BSE SENSEX S&P CNX 27,098 8,090 Bloomberg OBC IN Equity Shares (m) 299.8 M.Cap. (INR b) / (USD b) 80.0/1.3 52-Week Range (INR) 377/152 1, 6, 12 Rel. Per (%) 10/-13/38 Financials & Valuation (INR Billion) Y/E Mar 2015E 2016E 2017E NII 51.2 59.4 71.1 OP 40.3 48.3 57.5 NP 13.1 16.4 21.4 EPS (INR) 43.6 54.8 71.4 EPS Gr. (%) 14.7 25.6 30.4 BV/Share 459.6 501.6 556.4 P/E (x) 6.1 4.9 3.7 P/BV (x) 0.6 0.5 0.5 RoE (%) 9.8 11.4 13.5 ROA (%) 0.6 0.7 0.7 29 October 2014 2QFY15 Results Update Sector: Financials CMP: INR267 TP: INR400 Buy OBC s 2QFY15 PAT of INR2.9b (+16% YoY) was 4% above estimate as lower than expected non-interest income (mainly treasury gains & recovery from w/o accounts) and higher provisions (credit cost 1.3%) were compensated by tax writeback of INR 2.8b on account of prior period adjustments. Slippages and restructuring during 2QFY15 were at INR 9.8b and INR 7.1b respectively. Gross stress additions moderated to INR 17b in 2QFY15 vs INR 22.3b in previous quarter. Lower write-offs and moderate loan growth resulted in GNPA % increasing ~40bp QoQ to 4.7%. Calc. PCR improved marginally to 32%. Business growth remains tepid as loans grew 8% YoY (flat QoQ) resulting in NII 4% lower than expectation. Reported NIM improved 7bp QoQ to 2.63% led by asset relocation from investments to loans. CD ratio increased 100bp to 74%. Other highlights: (1) Net stress loans (ex SEB and AI) increased to 8.8% (stable QoQ) (2) Fees grew 9% YoY largely in-line with balance sheet growth (3) Recovery from written-off accounts stood at INR620m in 2QFY15 (INR1.8b in 1Q). Valuation & view: Bank s focus on consolidation of balance sheet (to conserve capital and focus on asset quality) and prudent utilization of non-core income to clean up the balance sheet is comforting. CET I ratio (8.7%) remains better than peers. ROEs are expected to improve gradually with improvement in loan growth and asset quality. Valuations at 0.5x PBV FY16 largely price in negatives. Buy Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415 Vallabh Kulkarni (Vallabh.Kulkarni@MotilalOswal.com); +91 22 3982 5430 Investors are advised to refer through disclosures made at the end of the Research Report.
Quarterly Performance (INR b) Y/E MARCH 2QFY15A 2QFY15E Var (%) Comments Net Interest Income 12,463 13,045-4 Loan growth lower than expectation % Change (Y-o-Y) -3 2 Other Income 3,927 4,688-16 Lower than expected trading gains and recoveries from w/o account Net Income 16,389 17,733-8 Operating Expenses 7,841 8,137-4 Operating Profit 8,549 9,596-11 % Change (Y-o-Y) 4 16 Other Provisions 6,412 5,585 15 Credit cost remained high Profit before Tax 2,137 4,011-47 Tax Provisions -778 1,203-165 Tax write-back on account of prior period adjustments Net Profit 2,914 2,808 4 Lower other income and higher provisions compensated by tax writeback % Change (Y-o-Y) 16 12 Balance-sheet consolidation continues; NIMs expands QoQ Gross stress additions moderated in 2QFY15 to INR 17b (v/s INR 22.3b in 1Q) Net stress loans (ex SEB and AI) increased to 8.8% vs 8.7% a quarter ago NIM improvement led by rebalancing in asset profile Yield on loans remained flat QoQ at 11.72% however, yield on funds increased 11bp QoQ to 9.36%. Cost of funds increased 6bp QoQ to 7.0% in 2QFY15. Reported NIM improved 7bp QoQ to 2.63% led by asset relocation from investments to loans. Tepid loan growth (+8% YoY and flat QoQ) resulted in NII 4% lower than expectation. NIMs are largely inline with expectation CD ratio increased 100bp to 74% in 2QFY15. Retail loans grew 9% YoY (+3% QoQ), driven by 14% YoY (+2% QoQ) in housing segment. Large corporate segment grew 12% YoY (flat QoQ). Gross stress additions moderated QoQ Gross stress additions moderated in 2QFY15 to INR 17b from INR 22.3b in previous quarter. Gross slippages for the quarter were INR9.8b (annualized slippage ratio of 3%) v/s INR14.3b (4.5%) in. Upgrades and recoveries stood at INR2.4b (v/s INR6.3b in ). Net slippages declined to INR7.4b from INR8b in (net slippage ratio of 2.3%). While net slippages moderated QoQ, lower write-offs and flat loans QoQ resulted in GNPA increasing ~40bp QoQ to 4.7%. GNPA in absolute terms increased 11% QoQ. Calc. PCR improved marginally to 32%. PCR including technical write-off was stable QoQ at 59%. During the quarter bank restructured loan of INR7.1b (0.5% of loans). Outstanding standard restructured loans (OSRL) stood at INR108b (Flat QoQ, 7.7% of loans). Ex-SEB and AI OSRL stood at INR77b (5.5% of the loans). Management mentioned that pipeline for loans to be restructured stands at INR10b. Other highlights Exposure to infrastructure segment was largely flat QoQ and grew 1% YoY. Of this, power exposure was up 3% YoY (+1% QoQ) and roads and ports exposure was declined 2% QoQ (+1% YoY). Infrastructure segment accounted for 17% of total exposure of the bank. 29 October 2014 2
Exposure to state government power entities increased 6% QoQ (-11% YoY); while exposure to power distribution increased 8% QoQ. CASA deposits grew 3% QoQ (+8% YoY) led by 7% QoQ growth in CA deposits (+8% YoY). SA deposits grew 8% YoY (+2% QoQ). CASA ratio improved to 24.9% (24.1% in previous quarter). Retail deposits grew 12.4% YoY higher than total deposits growth of 6.4% YoY Bank added 32 branches in 2QFY15 increasing the branch strength to 2161 branches. Bank added 35 ATMs