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Banking Sector Overview

Banking sector g
Q1 FY13 Review
Morning Shows The Day Morning Shows The Day
Sr. Analyst : Rakesh Kumar Associate : Hetal Shah
Tel: +9122 - 4096 9750 Tel: +9122 - 4096 9725
Email : rakesh@dolatcapital.com Email: hetals@dolatcapital.com
Financials Sector Q1FY13 Overview
In Q1 FY13, private sector banks demonstrated better performance on balance-sheet expansion,
stability of margin and asset quality fronts. On deposit mobilization front, each of the private sector
banks under coverage (barring ICICI Bank) recorded higher deposit growth than the industry and
t t d b k S ll i t t t d h hi h i i d it b state-owned banks. Smaller private sector posted much higher expansion in deposit base; among
state-owned banks, IOB, PNB and Andhra Bank were ahead of its peers
Overall, banks deposit profile demonstrated weakening with decrease in CASA share. KVB and p p g
Andhra Bank surprised with increase in CASA share even in such tight liquidity condition; in case of
KVB, current deposit mobilization significantly aided CASA share
Private sector banks under coverage outshined state-owned banks and industry overall in credit Private sector banks under coverage outshined state-owned banks and industry overall in credit
disbursements. Smaller private sector banks under coverage were better off due to their lower
bases. State-owned banks (under coverage) recorded lesser credit book expansion than the
industry overall. Canara Bank moderated its credit growth to further reduce dependence on
h l l d d h t t t l d b i wholesale advances and short-termcorporate loans on unsecured basis
On asset quality front, PSU banks performance was quite dismal with sharp jump in gross slippage
ratio. SBI, UBI, Andhra Bank and BoI posted highest increase in slippages ratio on sequential basis. p g pp g q
IOB and OBC recorded sequential decline with higher base in Q4 FY12. Private sector banks were
better off on this front as well in our coverage universe
Though some of the state-owned banks (under coverage) reported higher credit cost on sequential Though, some of the state-owned banks (under coverage) reported higher credit cost on sequential
basis but not enough to maintain PCR. Most of banks under coverage reported sequential decrease
in PCR except for OBC, Syndicate Bank and ICICI Bank
Financials Sector Overview (Contd..)
Most of banks under coverage posted further increase in outstanding restructured loan book except
SBI, HDBK, ICICI Bank and KVB. Overall, on asset quality fronts, incrementally PSU banks were
further hit with increase in gross slippage ratio, outstanding restructured loan book and decrease in
PCR PCR
On margin front, most of banks witnessed sequential fall in margin except for OBC and PNB.
Syndicate Bank and BoI reported biggest fall in margin on sequential basis mainly due to larger fall y p gg g q y g
in credit yield on the back of downward revision in rates, much higher slippages and loan
restructuring at lesser rates
Sequential decrease in C-D ratio with downward revision in lending rates re-pricing of liabilities with Sequential decrease in C-D ratio with downward revision in lending rates, re-pricing of liabilities with
a lag had negative impact on banks margin. Among PSU Banks, Syndicate Bank and Andhra Bank
recorded sequential increase in C-D ratio and among private sector banks, HDBK and ICICI Bank
posted further expansion in C-Dratio
On fee income front, most of banks recorded healthy growth on YoY basis; SBI, Syndicate Bank and
ICICI Bank were outliers with relatively lesser traction in our coverage universe
Overall, banks under our coverage took a beating on profitability level on sequential basis. OBC,
Syndicate Bank, SBI and Andhra Bank recorded improvement in RoA on sequential basis. OBCs
performance was robust all along and could report better performance, but in case of SBI and
Andhra Bank in spite of much higher additions to GNPL these banks made lesser NPL provisions Andhra Bank, in spite of much higher additions to GNPL, these banks made lesser NPL provisions
and took a dent on their PCR. In case of Syndicate Bank, high tax credit succored the profitability
Financials - TOP PICKS
ICICI Bank (CMP: ` 956, TP : ` 1,323, Buy)
ICICI Banks traction in business expansion, improvement in margin, reduction in credit cost
and decrease in leverage (with expansion in balance-sheet size) would yield higher return
ratios going forward
