

5 June 2013

+91-22-6171-7328

4QFY13 : BANK NAVIGATOR

PVT Banks persistent , PSBs at attractive valuations

The divergence between performance of PVT and PSB banks continued during 4QFY13 as well. As expected, PVT banks continued with their superior performance across parameters (growth, NIM, C/I and asset quality). PSBs performance was disappointing with NIM compression, higher opex (wage provisions) and continued asset quality woes (though the pace of deterioration moderated). Steady and superior performance by PVT banks is likely to continue. PSBs performance so far has been unimpressive and further headwinds persist (wage provisions, increased restructured provisions and asset quality pressure). However with an expected uptick in the economy and interest rates heading south, PSBs offer an attractive trade. PSBs trade at valuations which are below historic averages and at a historic discount vis--vis private banks. Further, PSBs have underperformed (on 1M basis) both the CNX Bank Nifty and the PVT pack. PSBs have fallen 3% to 12%, while private banks have delivered returns between 1% to 9%. For FY13-15E, we expect our coverage universe to report Core earnings CAGR of 17% (PVT banks 21% and PSBs at 15%) driven by loan CAGR of 17% (PVT banks 19% and PSBs 16%). Net earnings are expected to grow at 18% CAGR (PVT banks 19%, PSBs 17%), after factoring credit cost of 105bps (vs. 110bps in FY13).

Top Picks
PNB : Leveraged play on the economy, superior return ratios vs. peers and management continuation. CBK : Best placed for falling interest rates (with SLR at 39%), higher Tier I and lower CD ratio propel well for growth. OBC : Delivers within guidance in difficult environment, debulking balance sheet and improving CASA and NIMs. Attractive valuations. ICICIBC : Higher PAT growth vs. balance sheet growth, steady improvement in NIMs, controlled opex and credit cost. Capital repatriation from foreign sub is positive. FB : Lower leverage (Tier I at 14.1%). Revamped underwriting and risk functions to benefit asset quality. Significant branch addition in the last two years to drive growth and improve CASA.

4QFY13 : BANK NAVIGATOR

4QFY13 Review : The quarter gone by

PVT Banks : steady performance
PVT banks delivered a yet another quarter of steady and sustained performance. Higher than industry business growth, stable NIMs and controlled asset quality led to better than expected core and net earnings. AXSB, IIB, VYSB and YES reported better than estimated earnings and maintained stable asset quality . FB disappointed with higher slippages in the corp loan segment. We have marginally upgraded our estimates for PVT banks.

PSBs : NIM compression, higher opex / provisions dent OP

NIM compression, higher opex (wage revisions) and provisions (Loan loss, MTM and restructured assets) has dragged the performance of the entire PSB space. Treasury gains and tax reversals saved net earnings for PSBs. CRPBK, SBIN and PNB reported improvement in asset quality (QoQ). ALBK and DBNK disappointed across parameters. With the revised guidelines, few PSBs reported sequential decline in restructured assets . We have revised our earnings downwards for most of the PSB.

Key highlights
AXSB : PAT +22%; Slippages 0.8% ann.; NIM 3.7%. GNPA at 1.1%; restructured assets 2.2%. FB : PAT -7%, Slippages 3.4% ann. NIM 3.1%, Restructured book at 4.7%. ICICIBC : PAT +21% Slippages 1.1% ann. NIM 3.3%. GNPA at 3.2%; Restructured assets 1.8%. IIB : PAT +38%, Fee income +40%. Slippages 1.2% ann. NIM 3.7%. Loan growth 26% YoY. SIB : PAT +33%, Slippages 2% ann. NIM 3.2%, Restructured book at 5.2%. VYSB : PAT +34%, slippage 0.5% ann.; NIM 3.7%; PCR 98%. GNPA 1.8%. YES : PAT +33%, CASA 18.9%. NIM 3%. PCR 93%; +1300bps QoQ.

Key highlights
ALBK : PAT -68%; slippages 8.2% ann.; net impaired assets 13.4%; PAT downgrade ~17%. PNB : PAT -21%. Slippages 3.9% ann. Restructured book 10.4%. BOI : PAT -21%, Slippages 2.4% ann. Net impaired assets 7.6%. BOB : PAT -32%, Slippages 2.7% ann.; PAT downgrade 15%; Restructured book 7% . SBIN : PAT -19% Slippages 2.3% ann. NIM 3.3%; Loan book +20%. CBK : PAT -13%, Slippages 1.9% ann. SLR 29%; AFS 39%. Tier I 9.8%. UNBK : PAT +2.6x QoQ, Slippages 1.7%, Restructured assets 5.5%, Net impaired assets 7.1%. OBC : Slippages 3.3% ann. PAT +16%; NIM +14bps YoY; Restructured assets 7.7%, Net impaired assets 10%. 3

4QFY13 : BANK NAVIGATOR

Advances : PVT banks lead

Advances (Rs bn)
10,456

Rs bn

Banking sector reported credit growth of 14% YoY in FY13, 200bps below RBIs projections. Our coverage universe reported growth of 15.3% YoY (+7% QoQ), driven by ~16% YoY (+5% QoQ) growth in PVT banks. PSBs reported 15% YoY (+7.4% QoQ) growth. PSBs like SBIN, ANDB, CRPBK and UNBK, reported higher than PSB coverage growth. PVT banks like IIB, CUBK and YES reported higher than industry advances growth. We expect loan growth of 16% CAGR over FY13-15E, with PVT banks expected to report growth of ~19% CAGR.

3,282 3,087 2,930 2,902 2,422 2,397 2,119 1,970 1,963 1,309 1,290 1,187 1,072 1,001 665 470 443 441 392 318 318 297 153 66

Growth YoY (%)

26.4% 25.5% 24.6% 23.7% 22.7% 22.7% 20.5% 18.5% 18.2% 18.2% 17.5% 17.1% 16.8% 16.6% 16.6% 16.5% 16.3% 16.0% 15.2% 14.4% 14.2% 10.6% 8.4% 5.1% 4.2%

SBIN BOB PNB BOI ICICIBC CBK HDFCB UNBK AXSB IDBI ALBK OBC CRPBK INBK ANDB DBNK YES IIB FED J&K SIB VYSB KVB CUBK DEVB

Growth QoQ (%)

De-bulking balance sheet
3.8% 4.3% 4.5% 5.4% 5.7% 6.0% 6.9% 7.2% 7.2% 7.7% 8.7% 9.6% 9.6% 9.7% 9.9% 10.4% 10.9% 11.0% 11.5% 11.7% 13.7% 15%