during the quarter increasing the ATM network to 2,449. Conference Call highlights Asset Quality No direct exposure in coal block; but indirect exposure worth INR9b across 14 blocks (still standard assets in the book) Five accounts contributed INR 5.6b out of total restructuring of INR7.1b restructured during the quarter. OBC has INR10b restructuring pipeline Slippage from restructured book in 2QFY15 INR6.84b Change in regulations led to muted asset sale to ARCs of INR340m; O/S Security receipts from ARCs are ~INR5.5b Interest income reversal due to slippages in 2QFY15 were INR520m Balance Sheet Guiding for 10-12% loans and deposits growth in FY15 Loan book break up - 52% large corporate; 19% mid corporate; 15% Retail, Agri Lending opportunity over the last 3-6 months into real estate sectors and Brownfield projects; no opportunity into Greenfield projects. NIMs guidance of 2.6-2.7%; Cost-to-Income ratio to remain at 47-48% Other highlights Capital related: INR 10b T2 bonds issued; Approval for INR5b QIP, requested INR10b from GOI, INR15b AT1 issuance planned in FY15 Focus on capital conservation; CET1 (without profits) - 8.43% Tax rate to remain at similar levels as 1HFY15 (~20%) Tax write-back of INR 2.1b relating to prior period; Mainly on account of higher than MAT, tax provision made during 2013-14 No change in pension assumption despite fall in interest rates (9% discount rate) MTM surplus outstanding as on September 30, 2014 INR 900m 29 October 2014 3
Valuation and View Bank s focus on consolidation of balance sheet (to conserve capital and focus on asset quality) and prudent utilization of non-core income to clean up the balance sheet is comforting. Stress on asset quality continues to impact NIMs and also resulting in higher credit cost impacting RoA s. CET I ratio (8.7%) remains better than peers. ROEs are expected to improve gradually with improvement in loan growth and asset quality. Valuations at 0.5x PBV FY16 largely price in negatives. We cut our FY15 earnings estimate by ~4% to factor in lower NIM and noninterest income performance. We largely maintain FY16/17 estimates. Bank is expected to report RoA of ~0.7% and RoE is expected to be 12/13% over FY16/17E. Maintain Buy with a Target Price of INR400 (0.8x FY16 BV). We cut FY15 PAT estimate by ~4%; Largely maintain FY16/17 estimates INR B Old Estimates Revised Est Change (%) FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 Net Interest Income 54.4 61.6 73.7 51.2 59.4 71.1-5.9-3.6-3.6 Other Income 21.0 24.0 26.3 20.5 24.1 26.3-2.3 0.7 0.2 Total Income 75.4 85.5 100.0 71.6 83.5 97.4-4.9-2.4-2.6 Operating Expenses 31.8 36.1 41.7 31.4 35.2 39.9-1.4-2.4-4.3 