We expect credit book to expand in high teens (20%CAGR during FY12-14E) driven by SME, e e pec c ed boo o e pa d g ee s ( 0%C G du g ) d e by S ,
retail &working capital requirements
The bank would record NIM in a range of 2.8-2.9% on the back of higher yield on
investments reduction in losses on securitized book traction in overseas business and investments, reduction in losses on securitized book, traction in overseas business and
stability in CASAdeposit share
We expect that the banks other income to growby 17%CAGR over FY12-14E on the back of
healthy core fee income
With tier I capital of 12.8% (as on end-J une12), the bank is adequately capitalized. The bank
wouldnot be required to raise equity capital in near future q q y p
The bank quotes at cheap valuations, hence offer an opportunity to add to the positions. At
current price, the stock quotes at 1.8x and 1.7x adjusted book value (ABV) FY13 and FY14
respectively Based on our price target of ` 1 323 the stock will trade at 2 6x and 2 3x ABV respectively. Based on our price target of ` 1,323, the stock will trade at 2.6x and 2.3x ABV
FY13and FY14 respectively
Financials - TOP PICKS
HDFC Bank (CMP: ` 596, TP : ` 627, ACC)
HDBKs diversified credit book with prudent expansion strategy has led to healthy yield and
i i l d li i Hi h l t d it h t i i i i d l id minimal delinquencies. High low-cost deposits share contain erosion in margin and also aides
the bank to cross-sale its other products to huge low-cost depositors base. We expect credit
to expand faster than the systemat CAGR of 21%over FY12-14
Slight re-balancing in credit book in favor of high-yielding assets aided yield on advances
(mainly due to higher composition of retail loan book). Higher asset yield and expansion in C-
D ratio aided margin. Going forward, we expect NIM to stabilize at 4.2% on yearly average
basis basis
Majority of fee income comes fromvarious retail segment and is quite diversified. Incremental
adverse impact on the banks fee income would be muted
HDBK demonstrated robust performance on asset quality front; GNPA & restructured loan
book remained almost stagnant. The bank has been maintaining most comfortable asset
quality amongst the peer group with GNPA at 0.97% and NNPA at 0.2%. Total restructured
assets were 0.3%of the banks gross advances as of Q1 FY13
At current price, the stock quotes at 4.0x and 3.4x adjusted book value (ABV) FY13E and
FY14E respectively. Based on our target price of ` 627, the stock would trade at 4.2x and 3.6x p y g p ,
ABV FY13E and FY14E respectively
Financials - TOP PICKS
Karur Vysya Bank (CMP: ` 401, TP : ` 512, Buy)
Karur Vysya Banks better understanding of clienteles business domain and widespread
regional presence are the key strengths. Continued robust credit book expansion and
containeddelinquencies have been key outcomes of the banks strengths
We expect the banks credit book to expand by 28% cagr in FY12-14 much higher than the e e pec e ba s c ed boo o e pa d by 8% cag uc g e a e
industry. Key focus area wouldbe retail trade, SME and agriculture sectors
In Q1 FY13, KVBs margin drifted by 22bps QoQ to 2.82% on higher cost of funds, however
going forward moderation in deposit growth and increase in credit deposit ratio would protect going forward, moderation in deposit growth and increase in credit-deposit ratio would protect
erosion in margin. Though, the decline in CASA share remain our near term concern. We
factor margin to drift by 26bps to 2.62%(on yearly average basis), as a conservative stance
We expect GNPA to hold in the current level even as the marginal pressure on asset quality
wouldbe mitigated by higher recoveries and upgradations
At current price, the stock quotes at 1.4x and 1.3x adjusted book value (ABV) FY13 and FY14 p , q j ( )
respectively. Based on our price target of ` 512, the stock will trade at 1.8x and 1.6x ABV
FY13and FY14 respectively
Financials - TOP PICKS
Syndicate Bank (CMP: ` 95, TP : ` 145, Buy)
Syndicate Banks management plans to expand credit book faster than the industry, in the range of
18 19% f f 22% f f 18-19% and retail credit book would grow at even faster pace of 22%. Key focus area for credit
growth would be retail, MSME and mid-corporate. We expect credit book to grow 17.4% CAGR in
FY12-14. Faster expansion in retail and MSME books would aid asset yield and margin
The bank plans to increase its CASA share by 100-125 bps to 32% mark. Also, re-pricing of bulk
deposits and CDat lesser rated would aid margin erosion in declining interest rate scenario.