IIB CUBK DEVB YES KVB HDFCB SBIN J&K ANDB CRPBK INBK UNBK FED ALBK SIB BOI DBNK AXSB OBC ICICIBC BOB VYSB IDBI PNB CBK

Source: Bank, HDFC sec Inst Research

HDFCB VYSB ICICIBC PNB OBC IIB DBNK CUBK BOI SBIN YES INBK ALBK KVB SIB BOB AXSB J&K DEVB ANDB CBK UNBK FED CRPBK IDBI

-0.7% 0.5% 1.2%

4QFY13 : BANK NAVIGATOR

Sector deployment : Industry growth in slow lane

Advances (Rs bn)
Agri 12% Textiles 4% Others 21%

Pers loans 18%

Metals 6% Industry 45%

Advances for banking sector grew at 14% YoY for FY13 , 200bps below RBIs projections. Agri growth slowed at 8%. Industry segment grew at 15.7%. Services growth slowed down to 13.6% YoY, while personal loans grew at 14.5% YoY. Within services, trade continued to grow at a healthy 24%, while growth in the NBFC segment slowed down to 15% (30% YoY in FY12). Amongst industry segments, infra grew 16.5% YoY (power grew 26%), metals at 21% YoY.

Services 24% Infrastructure 15%

Sector credit growth at 14% YoY for FY13

% YoY

Wedge between credit and deposit growth narrowed

10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10%

30%

20%

10%

Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13

Sep-09

Sep-10

Sep-11

Mar-09

Mar-10

Mar-11

Mar-12

Sep-12

Source: Bank, HDFC sec Inst Research

Mar-13

Dec-09

Dec-10

Dec-11

Dec-12

Jun-09

Jun-10

Jun-11

Jun-12

4QFY13 : BANK NAVIGATOR

Deposits : year-end push , sustainability is a challenge

Deposits (Rs bn)
Rs bn
12,027

Deposits growth YoY (%)

36% 32% 28% 26% 24% 23% 22% 21% 20% 20% 20% 20% 18% 18% 18% 17% 17% 15% 15% 15% 13% 12% 9% 8%

SBIN BOB PNB BOI CBK HDFCB ICICIBC UNBK AXSB IDBI ALBK OBC CRPBK INBK ANDB DBNK YES J&K FED IIB SIB VYSB KVB CUBK DEVB

Deposits grew at 14.3% YoY (March 2013). Reduction in bulk deposits and yea-end spike in low cost deposits was visible with improvement in CASA ratio. Our coverage universe reported deposits growth of 15% YoY (+6.5% QoQ), driven by ~17.7% YoY (5.6% QoQ) growth in PVT banks. PSBs reported 14.5% YoY (+6.7% QoQ) growth. PSBs like Dena, BoB and CRPBK, beat their PSB peers. Amongst PVT Banks YES, IIB and SIB reported higher growth. We expect deposits growth of 16% CAGR over FY13-15E, with Private banks expected to report growth of ~19%, while PSB will report 15% growth.

4,739 3,916 3,818 3,559 2,962 2,926 2,638 2,526 2,271 1,787 1,759 1,660 1,420 1,238 972 670 642 576 541 443 413 387 203 84

Deposits growth QoQ (%)

22%

CASA drives growth

15% 14% 14% 13% 12% 11% 10% 10% 10% 10% 9% 9%

Continues to shed bulk deposits

19% 18%

7% 6% 5% 5% 4% 4% 4% 3%

3%

Source: Bank, HDFC sec Inst Research

YES DEVB IIB DBNK CUBK BOB CRPBK SIB J&K KVB HDFCB BOI UNBK FED INBK VYSB ANDB SBIN AXSB ICICIBC OBC ALBK CBK IDBI PNB

IDBI YES CRPBK DBNK BOB SIB J&K FED DEVB UNBK ANDB CBK VYSB BOI KVB CUBK IIB INBK ALBK OBC HDFCB SBIN AXSB ICICIBC PNB

2% 1%

4QFY13 : BANK NAVIGATOR

CASA : CA drives QoQ improvement

CASA (Rs bn)
Rs bn
5,255

23 34 74 82 127 134 155 159 252 280 318 360 391 432 549 571 816 861 938 1,121 1,199 1,226 1,405 1,533

For our coverage universe, CASA deposits grew 15% YoY (+8% QoQ), driven by ~18% YoY growth in PVT banks. PSBs reported 14.4% YoY and 7.6% QoQ growth. PSBs like CRPBK, UNBK and BoB reported 16-20% YoY growth. Yes, (72%), IIB (37%) and AXSB (23%) reported strong growth amongst PVT banks. As expected, CA segment reported a strong 30% QoQ growth driven by 40% growth in the PSBs. PVT banks reported 12% QoQ growth. Banks like CRPBK and IDBI reported 50% QoQ growth. CASA ratio for our coverage universe remained flat YoY (+45bps QoQ) with steady YoY (+27bps QoQ) ratio for PSBs. PVT Banks reported a rise of 17bps YoY (+124bps QoQ). Dena, INBK, BoB and BoI reported YoY fall in CASA proportion, while PNB, IDBI and OBC reported improvement. On QoQ basis, IDBI, PNB and SBIN reported sharp improvement.

CASA change YoY and QoQ (%)

80% 70% 60% 50% 40% 30% 20% 10% 0% YoY QoQ

DEVB CUBK KVB SIB YES VYSB FED IIB J&K DBNK ANDB CRPBK INBK OBC ALBK IDBI UNBK CBK BOI AXSB BOB ICICIBC HDFCB PNB SBIN

CASA Ratio (%)

47% 44% 44% 42% 39% 39%

YES IIB AXSB KVB CRPBK HDFCB UNBK J&K FED BOB BOI OBC SBIN CUBK SIB PNB ANDB ALBK IDBI DEVB VYSB ICICIBC CBK INBK DBNK

Source: Bank, HDFC sec Inst Research

HDFCB AXSB SBIN ICICIBC J&K PNB VYSB UNBK ALBK IIB DBNK INBK DEVB FED ANDB BOB IDBI BOI OBC CBK CRPBK KVB YES SIB CUBK

33% 31% 31% 29% 29% 28% 27% 27% 26% 25% 25% 25% 25% 24% 22% 19% 19% 19% 17%

SA growth 141%

CA growth 58% QoQ

~100ps / qtr

4QFY13 : BANK NAVIGATOR

Core Earnings : PVT banks lead

Core Earnings (Rs bn)
Rs bn
111

1 2 3 3 4 5 6 6 6 7 9 10 11 11 12 14 20 21 25 27 28

38 38 43

NII growth YoY (%)

43% 42% 42% 33% 27% 24% 23% 22% 21% 19% 19% 17% 14% 14% 12% 5% 4% 2% 2% 1%

DEVB CUBK KVB SIB VYSB FED DBNK J&K YES IIB CRPBK ANDB ALBK INBK OBC IDBI UNBK CBK BOI AXSB BOB PNB ICICIBC HDFCB SBIN

NII under our coverage universe grew a mere 5% YoY and +2% QoQ (ex SBIN : 10% YoY and 3% QoQ) with PVT banks recording 24% YoY (+7% QoQ) and PSB reporting flat YoY and QoQ growth (ex SBIN : 3.5% and 1% QoQ). PSBs muted performance was driven by NIM compression. Within covered PSBs, PNB and OBC reported 14% growth. ALBK disappointed with 18% de-growth. PVT banks surprised positively on core earnings growth. Amongst PVT banks, YES and IIB grew 42% YoY each, ICICIBC and AXSB reported +22% YoY growth. FB reported decline of 3% with higher slippages and NIM compression.