Operating Profits 43.5 49.4 58.3 40.3 48.3 57.5-7.5-2.4-1.4 Provisions 23.4 24.8 25.9 23.5 23.9 25.3 0.3-3.3-2.1 PBT 20.1 24.7 32.5 16.8 24.3 32.2-16.7-1.5-0.9 Tax 6.5 8.0 10.6 3.7 7.9 10.8-43.6-1.5 2.2 PAT 13.6 16.7 21.9 13.1 16.4 21.4-3.7-1.5-2.4 Margins (%) 2.5 2.5 2.6 2.4 2.5 2.6 Credit Cost (%) 1.3 1.0 1.0 1.3 1.3 1.1 RoA (%) 0.6 0.6 0.7 0.6 0.7 0.7 RoE (%) 10.2 11.5 13.8 9.8 11.4 13.5 One year forward P/BV PB (x) Peak(x) Avg(x) Min(x) 2.5 2.1 2.0 1.5 0.9 1.0 0.5 0.5 0.0 0.3 One year forward P/E PE (x) Peak(x) Avg(x) Min(x) 16 11.3 11 6 6.3 4.5 1 2.4 Oct-04 Jan-06 Apr-07 Jul-08 Oct-09 Jan-11 Apr-12 Jul-13 Oct-14 Oct-04 Jan-06 Apr-07 Jul-08 Oct-09 Jan-11 Apr-12 Jul-13 Oct-14 Source: MOSL, Bloomberg Source: MOSL, Bloomberg 29 October 2014 4
DuPont Analysis: Asset quality remains a key for improvement in return ratios (%) Y/E MARCH FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Net Interest Income 3.21 2.84 2.55 2.03 1.96 2.33 2.80 2.49 2.49 2.44 2.26 2.38 2.47 Fee income 0.40 0.48 0.47 0.49 0.48 0.49 0.44 0.45 0.42 0.43 0.47 0.51 0.52 Fee to core Income 11.11 14.52 15.65 19.41 19.48 17.31 13.54 15.35 14.41 15.09 17.30 17.56 17.34 Core Income 3.61 3.32 3.02 2.52 2.44 2.81 3.23 2.94 2.90 2.87 2.73 2.89 2.99 Operating Expenses 1.67 1.71 1.50 1.31 1.36 1.35 1.27 1.37 1.41 1.39 1.38 1.41 1.39 Cost to Core Income 46.42 51.44 49.77 52.07 55.77 47.95 39.17 46.49 48.52 48.31 50.73 48.92 46.40 Employee cost 0.83 0.89 0.78 0.67 0.74 0.78 0.70 0.80 0.83 0.80 0.77 0.77 0.75 Employee to total exp 49.88 51.81 52.20 50.88 54.68 57.61 55.40 58.60 59.14 57.48 55.55 54.46 53.75 Other operating expenses 0.84 0.82 0.72 0.64 0.62 0.57 0.56 0.57 0.58 0.59 0.62 0.64 0.64 Core Operating Profit 1.93 1.61 1.52 1.21 1.08 1.46 1.97 1.57 1.50 1.48 1.34 1.48 1.60 Trading and others 0.66 0.50 0.44 0.27 0.58 0.47 0.20 0.28 0.46 0.49 0.43 0.46 0.40 Operating Profit 2.59 2.11 1.95 1.48 1.66 1.94 2.17 1.85 1.95 1.97 1.78 1.94 2.00 Provisions 0.84 0.40 0.37-0.05 0.52 0.65 0.81 1.01 1.14 1.22 1.04 0.96 0.88 NPA 0.32-0.10-0.30-0.23 0.17 0.43 0.63 0.64 0.84 0.80 0.80 0.81 0.72 Others 0.52 0.50 0.67 0.18 0.35 0.23 0.18 0.38 0.30 0.42 0.24 0.15 0.16 PBT 1.75 1.71 1.59 1.53 1.14 1.28 1.36 0.84 0.81 0.75 0.74 0.98 1.12 Tax 0.15 0.29 0.34 0.51 0.25 0.38 0.36 0.17 0.11 0.21 0.16 0.32 0.37 Tax Rate 8.67 16.76 21.49 33.36 21.91 29.25 26.28 19.93 13.55 27.90 22.00 32.50 33.50 RoA 1.60 1.42 1.24 1.02 0.89 0.91 1.01 0.67 0.70 0.54 0.58 0.66 0.74 Leverage (x) 15.84 13.30 12.34 14.47 16.62 18.15 17.04 15.91 16.31 16.92 17.07 17.28 18.14 RoE 25.34 18.90 15.35 14.78 14.81 16.48 17.15 10.72 11.46 9.16 9.84 11.39 13.49 29 October 2014 5