The banks management expects 15bps decline in margin to 3.25%from3.4%in FY12. We factor in g p p g
10 bps decline in margin to 2.96%(on yearly average basis) primarily due to decline in interest rates
and re-pricing lag of liabilities
On the back of higher loan growth and alignment of processing charges with peers, fee income is On the back of higher loan growth and alignment of processing charges with peers, fee income is
expected to revive. We expect the banks other income to growby 13%YoY in FY13
As on J une12, the banks asset quality improved on sequential basis; further higher PCR provides
comfort for future NPL provisioning The banks management expects to do a substantial recoveries comfort for future NPL provisioning. The banks management expects to do a substantial recoveries
in FY13
At current price, the stock quotes at 0.65x and 0.56x adjusted book value (ABV) FY13 and FY14
respectively Based on our price target of ` 145 the stock will trade at 1 0x and 0 9x ABV FY13 and respectively. Based on our price target of ` 145, the stock will trade at 1.0x and 0.9x ABV FY13 and
FY14respectively
Financials- Q1FY13 Result Analysis
In Q1FY13, Majority of state-owned banks under coverage recorded healthy credit book expansion.
They grew higher than industry barring few names likes OBC, Syndicate Bank, Andhra Bank and
Canara Bank. Canara Bank decided to moderate its pace in order to reduce the dependence for p p
growth on wholesale advances and short-term corporate loans on unsecured basis and thereby
maintain its asset quality
I th t SCB i t t d d t f 16 7% Y Y hil i In the quarter, SCBs investment expanded at a pace of 16.7% YoY, while our coverage universe
reported 13.6% growth on an average. Majority of growth was contributed by addition of N-SLR
investments.
In the quarter, most of banks under coverage recorded much higher traction barring BoI. Slackness
in credit demand and banks higher base rate led corporates to go for investments. With continuous
rise in NPLs, banks are finding investments instruments relatively safer asset on risk-adjusted basis.
In Q1FY13, SCBs deposits base expanded by 16.1% YoY and our coverage universe grew at
16.6% on an average. Majority of banks under coverage recorded higher growth than industry
barring OBC, Canara Bank, Union Bank and BOI. Smaller private sector banks could report better barring OBC, Canara Bank, Union Bank and BOI. Smaller private sector banks could report better
traction due to base effect. Majority of banks under coverage witnessed sequential decline in their
CASA deposits; whereas on YoY basis, most the of banks reported 10-18%growth. On CASA ratio
front, all banks under coverage witnessed sequential decline in their CASA ratio except KVB and
Andhra Bank Andhra Bank
Financials- Q1FY13 Result Analysis (Contd..)
In Q1FY13, considering lack of genuine credit demand, majority of banks was not able to deploy
their incremental funds towards credit. Consequently banks incremental creditdeposit ratio
declined on sequential basis. Fewbanks like OBC, Axis Bank, CUB, PNB, and ICICI Bank recorded
i i i t l C D ti Hi h d it t bd d dit d d d di i f expansion in incremental CD ratio. Higher deposit rate, subdued credit demand and diversion of
banks assets towards investments reflected into slight moderation or decline in CD ratio in majority
of the banks
Majority of the banks under coverage recorded robust growth on NII front on yearly basis barring
Andhra Bank and Canara Bank which reported single digit growth. Andhra Bank reported merely 3%
YoY growth in NII which was mainly due to interest income losses due to restructuring and high
slippages Canara Bank reported lesser growth in NII mainly due to moderation in balance sheet slippages. Canara Bank reported lesser growth in NII mainly due to moderation in balance-sheet
expansion and difficulty in passing on higher liabilities cost.
On margin front, majority of banks under coverage reported decrease in margin. OBC and PNB On margin front, majority of banks under coverage reported decrease in margin. OBC and PNB
recorded improvement in margin on QoQ basis. On YoY basis, most of banks under coverage
reported decline in margin except for ICICI Bank, Axis Bank, BOI, HDBK and Syndicate Bank
On fee income front, banks under coverage recorded healthy growth on YoY basis barring SBI
whereas on QoQ basis all banks except KVB reported decline in fee income. On capital gains front,
most of the banks reported poor show due to volatility on bond yield across the tenures except for
the fewones like SBI, Syndicate Bank, HDBK and BoI , y ,
Financials- Q1FY13 Result Analysis (Contd..)