NII growth QoQ (%)

Higher interest reversals; NIM compression
14.4% 13.2% 9.2% 8.7% 7.9% 7.3% 6.8% 6.6% 6.0% 5.4% 5.2% 5.2% 4.7% 1.9% 1.2% 0.8% 0.6%

PSBs disappoint

Source: Bank, HDFC sec Inst Research

DEVB IIB YES VYSB CUBK AXSB J&K ICICIBC HDFCB IDBI KVB SIB PNB OBC CRPBK UNBK ANDB CBK INBK BOB -1% BOI -3% FED -5% SBIN DBNK -6% ALBK -18%

IIB DEVB YES ICICIBC HDFCB BOI AXSB J&K CUBK CRPBK VYSB CBK UNBK IDBI PNB OBC KVB -0.7% SBIN -0.9% BOB -1.8% ANDB -3.2% INBK -3.7% FED -5.4% SIB DBNK -8.6% ALBK -20.6%

4QFY13 : BANK NAVIGATOR

NIM : under pressure for PSBs

NIM (%)
4.5% 4.1% 3.7% 3.7% 3.7% 3.5% 3.5% 3.4% 3.3% 3.3% 3.2% 3.1% 3.1% 3.0% 3.0% 2.9% 2.9% 2.8% 2.7% 2.5% 2.5% 2.4% 2.3% 2.3% 2.2%

CD Ratio (%)
61% 68% 68% 69% 70% 72% 72% 73% 73% 75% 76% 77% 77% 77% 77% 78% 79% 79% 80% 81% 81% 82% 86% 87% 99%

HDFCB J&K VYSB AXSB IIB DEVB PNB CUBK SBIN ICICIBC SIB FED KVB ANDB YES UNBK INBK OBC BOB BOI DBNK CBK CRPBK ALBK IDBI

NIM compression was for PSBs, with higher interest income reversals and reduction in spreads/base rates. PVT banks continued to report improvement in NIMs. ALBK, DBNK, SBIN and BoI - amongst PSBs reported a sharp fall YoY. OBC and IDBI reported improvement in NIMs. On QoQ basis, ALBK, DBNK and ANDB reported sharp fall in NIMs Amongst PVT Banks : VYSB, IIB and ICICIBC reported YoY improvement. We expect NIMs to remain stable for PVT banks and marginally decline for PSBs. Better asset mix, steady CASA traction and lower slippages will benefit PVT banks in maintaining NIM.

Best placed

CD ratio for the coverage universe has remained flat on YoY and QoQ basis. PSBs CD Ratio marginally inched up by 50bps QoQ (YoY flat) to 78.5%. Banks like - DNBK, BOB and CBK reporting sharp fall of +300bps YoY. PVT banks CD ratio declined 110bps YoY and 40bps QoQ with YES, VYSB and DEVB reporting a sharp fall (470bps+).

Source: Bank, HDFC sec Inst Research

J&K CBK DBNK BOB YES CRPBK SIB ALBK OBC INBK CUBK FED BOI KVB VYSB AXSB DEVB PNB UNBK ANDB HDFCB IIB IDBI SBIN ICICIBC

4QFY13 : BANK NAVIGATOR

Yield and Cost movement : Both headed lower

Yield on Advances (%)
13.5% 13.4% 12.8% 12.7% 12.7% 12.4% 12.4% 11.9% 11.9% 11.8% 11.8% 11.5% 11.4% 11.3% 11.1% 11.1% 10.7% 10.6% 10.6% 10.5% 10.5% 10.4% 9.7%

Due to high proportion of foreign book

Reduction in base rate, lowering spreads in selective segments / products and higher slippages weighed on yields for the PSBs. Only CBK and IDBI reported improvement in yields on YoY basis. On QoQ basis, coverage PSBs reported a decline of 20-100bps in yields. ALBK (98bps) and OBC (45bps) reported sharp decline. PVT banks reported marginal decline in yields on YoY basis. FB reported a sharpest decline with higher slippages and FITL.

Cost of funds (%)

Higher proportion of foreign deposits
6.2% 6.3% 6.4% 6.5% 6.6% 6.7%

IIB CUBK DEVB SIB KVB J&K YES ANDB VYSB OBC HDFCB CRPBK FED DBNK CBK UNBK PNB INBK IDBI SBIN ALBK AXSB ICICIBC BOB BOI

8.6% 8.6%

7.5% 7.7% 7.7% 7.8% 7.8% 7.9% 8.0% 8.1% 8.1% 8.2% 8.3% 8.4%

The entire banking industry reported decline in cost of deposit / funds QoQ, with fall in bulk deposits proportion, reduction in deposits rates and higher CASA proportion. Sharp growth in CASA deposits enabled, YES and IIB to report ~40bps QoQ fall in CoD.

7.1%

7.1%

7.3%

5.8%

Source: Bank, HDFC sec Inst Research

BOB BOI ICICIBC HDFCB SBIN UNBK AXSB PNB J&K INBK VYSB ALBK FED DBNK CBK OBC DEVB ANDB CRPBK IIB YES KVB SIB IDBI

5.8%

6.0%

10

4QFY13 : BANK NAVIGATOR

Non-Interest income: treasury gains aid growth

Non-Interest income (Rs bn)
Rs bn
55.5

Aggregate noninterest income of the banks under our universe grew 12% YoY (+28% QoQ), driven by PSBs (largely due to treasury gains) Treasury gains (and to some extent recoveries) drove the growth in non interest income for PSBs, while PVT banks continued their superior performance in the core fee income segment. Less fee income avenues, reduction in various charges and muted performance in loan growth is expected to have an impact on PSBs fee income. However, with the fall in interest rates, PSBs would benefit from treasury gains.