Story in charts Reported NIM improved by 7bp QoQ (%) 2.9 2.9 2.6 2.7 2.8 2.8 2.8 2.8 2.9 2.8 2.7 2.7 2.6 2.6 Moderation in business growth continues Deposit YoY Gr. (%) Loans YoY Gr. (%) 21 22 17 17 16 15 21 19 13 12 12 9 8 14 8 8 8 12 13 11 9 10 8 8 10 7 6 6 2QFY12 3QFY12 4QFY12 2QFY13 3QFY13 4QFY13 2QFY14 3QFY14 4QFY14 2QFY15 1HFY12 9MFY12 FY12 1HFY13 9MFY13 FY13 1HFY14 9MFY14 FY14 1HFY15 Fee income performance in line with BS growth (%) Fee Income (INR m) YoY Gr. (%) 17 20 24 25 12 6 15 24 12 14 9 3-8 -4 2,132 2,331 2,289 2,699 2,250 2,137 2,205 2,768 2,517 2,455 2,463 3,429 2,868 2,679 Credit cost remains elevated (%) Credit cost (INR m) Credit cost (%) 2.1 1.8 1.5 1.6 1.4 1.0 1.2 1.4 1.3 1.1 1.0 0.9 0.6 0.4 2QFY12 3QFY12 4QFY12 2QFY13 3QFY13 4QFY13 2QFY14 3QFY14 4QFY14 2QFY15 Slippages remain elevated (INR b) 3.8 15.0 7.0 13.2 10.4 8.1 7.1 7.6 6.5 14.3 10.1 10.4 12.1 9.8 GNPA up 11% QoQ; PCR stable QoQ (%) 75.1 63.8 63.3 61.5 64.4 64.5 63.6 63.0 63.9 61.5 59.7 60.2 59.1 59.0 2.1 1.1 3.0 1.9 2.9 GNPA NNPA PCR (incl, tech w/off) 1.9 2QFY12 3QFY12 4QFY12 2QFY13 3QFY13 4QFY13 2QFY14 3QFY14 3.2 4QFY14 2QFY15 1HFY12 9MFY12 FY12 1HFY13 9MFY13 2.2 2.1 2.0 2.1 2.3 2.3 2.7 2.9 2.8 3.1 3.3 FY13 3.0 2.9 3.0 3.2 3.4 3.8 3.9 4.0 4.3 4.7 1HFY14 9MFY14 FY14 1HFY15 1,354 3,422 1,011 5,000 4,301 3,010 3,512 4,986 3,450 3,319 2,814 7,281 4,783 4,474 2QFY12 3QFY12 4QFY12 2QFY13 3QFY13 4QFY13 2QFY14 3QFY14 4QFY14 2QFY15 29 October 2014 6
Quarterly Snapshot FY13 FY14 FY15 Variation (%) INR m 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q QoQ YoY Profit and Loss Net Interest Income 11,258 11,571 12,044 12,138 13,070 12,809 12,304 13,087 12,428 12,463 0-3 Other Income 4,084 4,068 3,778 4,617 5,381 3,119 3,408 7,545 5,882 3,927-33 26 Trading profits -133 519 618 681 2,056-169 324 267 1,242 628-49 -472 Recoveries 1,967 1,412 955 1,168 807 832 621 3,850 1,771 620-65 -26 Fee income 2,250 2,137 2,205 2,768 2,517 2,455 2,463 3,429 2,868 2,679-7 9 Total Income 15,343 15,639 15,822 16,755 18,451 15,928 15,712 20,632 18,310 16,389-10 3 Operating Expenses 6,377 6,427 6,559 7,290 7,568 7,677 7,128 6,795 6,892 7,841 14 2 Employee 3,762 3,665 3,906 4,428 4,504 4,461 3,937 3,864 3,706 4,261 15-4 Others 2,615 2,762 2,652 2,862 3,064 3,216 3,191 2,931 3,186 3,580 12 11 Operating Profits 8,965 9,212 9,264 9,465 10,883 8,251 8,584 13,837 11,417 8,549-25 4 Provisions 3,321 4,599 6,038 7,588 5,327 5,505 5,611 9,307 5,416 6,412 18 16 PBT 5,644 4,614 3,226 1,877 5,555 2,746 2,973 4,530 6,001 2,137-64 -22 Taxes 1,730 1,592 (39) (1,202) 2,022 232 730 1,427 2,356 (778) (133) (436) PAT 3,914 3,022 3,264 3,079 3,534 2,514 2,243 3,103 3,645 2,914-20 16 Asset Quality GNPA 33,776 34,656 36,900 41,840 43,029 