In Q1FY13, in case of state-owned banks, employees expenses rose at healthy pace on YoY basis
mainly due to fresh recruitments and wage revisions. All the private sector banks under coverage,
employees expenses reported much higher increase due to branch expansion and wage revision
IOB and Union Bank reported increase in cost-income ratio (C-I ratio) on QoQ basis on the back of
weak NII growth and higher operating overheads
Majority of state-owned banks under coverage except for PNB, Syndicate Bank IOB and OBC
reported increase (on QoQ basis) in gross slippages ratio. Slippages from restructured loan book
also added to increase in slippages ratio; PSU banks with higher delinquency rates in previous
quarters were better off in the Q1. OBC and IOB managed to reduce their gross slippages on
sequential basis; a positive surprise
I f t t d b k fit bilit t k b ti d t i th h f In case of state-owned banks, core profitability took a beating due to pressure on margin though fee
income remained strong. For majority of state-owned banks, gross slippages ratio also increased
due to slippages fromrestructured loan book. Overall, PSU banks earning quality was subdued. On
other hand, private sector banks were better off on the back of better margin, healthy fee income
and lesser slippages ratio
Further decline in provision coverage ratio (including technical write-offs) on QoQ basis across
state owned banks like SBI and Andhra Bank was qualitatively negative Majority of banks under state-owned banks like SBI and Andhra Bank was qualitatively negative. Majority of banks under
coverage reported fall in PCR. Banks managed to show up good bottom-line though with a
compromise on buffer
Conclusion
Overall, in Q1FY13, private sector banks outshined state-owned banks qualitatively and
quantitatively. Private Banks reported healthy growth in core fee income with firm margin quantitatively. Private Banks reported healthy growth in core fee income with firm margin
(barring CUB & KVB). Asset quality also remained under control with some additions in
restructured loan book in CUB and Axis Bank. Overall, private banks performance remained
strong on CASA deposit, incremental gross slippages &provision coverage on balance-sheet
id side.
Majority of the state-owned banks performance was poor mainly due to strain on margin and
further increase in slippages ratio PSU banks provision coverage ratio came down due to further increase in slippages ratio. PSU banks provision coverage ratio came down due to
lesser credit costs and also reflecting banks efforts to push bottom-line at a cost on their
buffer
Financials Annual Estimates
Particulars Reco
CMP
(`)
Target
Price
Upside/
Down-
side
NII (` mn) Net Profit (` mn) P/ABV (x)
FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E
Andhra Bank BUY 95 145 52 37,593 40,377 46,921 13,447 12,933 14,703 0.8 0.7 0.6
Axis Bank BUY 1,076 1,582 47 80,177 97,289 114,277 42,422 50,797 58,961 2.0 1.7 1.4
BoI Reduce 273 250 (9) 83,134 88,731 100,918 26,775 21,113 20,993 1.0 0.9 0.8
Canara Bank BUY 333 496 49 76,893 82,397 95,487 32,827 32,833 36,232 0.9 0.8 0.7
City Union Bank BUY 51 68 33 4,998 5,989 7,335 2,803 3,161 3,751 1.7 1.4 1.2
HDBK * ACC 596 627 5 122 968 142 507 168 715 51 671 67 137 84 145 4 7 4 0 3 4 HDBK ACC 596 627 5 122,968 142,507 168,715 51,671 67,137 84,145 4.7 4.0 3.4
ICICI Bank BUY 956 1,323 38 107,342 139,453 165,617 64,653 81,838 92,111 2.0 1.8 1.7
IOB ACC 71 83 17 50,162 54,905 61,526 10,502 9,618 10,537 0.6 0.6 0.6
KVB BUY 401 512 28 9,171 10,710 13,635 5,017 5,324 6,640 1.6 1.4 1.3
OBC BUY 231 325 41 42,158 45,609 52,725 11,416 11,495 15,440 0.7 0.7 0.6
PNB BUY 712 912 28 134,144 145,683 170,574 48,842 46,585 58,184 1.0 0.9 0.8
SBI Reduce 1,895 1,810 (4) 432,911 452,900 515,503 117,073 126,121 155,791 1.7 1.7 1.4
Syndicate Bank BUY 95 145 53 50,850 56,932 65,296 13,134 16,377 17,257 0.8 0.6 0.6
UnionBank Reduce 159 163 2 69 089 72 874 84 207 17 871 15 557 17 766 0 8 0 8 0 7 Union Bank Reduce 159 163 2 69,089 72,874 84,207 17,871 15,557 17,766 0.8 0.8 0.7
*Revised
Net Advances
During the quarter, SCBs aggregate
credit book grew by 18.7% YoY, while
our coverage universe on an average
reported credit expansion of 19.6%YoY
Majority of state-owned banks under
coverage grew higher than industry coverage grew higher than industry
barring few names likes OBC,
Syndicate Bank, Andhra Bank and
Canara Bank
Canara Bank decided to moderate its
pace to reduce the dependence for
growth on wholesale advances and growth on wholesale advances and
short-term corporate loans on
unsecured basis
Bigger private sector banks credit book
grew at 22-30% rate. Old-generation
private sector banks recorded much
higher growth partially due to their higher growth partially due to their
smaller bases
C-D ratio (%)
In Q1FY13, considering lack of
genuine credit demand, majority of
banks was not able to deploy their banks was not able to deploy their
incremental funds towards credit.