22.1 20.1 18.0 11.9 11.7 11.5 10.9 10.1 8.8 5.7 5.2 4.6 4.6 3.8 3.7 3.5 2.4 2.1 2.0 2.0 1.6 1.2 0.8 0.3

Growth YoY (%)

Boosted by treasury gains Dragged by lower treasury gains
131%

SBIN ICICIBC AXSB HDFCB BOB PNB IDBI BOI CBK UNBK CRPBK ALBK OBC INBK YES IIB ANDB DBNK J&K VYSB FED KVB SIB CUBK DEVB

Growth QoQ (%)

71% J&K 54% ANDB 50% INBK 48% ALBK 48% IDBI 47% SIB 42% YES 41% KVB 34% OBC 34% CRPBK 33% BOB 32% CUBK 31% CBK 26% AXSB 26% IIB 23% FED 18% DEVB 16% UNBK 13% BOI 12% DBNK 11% HDFCB 5% SBIN 2% VYSB ICICIBC -1% PNB -8%

92% 83%

Source: Bank, HDFC sec Inst Research

J&K INBK SIB DBNK ALBK SBIN KVB ANDB CRPBK BOB UNBK IDBI AXSB CUBK OBC YES PNB CBK BOI DEVB VYSB IIB ICICIBC 0% FED -3% HDFCB -6%

63% 54% 52% 50% 49% 47% 42% 37% 32% 24% 22% 22% 21% 21% 19% 17% 14% 7% 3%

11

Treasury gains (Rs bn)

22.5%
2.9 2.7
% YoY

24.5%
Rs bn
2.5 2.4 2.4 2.3 1.6 1.6 1.3 1.2 1.1 1.0 0.9 0.8 0.8 0.7 0.7 0.6 0.6 0.2 0.1 0.1 0.063 0.052

26.5%

28.5%

30.5%

32.5%

34.5%

Source: Bank, HDFC sec Inst Research

Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 BOB PNB CBK AXSB UNBK SBIN BOI IDBI INBK CRPBK ANDB ALBK ICICIBC J&K DBNK YES OBC HDFCB FED IIB SIB CUBK VYSB DEVB

SLR (%) : Banks holding excess ~420bps

As % of operating profit

Treasury gains : drives non interest income for PSBs

10yr Gsec (%) : headed lower

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10-year G-sec

2% 2% 3% 3% 3%

Saver for PSBs

21% 22%

6% 7% 7% 8% 8% 9% 10% 11% 12% 13% 13% 13% 14% 15% 15% 16% 16%

4QFY13 : BANK NAVIGATOR

12

Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13

HDFCB VYSB ICICIBC SBIN IIB CUBK SIB OBC BOI AXSB PNB IDBI YES DEVB ALBK BOB CRPBK UNBK ANDB CBK FED J&K DBNK INBK

4QFY13 : BANK NAVIGATOR

OPEX : continues to rise for PSBs

Total Opex cost (Rs bn)
100 90 80 70 60 50 40 30 20 10 0 Rs bn Other Staff

SBIN PNB BOB HDFCB ICICIBC CBK BOI INBK UNBK AXSB ALBK IDBI OBC ANDB CRPBK DBNK J&K VYSB IIB YES SIB FED KVB CUBK DEVB

Aggregate opex increased 15% YoY (14% QoQ) led by PSBs growth (16% YoY and QoQ); PVT banks opex grew 13% YoY (8% QoQ). Staff cost shot up 8% YoY (+15% QoQ) on back of 9% YoY and 17% QoQ rise in PSBs . PVT banks staff cost increased ~5% YoY. PSBs have made provisions for the expected wage revision. Lower earnings and continued rise in opex led to 530bps YoY rise in the C/I ratio for PSBs. However, PVT banks reported an improvement of 265bps YoY. NIM compression, higher wage provisions would impact C/I ratios (ex treasury) for PSBs .

Opex growth YoY (%)

69%

C/I Ratio (%)

Steady improvement QoQ
64% 62%

INBK KVB J&K YES CRPBK IIB PNB IDBI CUBK ANDB SIB SBIN DBNK HDFCB DEVB VYSB UNBK BOB OBC AXSB FED ALBK ICICIBC CBK BOI

43% 38% 35% 30% 29% 27% 25% 25% 23% 22% 20% 19% 18% 17% 15% 13% 11% 11% 10% 10% 10% 8% 6% 2.8%

Source: Bank, HDFC sec Inst Research

INBK DEVB SIB VYSB SBIN ALBK HDFCB DBNK KVB IIB BOB FED ANDB CBK OBC PNB BOI CUBK UNBK AXSB ICICIBC CRPBK IDBI YES J&K

55% 54% 53% 51% 51% 50% 49% 47% 46% 45% 45% 45% 44% 42% 42% 41% 41% 40% 40% 38% 38% 38% 36%

Wage cost drives opex

13

4QFY13 : BANK NAVIGATOR

Provisions : led by loan loss and restructured provisions

Other provisions (Rs bn)
41.8

Rs bn

Led by NPA provisions and restructured assets provisions

Aggregate other provisions jumped 54% YoY (+45% QoQ) driven by 87% YoY and +38% QoQ rise by PVT banks. PSBs reported 51% YoY and 46% QoQ increase. NPA provisions continue to increase for the PSBs with BoI, IDBI and ANDB reporting sharp increase. Banks like PNB, CBK and CRPBK reported YoY decline. MTM provisions also impacted PSBs.

16.4 15.1 14.8

Growth YoY (%)

1198%

SBIN BOB BOI PNB IDBI OBC CBK UNBK ALBK AXSB INBK ICICIBC CRPBK ANDB DBNK HDFCB J&K FED YES KVB IIB SIB CUBK VYSB DEVB

8.7 7.6 7.5 6.6 6.2 6.0 4.8 4.6 4.6 3.7 3.4 3.0 1.8 1.0 1.0 0.9 0.8 0.7 0.4 0.3 0.1

% of OP
NPA provisions continue to drag performance
10% 12% 13% 15% 15% 21% 21% 27% 29% 32% 33% 37% 39% 44% 50% 51% 52% 54% 55% HDFCB VYSB ICICIBC IIB YES DEVB AXSB FED CUBK SIB J&K KVB UNBK CBK CRPBK ANDB PNB SBIN IDBI BOI BOB OBC ALBK INBK DBNK 73% 75% 80% 81% 84% 85%

Source: Bank, HDFC sec Inst Research

KVB 533% FED 434% SIB 327% AXSB 242% YES 217% IDBI 115% BOI 112% J&K 94% BOB 78% IIB 63% CBK 50% ANDB 48% CUBK 44% PNB 42% OBC 37% ALBK 36% CRPBK 34% DEVB 33% SBIN 27% UNBK 17% DBNK ICICIBC -2% INBK -15% HDFCB -27% VYSB -41%

14

4QFY13 : BANK NAVIGATOR

Loan loss : remains elevated for PSB

NPA provisions (Rs bn)
Rs bn
39.7

Loan loss provisions jumped 28% YoY and QoQ; driven by PSBs growth of 28% YoY and 33% QoQ. Ex SBIN, PSBs reported 18% growth. PVT too reported 29% YoY growth (-2% QoQ). Despite a higher base, PSBs continued to report higher loan loss provisions. Banks like SBIN, BoI and IDBI reported surge in provisions. While PNB and CBK reported YoY decline. We have factored in credit cost of ~105bps for our coverage universe, with avg credit cost of 115bps for PSBs and ~70bps for PVT banks.