48,871 51,841 56,179 59,829 66,438 11 36 NNPA 23,061 23,934 26,106 29,027 29,364 34,229 38,335 39,044 42,288 45,202 7 32 GNPA (%) 3.0 2.9 3.0 3.2 3.4 3.8 3.9 4.0 4.3 4.7 41 97 NNPA (%) 2.1 2.0 2.1 2.3 2.3 2.7 2.9 2.8 3.1 3.3 18 60 PCR (Calculated, %) 32 31 29 31 32 30 26 30 29 32 265 200 PCR (Reported, %) 64 64 64 63 64 61 60 60 59 59-15 -252 Slippages 7,069 6,522 8,136 10,406 7,642 10,139 10,437 12,053 14,312 9,784-32 -4 Slippage Ratio 2.9 2.5 3.0 3.7 2.7 3.4 3.4 3.7 4.5 3.0-147 -39 Prov. for NPA in qtr 4,301 3,010 3,512 4,986 3,450 3,319 2,814 7,281 4,783 4,474-6 35 Credit Cost 1.5 1.0 1.2 1.6 1.1 1.0 0.9 2.1 1.4 1.3-8 26 Restr. loans (INR b) 110 115 118 99 103 94 97 107 107 108 1 15 % to Loans 9.6 9.7 9.5 7.6 8.0 7.3 7.2 7.6 7.8 7.7-6 45 Ratios (%) Fees to Total Income 14.7 13.7 13.9 16.5 13.6 15.4 15.7 16.6 15.7 16.3 Cost to Core Income 47.2 46.9 46.0 48.9 48.6 50.3 48.3 41.1 45.1 51.8 Tax Rate 30.7 34.5-1.2-64.0 36.4 8.4 24.6 31.5 39.3-36.4 CASA Reported 24.0 24.1 23.9 24.6 23.5 24.5 24.2 24.3 24.1 24.9 Loan/Deposit 72.0 72.4 73.4 74.0 72.6 74.1 73.4 72.8 74.1 75.3 Margins Reported (%) Yield on loans 12.4 12.4 12.3 12.0 12.0 11.9 11.9 11.7 11.7 11.7-1 -14 Yield On Investments 7.5 7.5 7.4 7.4 7.4 7.6 7.5 7.5 7.5 7.6 9-1 Cost of Deposits 8.0 7.9 7.8 7.8 7.7 7.6 7.7 7.7 7.8 7.7-3 13 Spreads 2.5 2.5 2.6 2.7 2.6 2.6 2.4 2.5 2.3 2.4 5-20 NIMs 2.8 2.8 2.8 2.8 2.9 2.8 2.7 2.7 2.6 2.6 7-21 Balance sheet (INR b) Deposits 1,582 1,642 1,685 1,759 1,763 1,752 1,825 1,935 1,865 1,864 0 6 of which CASA Deposits 380 396 402 432 418 430 442 470 449 463 3 8 Current Deposits 99 99 105 117 106 106 108 119 106 114 7 8 Savings Deposits 281 297 297 315 313 324 334 352 343 350 2 8 Gross Advances 1,139 1,188 1,236 1,302 1,280 1,298 1,340 1,408 1,383 1,403 1 8 29 October 2014 7
EPS: MOSL forecast v/s consensus (INR) MOSL Consensus Variation Forecast Forecast (%) FY15 43.6 46.7-6.6 FY16 54.8 57.4-4.5 Shareholding pattern (%) Sep-14 Jun-14 Sep-13 Promoter 59.1 59.1 58.0 Stock performance (1-year) 380 310 240 170 Sensex - Rebased DII 20.9 22.2 24.0 FII 12.7 12.3 10.0 100 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Others 7.3 6.3 8.1 Note: FII Includes depository receipts Financials: Valuation Matrix 61.2 Rating CMP Mcap EPS (INR) P/E (x) BV (INR) P/BV (x) RoA (%) RoE (%) Dividend (INR) (USDb) FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 Yield (%) # ICICIBC* Buy 1,604 30.3 117.8 143.6 11.3 9.0 665 770 2.0 1.7 1.9 1.9 16.2 17.1 1.6 HDFCB Buy 891 34.9 53.6 65.8 16.6 13.6 256 306 3.5 2.9 2.0 2.0 22.8 23.4 1.0 AXSB Buy 426 16.3 36.7 43.3 11.6 9.8 220 256 1.9 1.7 1.8 1.7 17.9 18.1 1.1 KMB* Neutral 1,080 13.6 48.9 59.8 22.1 18.0 322 381 