Consequently banks incremental
credit-deposit ratio declined on
sequential basis. Few banks like
OBC, Axis Bank, CUB, PNB, and
ICICI Bank recorded expansion in
incremental C Dratio incremental CDratio
Higher deposit rate, subdued credit
demand and diversion of banks demand and diversion of banks
assets towards investments reflected
into slight moderation or decline in C-
Dratio in majority of the banks
YoA (%)
In Q1FY13, majority of banks under
coverage recorded improvement in
YoA (on YoY basis) on the back of YoA (on YoY basis) on the back of
increased exposure to high-yielding
credit portfolio
Though, some of the banks YoA
went for toss mainly due to high
slippages and sharp additions to
restructured loan book restructured loan book
Some of the banks like BOI, OBC,
Andhra Bank and Syndicate Bank Andhra Bank and Syndicate Bank
recorded higher drift in YoA on QoQ
basis mainly due to much higher
incremental loan restructuring
*Ratiosarecalculated
Investments
In the quarter, SCBs investment
expanded at a pace of 16.7% Y/Y,
while our coverage universe reported while our coverage universe reported
13.6%growth on an average
Most of banks under coverage Most of banks under coverage
recorded much higher traction barring
BoI
Slackness in credit demand and
banks higher base rate led
corporates to go for investments.
Wi h i i i NPL b k With continuous rise in NPLs, banks
are finding investments instruments
relatively safer asset on risk-adjusted
basis basis
Canara Bank, Syndicate Bank,
HDBK, Andhra Bank reported higher , p g
growth in investment book
YoI (%)
In the quarter, majority of banks
under coverage witnessed
improvement in YoI on YoY basis improvement in YoI on YoY basis
mainly on the back of banks
investment into high-yielding
investments
SBI and IOB recorded highest drift in
YoI on sequential basis
*Ratiosarecalculated
Deposits
In Q1FY13, SCBs deposits base
expanded by 16.1% Y/Y and our
i t 16 6% coverage universe grew at 16.6%
on an average
Majority of banks under coverage Majority of banks under coverage
recorded higher growth than
industry barring OBC, Canara
Bank, Union Bank and BOI.
Smaller private sector banks could
report better traction due to base
effect
On sequential basis, only Union
Bank & Syndicate Bank recorded
de-growth in deposit base de-growth in deposit base
Higher retail term deposit rates
caused faster deposit mobilization caused faster deposit mobilization
in most of the banks
CoD (%)
In Q1FY13, each of the banks under
coverage reported uptick in cost of
deposits (on yearly basis) except deposits (on yearly basis) except
BOI mainly on the back of
continuous re-pricing of deposits
Banks with higher dependence on
whole-sale deposits and faster
deposit mobilization reported slightly
higher increase in cost of deposits
Canara Bank, HDBK and KVB
d hi h i i C D reported higher expansion in CoD
on QoQ basis
*Ratiosarecalculated(Costoffunds)
CASA Deposits & CASA Ratio
All banks under coverage witnessed
sequential decline in their CASA ratio except q p
KVB andAndhra Bank
Majority of banks under coverage witnessed
sequential decline in their CASA deposits;
whereas on YoY basis, most the of banks
reported 10-18%growth
NII
Majority of the banks under coverage
recorded robust growth on NII front
barring Andhra Bank and Canara Bank
which reported single digit growth (on
yearly basis)
Canara Bank reported lesser growth in
NII mainly due to moderation in
balance-sheet expansion Further its balance sheet expansion. Further, its
yield on advances and funds went up
by 62bps and 48bps on YoY basis;
whereas its cost of deposits and funds
expanded by 84bps and 63bps YoY
leadingto de-growth in NII
A dh B k t d l 3% Y Y Andhra Bank reported merely 3% YoY
growth in NII which was mainly due to
interest income losses due to
restructuring and high slippages restructuring and high slippages
NIM (%)
On margin front, majority of banks
under coverage reported decrease in
margin on account of larger fall in yield margin on account of larger fall in yield
on advances and almost flat liabilities
cost
OBC and PNB recorded improvement
in margin on QoQ basis
On YoY basis, most of banks under
coverage reported decline in margin
except for ICICI Bank, Axis Bank, BOI,
HDBK andSyndicate Bank HDBK andSyndicate Bank
Fee & Treasury Income
On fee income front, banks under coverage
recorded healthy growth on YoY basis barring
SBI whereas on QoQ basis all banks except SBI whereas on QoQ basis all banks except
KVB reported decline in fee income
On capital gains front, most of the banks
reported poor show due to volatility on bond reported poor show due to volatility on bond