10.9 11.0

0.1

0.3

0.3

0.4

0.6

0.6

1.0

1.1

1.4

1.4

1.5

1.9

2.1

3.0

3.5

4.6

5.0

5.1

8.3

Growth YoY (%)

414%

DEVB KVB VYSB SIB FED IIB YES J&K CRPBK DBNK AXSB ANDB UNBK IDBI CBK ICICIBC OBC ALBK PNB BOI BOB SBIN

Credit cost (% ann.)

1.6% 1.6% 1.6% 1.5% 1.4% 1.1% 1.1%

207%

242%

0.9%

187%

0.9%

0.8%

0.6%

127%

0.6%

0.6%

0.6%

0.6%

0.5%

0.5%

0.5%

0.4%

0.4% UNBK

64%

0.4% KVB

80%

-41%

-24%

-12%

-11%

-7%

-2%

0%

14%

18%

25%

34%

34%

40%

J&K

ICICIBC

CRPBK

DBNK

ANDB

CBK

DEVB

SIB

IIB

VYSB

SBIN

BOI

PNB

IDBI

CRPBK

DBNK

SBIN

VYSB

UNBK

ICICIBC

BOB

OBC

AXSB

ALBK

PNB

DEVB

Source: Bank, HDFC sec Inst Research

ANDB

AXSB

ALBK

BOB

OBC

BOI

J&K

IDBI

SIB

CBK

YES

FED

IIB

YES

0.3%

15

4QFY13 : BANK NAVIGATOR

PBT : sharp fall for PSBs

PBT (Rs bn)
Rs bn
22.0 26.6 31.4 35.8

Despite steady loan growth and higher treasury gains, most of the PSBs have reported a sharp fall in OP and PBT. This fall is on the back of (1) NIM compression, (2) lower fee traction and (3) higher opex cost (read : staff cost). Aggregate PBT for the coverage universe declined 22% YoY (-15% QoQ) with PSBs reporting 39% YoY and 26% QoQ fall. Amongst PSBs : DNBK, ALBK, INBK, BoI and BoB reported 50%+ decline. CRPBK, UNBK and CBK reported <10% decline. However, the PVT banks registered growth of 18% YoY (+4% QoQ).

0.3 0.6 0.9 1.1 1.4 1.4 1.5 1.9 2.5 2.7 3.5 3.6 4.6 4.6 5.4 5.5 5.6 7.3 9.5 10.3 13.7

Growth YoY (%)

97%

DEVB DBNK INBK CUBK SIB ALBK KVB OBC VYSB FED ANDB J&K IIB CRPBK YES BOB BOI IDBI CBK UNBK PNB AXSB HDFCB ICICIBC SBIN

Growth QoQ (%)

105% -79% -74% -66% -55% -42% -40% -30%

-3% 8% 16% 19% 25% 26% 33% 39% 53%

DBNK ALBK INBK BOI BOB SBIN PNB KVB FED IDBI ANDB OBC CBK SIB UNBK CRPBK J&K AXSB ICICIBC CUBK HDFCB YES IIB VYSB DEVB

Source: Bank, HDFC sec Inst Research

DBNK INBK ALBK BOB OBC BOI SBIN PNB SIB ANDB FED J&K HDFCB ICICIBC KVB VYSB CUBK YES CBK AXSB IIB IDBI DEVB CRPBK UNBK

-27% -26% -18% -15%

-13% -2% 2% 3% 5% 6% 6% 6% 12% 17% 23% 27% 31%

-68%

-68% -62% -57% -55% -45% -28% -27% -24%

-21% -16% -14% -8%

-7% -5%

16

4QFY13 : BANK NAVIGATOR

Net earnings : tax reversals saves PSBs; PVT ahead of estimates

Net earnings (Rs bn)
33.0

Rs bn
23.0 18.9 15.6 11.3 10.3 7.9 7.6 7.3 5.5 3.6 3.6 3.4 3.1 3.1 2.9 2.5 2.2 1.7 1.6 1.5 1.3 1.3 0.8 0.3

Aggregate PAT for the coverage universe declined 8% YoY (+3% QoQ) with PVT banks registering growth of 22% YoY (8% QoQ). Despite, tax reversals during the quarter, net earnings for PSBs declined 20% YoY (flat QoQ). Most of the private banks surprised positively with higher net earnings growth. Most of the PSBs surprised negatively with the fall in earnings, especially ALBK, BoB, BOI and DNBK. UNBK surprised with higher earnings growth (QoQ) on the back of lower NPA provisions.

PVT banks surprised positively. PSBs huge disappointment

Growth YoY (%)

97%

SBIN ICICIBC HDFCB AXSB PNB BOB UNBK BOI CBK IDBI YES CRPBK ANDB OBC IIB INBK J&K FED VYSB KVB SIB ALBK DBNK CUBK DCB

Growth QoQ (%)

161%

38% 34% 33% 30% 26% 22% 21% 20% 16% 15% 8% 2% 1% 1%

DCB IIB VYSB YES HDFCB SIB AXSB ICICIBC J&K OBC CUBK KVB UNBK ANDB CRPBK -7% FED -13% CBK -15% INBK -19% SBIN -21% BOI -21% PNB -28% IDBI -32% BOB DBNK -51% ALBK

Source: Bank, HDFC sec Inst Research

ALBK -59% DBNK -39% J&K -14% PNB -13% INBK -12% BOI -6% OBC -6% CUBK -3% SBIN -3% BOB HDFCB CBK ICICIBC FED VYSB YES IIB AXSB CRPBK SIB DCB IDBI ANDB KVB UNBK

-68%

0% 2% 2% 2% 5% 5% 6% 15% 15% 17% 20% 27% 33% 34% 40%

17

4QFY13 : BANK NAVIGATOR

Gross NPA : remains elevated for PSBs

GNPA (Rs bn)
Rs bn
512

Marginal reduction QoQ for few PSBs

Deterioration in asset quality continued during 4QFY13 for PSBs. PVT banks reported moderate deterioration in asset quality. Aggregate Gross NPAs increased 38% YoY (flat QoQ) largely due to deterioration in PSBs with GNPA increasing 43% YoY (flat QoQ). PVT Banks reported growth of mere 9% YoY (flat QoQ). All PSBs reported a rise in GNPA on YoY basis. Sequentially, only CRPBK, SBIN, PNB and UNBK reported a meaningful decline in GNPA. ALBK, OBC and ANDB reported sharp QoQ rise in GNPA. Amongst PVT banks, on QoQ basis, YES reported 24% increase. KVB and SIB reported a decline. Asset impairment would continue for the sector, largely driven by PSBs. GNPAs (for our coverage universe) are expected to increase by 30% CAGR over FY13-15E , driven by PSBs (33% CAGR).

Growth YoY (%)

149%

SBIN PNB ICICIBC BOI BOB IDBI UNBK CBK ALBK OBC ANDB INBK AXSB HDFCB CRPBK FED DBNK J&K VYSB IIB SIB KVB DEVB CUBK YES

135 96 88 80 64 63 63 51 42 37 36 24 23 20 16 15 6 6 5 4 3 2 2 1

Growth QoQ (%)

45%

107% 93% 79% 62% 61% 55% 54% 52% 49% 42% 40% 35% 33% 32% 25% 19% 17% 17% 16% 12% 1% 1% -11% -11%

Source: Bank, HDFC sec Inst Research

ALBK ANDB INBK BOB SIB CRPBK CBK PNB DBNK BOI IDBI CUBK SBIN AXSB IIB J&K FED OBC HDFCB UNBK YES ICICIBC VYSB KVB DEVB

ALBK YES OBC ANDB INBK J&K DBNK BOB IIB AXSB CBK BOI IDBI 0% VYSB -1% FED -1% UNBK -2% ICICIBC -3% CUBK -4% PNB -4% HDFCB -4% SBIN -8% DEVB -9% SIB CRPBK -10% KVB-19%

24% 13% 12% 12% 11% 10% 9% 9% 5% 3% 2% 1%

18

4QFY13 : BANK NAVIGATOR

Slippages : remains elevated for PSBs

Slippages (Rs bn)
Rs bn

58.7

The slippage story continued for the PSB, albeit at a lower pace. Amongst PSBs : SBIN and CRPBK positively surprised with lower slippages, while ALBK and BoI negatively surprising with higher slippage. Mid-tier PSBs continued to disappoint with higher slippages (especially ANBK, INBK and Dena). PVT banks continued to report controlled slippages. Most of the PVT banks reported QoQ decline in slippages. FB , disappointed with higher slippages in corp segment.

21.2

25.9

29.6

3.0

3.6

4.0

4.0

7.8

8.8

8.9

9.1

10.4

10.9

13.1

16.8

0.4

0.7

1.0

1.3

1.5

1.6

UNBK

FED

OBC

CUBK

ALBK

CBK

INBK

CRPBK

DBNK

ANDB

VYSB

ICICIBC

AXSB

SBIN

BOB

PNB

J&K

IDBI

KVB

BOI

IIB

SIB

Slippage Ratio (% ann. )

8.2%

Source: Bank, HDFC sec Inst Research

ALBK INBK PNB ANDB FED OBC BOB DBNK BOI SBIN SIB IDBI CBK CUBK UNBK J&K KVB IIB ICICIBC CRPBK AXSB VYSB

5.0% 3.9% 3.7% 3.4% 3.3% 2.7% 2.5% 2.4% 2.3% 2.0% 2.0% 1.9% 1.8% 1.7% 1.7% 1.3% 1.2% 1.1% 1.1% 0.8% 0.5%

19

4QFY13 : BANK NAVIGATOR

Coverage Ratio : PSBs report decline

PCR ( calculated) %
16% 20% 31% 31% 32% 33% 35% 37% 42% 44% 46% 47% 47% 52% 57% 62% 70% 71% 72% 77% 77% 80% 91% 93% 98.4%

PVT banks much better placed

Coverage ratio for most of the PSBs declined YoY, except for UNBK and OBC (under our coverage). On QoQ basis, SBIN, PNB and CRPBK have reported an improvement in PCR. ALBK (-1100bps QoQ) reported the sharpest decline. Reported PCR for PVT banks (except YES) too declined on YoY and QoQ basis. However, it continues to remain on much higher side vs. PSBs. VYSB and YES have PCR of 90%+; SIB has lowest PCR of 53% amongst PVT banks.

PCR (reported) %
98% 94% 93% 86% 81% 80% 79% 77% 75% 71% 71% 70% 70% 68% 67% 65% 63% 62% 61% 61% 60% 59% 53% 50% 49.6%

CBK ALBK OBC CRPBK BOI INBK ANDB DBNK SIB CUBK PNB UNBK BOB IDBI SBIN KVB IIB AXSB FED ICICIBC DEVB HDFCB J&K YES VYSB

PCR (reported) change bps : QoQ

1301

bps

607 509 404 283 252 163 120 100 30 18 18 (15) (17) (55) (92) (99) (100) (109) (200) (233) (264) (287) (537)

VYSB J&K YES DEVB FED HDFCB AXSB ICICIBC KVB CUBK IDBI IIB DBNK BOB SBIN UNBK OBC CRPBK CBK BOI INBK PNB SIB ALBK ANDB

Source: Bank, HDFC sec Inst Research

YES FED SBIN CRPBK PNB J&K IDBI VYSB CUBK HDFCB KVB BOI CBK IIB OBC ICICIBC DBNK UNBK INBK AXSB DEVB BOB ANDB SIB ALBK

20

(1,097)

NNPA (Rs bn)

Rs bn

Growth YoY (%)

Source: Bank, HDFC sec Inst Research

VYSB-82.7% YES -60.0% IDBI UNBK J&K OBC ICICIBC HDFCB KVB SBIN IIB AXSB CBK DBNK CRPBK PNB DEVB BOI CUBK INBK FED BOB ANDB SIB ALBK
6.5% 10.9% 12.1% 18.0% 20.1% 33.1% 38.0% 38.8% 44.5% 49.0% 55.9% 60.4% 62.3% 62.5% 62.5% 62.7% 78.4% 99.2% 117.1% 171.6% 219% 226% 278%
219.6

Net NPA : Sharp rise for PSBs

YES VYSB DEVB J&K CUBK KVB IIB SIB FED HDFCB AXSB DBNK CRPBK ICICIBC INBK ANDB OBC IDBI UNBK ALBK BOB CBK BOI PNB SBIN
0.1 0.1 0.5 0.6 1.0 1.1 1.4 2.5 4.3 4.7 7.0 9.2 14.1 22.4 23.8 24.1 29.0 31.0 33.5 41.3 41.9 52.8 59.5 72.4

Growth QoQ (%)

66.6% 26.9% 24.6% 19.3% 19.1% 12.9% 12.3% 11.6% 11.3% 11.2% 9.2% 9.0% 6.8% 5.8% 5.4% 3.7% 2.8% 2.5%

ALBK SIB BOB FED ANDB DEVB DBNK J&K INBK OBC IIB BOI KVB UNBK CUBK AXSB CBK ICICIBC -4.6% PNB -5.4% HDFCB -6.1% IDBI -13.5% SBIN -16.9% CRPBK VYSB -42.9% YES -55%

4QFY13 : BANK NAVIGATOR

Elevated slippages and drop in PCR led to continued rise in NNPA for most of the PSBs.