yield across the tenures except for the few
ones like SBI, Syndicate Bank, HDBK and BoI
Employee Expenses
In Q1FY13, in case of state-owned
banks, employees expenses rose at
healthy pace onYoY basis healthy pace onYoY basis
All the private sector banks under
coverage employees expenses coverage, employees expenses
reported much higher increase due to
branch expansionand wage revision
On QoQ basis, PNBs employee
expenses grewat a robust pace as it
provided more for employee
d h i i l expenses due to change in actuarial
valuation of employees expenses
liabilities
C-I Ratio (%)
IOB and Union Bank reported
increase in cost-income ratio (C-I (
ratio) on QoQ basis on the back of
weak NII growth and higher operating
overheads
Andhra Bank, BoI, OBC and PNB
were on lower side on C-I ratio at
around 40 42% level and private around 40-42% level and private
banks were on higher side in a range
of 42-49%
Branches
Over the past one year, private
sector banks expanded their
networks at faster pace networks at faster pace
Axis Bank, CUB, HDBK and KVB
recorded 17-22% YoY incremental
addition to their branch networks;
ICICI Banks branch network reported
9%expansion
Among state-owned banks, BoI and
IOB recorded 20% YoY incremental
addition to their networks other PSU addition to their networks, other PSU
banks branch addition took place at
slightlymoderate pace
Gross slippage ratio (%)
Majority of state-owned banks under
coverage except for PNB, Syndicate
Bank IOB and OBC reported increase Bank IOB and OBC reported increase
(on QoQ basis) in gross slippages
ratio
Slippages fromrestructured loan book
also added to increase in slippages
ratio; PSU banks with higher
delinquency rates in previous quarters
were better off in the Q1
OBC d IOB d d OBC and IOB managed to reduce
their gross slippages on sequential
basis; a positive surprise
Credit Cost (%)
Against the sequential rise in gross
slippages ratio, some of the state-
owned banks made lesser NPA
provisions in order to enhance their
profitability and core capital
PNB, SBI, Syndicate Bank and
OBC made lesser provisions
Net Profit
In terms of growth and quality in
bottom-line, private sector banks
t f d t t d b k outperformed state-owned banks;
latters performance could have been
impacted even more if one factors in
higher credit cost considering surge in
gross slippages ratio
Quality of bottom-line deteriorated in
case of few state owned banks On case of few state-owned banks. On
yearly basis, all banks under coverage
except Andhra Bank reported increase
in net profit growth
Majority of the state owned banks
incremental gross slippages ratios were
at high level and additions to at high level and additions to
restructured loan book were also
elevated. PSU banks lesser NPA
provision reflected into reduced
i i ti d th b provision coverage ratio and thereby
increase in their profitability
RoA (%)
Among the state-owned banks,
majority of banks reported flat or
decline in RoA sequentially owing to
lesser margin, moderation in core fee
income and requirements of NPA
provisioning provisioning
OBC, Syndicate Bank and SBI
recorded rise in RoA on sequential recorded rise in RoA on sequential
basis
ICICI Bank recorded sharp jump in p j p
return ratio on YoY basis mainly due
to higher margin and much lesser
NPL provision
On sequential basis, Union Bank,
IOB and PNB reported sharp decline
in RoA mainly due to asset quality in RoA mainly due to asset quality
deterioration
RoAE (%)
On return ratio level, relatively most
of private sector performed well on
yearly basis
Among state-owned banks, OBC was
b tt ff i l d t b tt better off mainly due to better
performance on margin and lesser
NPL provisioningon sequential basis
Asset Quality
Barring fewbanks, most of the banks under coverage reported increase in gross and net NPAlevels
Barring OBC and Syndicate Bank all other PSU banks under coverage witnessed increase in Barring OBC and Syndicate Bank all other PSU banks under coverage witnessed increase in
gross NPA level on QoQ basis
Provision Coverage Ratio (incl tech w/off)
OBC, Syndicate Bank, ICICI Bank,
PNB and KVB recorded improvement in
provision coverage ratio on QoQ basis provision coverage ratio on QoQ basis,
though Andhra Bank and SBIs
provision coverage came down sharply
due to lesser provisioningg
Majority of banks under coverage
reported fall in PCR. Banks managed to
show up good bottom-line though with
a compromise on buffer
Restructured Assets as % to Net Advances
On restructuring front, state-owned
banks witnessed further deterioration
with jump in restructured loan book.