Only CRPBK, SBIN, PNB and IDBI reported decline in NNPA QoQ amongst PSBs. ALBKs NNPA jumped 66% QoQ.

VYSB and YES amongst the PVT bank reported a sharp drop in NNPA on YoY and QoQ basis.

21

4QFY13 : BANK NAVIGATOR

Restructured assets : QoQ dip with new RBI guidelines

CDR Restructuring (Rs 2,290bn ) : sector wise break up
Others , 24% ShipBreaking/Ship Building, 3% Sugar, 3% NBFC, 3% Pharmaceutica ls, 3% Fertilizers, 4% Telecom, 5% Construction, 6% Power, 8% Textiles, 8% Iron & Steel, 23%

Restructured book (Rs bn)

431.1

Rs bn

Infrastructure, 10%

Restructured book as % of advances

0.1% 0.2% 0.3% 0.3% 1.5% 1.8% 2.2% 3.7% 3.8% 4.1% 4.7% 5.2% 5.5% 5.6% 6.5% 6.9% 6.9% 7.5% 7.7% 8.2% 9.1% 9.7% 10.4% 11.4%

PVT banks better placed

Source: Bank, HDFC sec Inst Research

DEVB HDFCB IIB YES CUBK ICICIBC AXSB KVB J&K SBIN FED SIB UBI BOI CRPBK BOB IDBI CBK OBC DBNK INBK ANDB PNB ALBK

SBIN PNB BOB CBK BOI ALBK IDBI UBI OBC INBK ANDB CRPBK DBNK ICICIBC AXSB FED SIB J&K KVB HDFCB CUBK YES IIB DEVB

226.2 181.1 163.5 148.8 135.6 116.3 99.4 97.1 96.9 76.8 54.2 53.2 43.7 20.6 16.4 14.9 10.9 4.8 2.4 1.4 1.2 0.1

Lower for few PSBs due to revised RBI guidelines

321.5

22

650.7
943.0

Rs bn

Net Impaired assets (Rs bn)

Gross Impaired assets (Rs bn)

Rs bn

Source: Bank, HDFC sec Inst Research

SBIN PNB BOB CBK BOI ALBK IDBI UBI OBC ANDB INBK CRPBK ICICIBC DBNK AXSB FED SIB J&K KVB HDFCB CUBK IIB YES DEVB VYSB 393.8 268.1 233.9 223.0 190.0 166.6 149.8 128.4 121.0 120.9 90.9 75.5 63.4 50.7 25.0 18.9 15.5 12.0 9.5 3.3 2.6 1.5 0.5 0.1
456.1 306.0 251.2 243.7 200.1 200.1 179.4 149.2 141.2 134.1 132.7 97.2 68.8 67.6 36.2 28.1 21.3 20.7 13.7 5.8 5.7 4.1 2.4 2.2

Impaired assets : undoubtedly higher for PSBs

SBIN PNB BOB BOI CBK IDBI ALBK UBI ICICIBC OBC ANDB INBK CRPBK DBNK AXSB FED HDFCB J&K SIB KVB IIB VYSB CUBK YES DEVB

Gross Impaired assets (%) of loans

Net Impaired assets (%) of loans

0.0% 0.3% 0.4% 0.6% 0.8% 2.2% 2.6% 2.6% 3.9% 4.0% 5.7% 5.9% 6.2% 7.1% 7.6% 7.7% 8.2% 8.5% 9.5% 9.7% 10.0% 11.3% 12.1% 12.8% 14.5%

VYSB YES HDFCB IIB DEVB CUBK AXSB ICICIBC J&K KVB FED SIB SBIN UBI BOI CRPBK BOB IDBI DBNK CBK OBC INBK ANDB PNB ALBK

15% 15% 13% 12% 11% 10% 10% 10% 9% 9% 9% 8% 8% 8% 7% 5% 5% 5% 3% 3% 3% 2% 1% 1% 1%

ALBK PNB ANDB INBK OBC DBNK IDBI CBK BOB SBIN BOI UBI FED CRPBK SIB J&K ICICIBC KVB AXSB DEVB CUBK VYSB IIB HDFCB YES

4QFY13 : BANK NAVIGATOR

23

Tier I (%) CRAR (%)

Source: Bank, HDFC sec Inst Research

FED IIB CUBK KVB ICICIBC DEVB AXSB SIB HDFCB INBK J&K VYSB BOB CBK PNB YES SBIN OBC ANDB CRPBK UBI BOI ALBK IDBI DBNK
14.1% 13.8% 13.3% 13.1% 12.8% 12.6% 12.2% 12.1% 11.1% 10.9% 10.9% 10.5% 10.1% 9.8% 9.8% 9.5% 9.5% 9.2% 8.5% 8.3% 8.2% 8.2% 8.1% 7.7% 7.3%

CAR : PVT better placed

PSBs near threshold limit

ICICIBC YES AXSB HDFCB IIB FED KVB CUBK SIB DEVB BOB VYSB IDBI INBK SBIN J&K PNB CBK CRPBK OBC ANDB UBI ALBK DBNK BOI
18.7% 18.3% 17.0% 16.8% 15.4% 14.7% 14.4% 14.0% 13.9% 13.6% 13.3% 13.2% 13.1% 13.1% 12.9% 12.8% 12.7% 12.4% 12.3% 12.0% 11.8% 11.5% 11.0% 11.0% 11.0%

Indian, CBK, BoI and SBIN have higher GoI stake. DNBK, IDBI, ALBK, BoI and UNBK Tier I almost the lowest. CBK and BoB better placed in term of Tier I amongst the PSBs.

FB, IIB, CUBK, KVB and ICICBC amongst the better placed.

INBK IDBI CBK BOI SBIN OBC ANDB CRPBK UBI PNB BOB ALBK DBNK
80% 72% 68% 64% 62% 58% 58% 58% 58% 58% 55% 55% 55%

GoI Holing (%)

PVT banks well placed in terms of CAR.

4QFY13 : BANK NAVIGATOR

24

4QFY13 : BANK NAVIGATOR

Consolidated Financials (our universe)

Income Statement
(Rs bn) Interest Earned Interest Expended Net Interest Income Other Income Fee Income (CEB) Treasury Income Total Income Total Operating Exp Employee Expense PPOP Provisions & Contingencies Prov. for NPAs (incl. std prov.) PBT Provision for Tax PAT FY12 FY13A/E 3,696 4,273 2,426 1,270 499 315 18 1,769 765 449 1,004 338 285 656 193 473 2,883 1,391 564 322 61 1,955 873 501 1,082 376 359 694 182 524 FY14E 4,856 3,227 1,629 635 371 61 2,264 991 579 1,272 390 389 882 262 620 FY15E 5,520 3,624 1,896 717 429 61 2,613 1,136 668 1,476 440 440 1,036 308 728 CAGR 14% 12% 17% 13% 15% 0% 16% 14% 15% 17% 8% 11% 22% 30% 18%

Sector loan book expected to grow at 17% CAGR; driven by PVT banks loan growth at 19% CAGR; PSBs expected to report 16% CAGR. 17% NII CAGR to be driven by PVT banks NII CAGR of 21% and PSB CAGR of ~15%. Loan loss provisions are expected to remain elevated with PSBs reporting CAGR of 9% (after reporting 21% CAGR during FY11-13) and PVT banks at 21% CAGR. Net earnings growth at 18% CAGR would largely be driven by PVT banks CAGR of 19% and ~17% by PSBs.

RoAA Tree
Net Interest Income Non Interest Income Treasury Income Operating Cost Provisions Provisions for NPAs Tax ROAA Leverage (x) ROAE FY12 2.87% 1.13% 0.04% 1.73% 0.76% 0.64% 0.44% 1.07% 14.75 15.75% FY13A/E 2.73% 1.11% 0.12% 1.71% 0.74% 0.70% 0.36% 1.03% 14.40 14.79% FY14E 2.77% 1.08% 0.10% 1.69% 0.66% 0.66% 0.45% 1.06% 14.49 15.30% FY15E 2.81% 1.06% 0.09% 1.68% 0.65% 0.65% 0.46% 1.08% 14.65 15.81%

Source: Bank, HDFC sec Inst Research

25

4QFY13 : BANK NAVIGATOR

Top picks
PNB : For second quarter in running PNBs GNPAs declined on a sequential basis. During 4QFY13, CASA ratio improved 230bps QoQ, while NIMs remained stable at 3.5%. PNBs superior NIMs and return ratios vis--vis PSB peers deserves a premium. Continuation in top management (till Oct-14) provides comfort. However, higher impaired assets and faster growth in riskier assets are persistent concerns. Maintain BUY, with a TP of Rs 997/ sh (1.25x FY14E ABV). CBK : Loan growth is set to return for CBK after around one year of consolidation. Moderation in slippages and higher recoveries provide comfort on asset quality. Pick up in business and stable margins will lead to 16% NII CAGR over FY13-15E. SLR stands at 29%, AFS accounts for 39% of investments. With an expected decline in interest rates, CBK can potentially book healthy treasury gains. Tier I at 9.8% is a positive. Maintain BUY with a revised TP of Rs 498/sh (1.1x FY14E ABV). OBC : OBC disappointed during 4QFY13, with higher slippages (due to one large account). Excluding for this, management continues to deliver across parameters, within stated guidance in difficult times. OBCs continuous success at de-bulking the balance sheet, improving CASA & NIMs are positives. It currently trades at an attractive valuations of 0.7x FY14E ABV. Maintain BUY, with a TP of Rs 355/sh (1x FY14E ABV). ICICIBC : We continue to maintain our positive stance. This is premised on improvement in return ratios (RoAs) driven by NIM improvement, controlled opex structure and wellmanaged credit cost. Strong liability franchise, high CRAR and capital repatriation from foreign subsidiaries offer headroom for steady growth. ICICBC trades at 1.9x FY14E ABV, ex subs. Maintain BUY. Our revised SOTP of Rs 1,318 (16% upside), is based on 2.2x FY14E ABV. FB : Despite a miss in 4QFY13, we continue to like FB owing to its low leverage (Tier I at 14.1%), revamped underwriting and risk functions and significant branch addition in the last two years. Operating efficiencies would start kicking in once new branches mature. The stock trades for 1.2x FY14E ABV. Maintain BUY with a TP of Rs 575/sh (1.5x FY14E ABV).

26

4QFY13 : BANK NAVIGATOR

Valuation Matrix
Banks ALBK AXSB BOB BOI CBK FB ICICIBC IIB VYSB OBC PNB SIB SBIN UNBK YES CMP (Rs) 124 1,395 661 289 398 455 1,139 510 652 248 761 25 2,025 220 493 Mcap (Rs bn) 62 653 279 173 176 78 1,318 266 101 72 269 34 1,385 131 195 Reco UPF OPF OPF OPF BUY BUY BUY OPF BUY BUY BUY OPF BUY OPF BUY ABV (Rs) FY14e 149 796 677 320 452 387 504 160 333 355 794 22 1,166 247 224 FY15e 179 921 745 358 513 435 565 188 383 402 939 26 1,366 292 268 P/E (x) FY14e 4.0 10.6 5.4 5.2 5.2 8.3 10.9 19.9 13.3 4.3 4.8 5.9 5.8 5.0 11.9 FY15e 3.5 9.0 4.6 4.4 4.4 7.1 9.1 15.6 10.7 3.5 4.2 5.1 4.6 4.1 9.6 P/ABV (x) FY14e 0.83 1.75 0.98 0.90 0.88 1.17 1.84 3.19 1.96 0.70 0.96 1.14 1.17 0.89 2.20 FY15e 0.69 1.51 0.89 0.81 0.78 1.05 1.60 2.72 1.70 0.62 0.81 0.96 0.93 0.75 1.84 ROAE (%) FY14e 14.0 17.3 15.9 13.9 14.0 14.0 15.3 16.8 15.6 13.1 16.9 18.6 16.2 15.8 22.2 FY15e 14.4 17.6 16.3 14.6 14.7 14.7 16.0 18.4 17.0 14.7 16.8 18.6 16.5 16.9 20.9 ROAA (%) FY14e 0.71 1.68 0.89 0.68 0.77 1.23 1.77 1.61 1.26 0.77 1.11 1.06 0.96 0.78 1.46 FY15e 0.71 1.68 0.91 0.70 0.79 1.25 1.84 1.61 1.31 0.84 1.11 1.02 0.99 0.83 1.45

CMP as on 4th June 2013

Source: Bank, HDFC sec Inst Research

27

4QFY13 : BANK NAVIGATOR

Rating Definitions BUY OUTPERFORM UNDERPERFORM SELL

: : : :

Where the stock is expected to deliver more than 15% returns over the next 12 months' period Where the stock is expected to deliver 0 to 15% returns over the next 12 months' period Where the stock is expected to deliver (-) 10% to 0% returns over the next 12 months' period Where the stock is expected to deliver less than (-)10% returns over the next 12 months' period

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