Particulars Q1FY13 Q4FY12 Q1FY12
Andhra Bank 7.9 7.1 3.7
with jump in restructured loan book.
Barring few PSU banks (likes SBI and
IOB) all other banks under coverage
saw their loan restructuring increasing
h l
Axis Bank 2.2 1.8 1.6
BoI 7.8 5.7 5.2
Canara Bank 6.2 3.4 4.0
sharply
Private sector banks were better off
with flat restructured loan book; Axis
CUB 2.3 2.2 2.8
HDBK 0.3 0.4 0.4
ICICI Bank 1.6 1.7 0.9
with flat restructured loan book; Axis
Bank witnessed increase in its
restructured loan book
IOB 9.1 9.0 5.8
KVB 2.6 2.7 2.6
OBC 9.6 8.5 3.8
PNB 8.7 8.5 6.4
SBI 4.0 4.3 4.5
Syndicate Bank 7.0 4.9 4.2 y
Union Bank 7.8 6.7 4.0
Dolat Universe
5.3 4.7 3.9
GNPA&RestructuredAssetsas%toGrossAdvances
Particulars (` mn)
Q1FY13
Gross
O/S
% to Gross
Particulars (` mn)
GNPA %
Restructured Aseets
% to Gross Advances
Particulars (` mn)
Gross
NPAs
Restructured
assets
% to Gross
Advances
Andhra Bank 23,583 67,690 10.5
Axis Bank 20 917 38 270 3 4
( )
FY13E FY14E FY13E FY14E
Andhra Bank 2.5 2.5 9.0 8.1
Axis Bank 1.2 1.2 2.2 2.1
Axis Bank 20,917 38,270 3.4
BoI 67,518 205,894 10.3
Canara Bank 44,966 140,559 8.2
CUB 1,372 2,908 3.4
BoI 2.6 2.5 8.7 8.0
Canara Bank 1.9 1.9 5.7 5.5
CUB 1.0 0.9 2.1 1.8
HDBK 20,863 6,451 1.3
ICICI Bank 98,166 41,720 5.1
IOB 44,097 133,680 12.0
CUB 1.0 0.9 2.1 1.8
ICICI Bank 3.2 2.9 1.9 1.9
IOB 3.0 2.9 10.0 9.5
KVB 1 2 1 2 2 4 2 1
KVB 3,769 6,474 4.1
OBC 33,776 109,538 12.6
PNB 99,882 255,190 11.9
KVB 1.2 1.2 2.4 2.1
OBC 3.0 2.7 9.4 9.0
PNB 3.5 3.5 9.4 8.5
SBI 5 7 5 6 5 0 4 9
SBI 471,564 369,040 8.9
Syndicate Bank 30,768 88,800 9.3
Union Bank 65,415 135,210 11.4
SBI 5.7 5.6 5.0 4.9
Syndicate Bank 2.6 2.5 6.8 6.7
Union Bank 3.7 3.9 7.4 6.7
Capital Adequacy Ratio (%)
On core capital front, among private sector banks under coverage, Axis Bank was slightly on
lesser side at 9%. Other private sector banks under coverage had tier I capital in double digit
A t t d b k B I IOB d U i B k h d ti I it l i f 8% 8 4% Among state-owned banks, BoI, IOB and Union Bank had tier I capital in a range of 8%-8.4%,
other PSU banks were relatively comfortable
BUY Upside above 20% REDUCE Upside of upto 5% or downside of upto 15%
ACCUMULATE Upside above 5% and up to 20% SELL Downside of more than 15%
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