3.3 2.8 1.9 1.9 14.1 15.0 0.1 YES Buy 639 4.3 58.9 75.8 10.8 8.4 328 388 1.9 1.6 1.7 1.7 19.4 21.2 1.3 IIB Buy 693 5.9 43.3 54.4 16.0 12.7 228 273 3.0 2.5 1.9 1.9 20.5 21.7 0.7 VYSB Neutral 623 1.9 43.8 55.5 14.2 11.2 434 478 1.4 1.3 1.1 1.1 10.5 12.2 1.1 FB Buy 139 1.9 12.9 15.4 10.8 9.0 99 111 1.4 1.2 1.2 1.1 13.6 14.6 1.6 J&KBK Buy 139 1.1 25.2 28.4 5.5 4.9 152 174 0.9 0.8 1.3 1.3 17.6 17.4 2.9 SIB Buy 28 0.6 4.3 5.3 6.5 5.2 30 34 0.9 0.8 0.9 0.9 15.0 16.5 2.6 Private Aggregate 111.0 14.8 12.1 2.5 2.1 SBIN (cons)* Buy 2,643 32.2 321.0 433.8 7.9 5.8 2,347 2,702 1.1 0.9 0.9 1.0 14.4 17.0 1.5 PNB Buy 904 5.4 156.3 203.9 5.8 4.4 1,193 1,373 0.8 0.7 0.8 0.9 13.9 15.9 1.3 BOI Neutral 273 2.9 60.1 76.0 4.5 3.6 478 545 0.6 0.5 0.5 0.6 13.3 14.8 2.2 BOB Neutral 906 6.4 146.1 170.8 6.2 5.3 978 1,109 0.9 0.8 0.8 0.8 15.8 16.4 2.8 CBK Buy 388 2.9 81.2 107.2 4.8 3.6 626 709 0.6 0.5 0.6 0.7 13.6 16.1 3.2 UNBK Buy 225 2.3 40.2 48.7 5.6 4.6 330 370 0.7 0.6 0.6 0.7 12.8 13.9 2.3 OBC Buy 267 1.3 54.8 71.4 4.9 3.7 502 556 0.5 0.5 0.7 0.7 11.4 13.5 3.3 INBK Buy 167 1.3 28.1 32.0 5.9 5.2 288 312 0.6 0.5 0.6 0.6 10.1 10.7 2.8 CRPBK Neutral 327 0.9 61.9 74.2 5.3 4.4 687 745 0.5 0.4 0.4 0.4 9.3 10.4 2.5 ANDB Neutral 77 0.7 12.8 13.4 6.0 5.7 165 174 0.5 0.4 0.4 0.3 8.0 7.9 3.5 IDBI Neutral 68 1.8 14.4 19.7 4.7 3.5 157 173 0.4 0.4 0.6 0.7 9.5 11.9 2.3 DBNK Neutral 62 0.5 13.6 16.8 4.6 3.7 137 150 0.5 0.4 0.5 0.5 10.3 11.7 3.4 Public Aggregate 59.7 7.4 5.8 0.9 0.8 HDFC* Buy 1,047 26.7 38 46 17.1 12.6 166 192 4.0 3.0 2.5 2.5 23.8 24.8 1.5 LICHF Buy 339 2.8 32 39 10.4 8.6 198 229 1.7 1.5 1.4 1.4 17.6 18.4 1.5 DEWH Buy 363 0.8 62 76 5.9 4.8 359 416 1.0 0.9 1.3 1.3 18.4 19.7 2.8 IHFL Buy 397 2.3 64 77 6.2 5.2 157 173 2.5 2.3 4.2 4.1 31.4 32.5 7.1 IDFC Neutral 145 3.6 14 16 10.6 9.3 109 121 1.1 0.9 2.5 2.5 12.5 13.0 1.9 RECL Buy 294 4.7 65 77 4.5 3.8 298 357 1.0 0.8 3.4 3.4 23.9 23.6 3.8 POWF Buy 278 6.0 59 69 4.7 4.0 295 346 0.9 0.8 3.2 3.1 21.5 21.6 3.8 SHTF Buy 892 3.3 90 105 9.9 8.5 514 604 1.7 1.5 2.6 2.8 18.5 19.5 0.9 MMFS Neutral 286 2.6 20 24 14.1 11.9 117 134 2.4 2.1 2.9 2.9 18.5 19.1 1.4 BAF Buy 2,754 2.2 208 245 13.2 11.2 1,123 1,328 2.5 2.1 2.9 2.8 20.1 20.0 1.2 NBFC Aggregate 55.1 11.7 9.9 2.2 1.9 *Multiples adj. for value of key ventures/investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries # Div Yield based on FY14 declared dividend; UR: Under Review 29 October 2014 8
Financials and valuation Income Statements (INR Billion) Y/E Mar 2014 2015E 2016E 2017E Interest Income 190.2 205.0 220.4 255.0 Interest Expense 138.9 153.9 161.0 183.9 Net Interest Income 51.3 51.2 59.4 71.1 Change (%) 9.1-0.2 16.1 19.7 Non Interest Income 19.5 20.5 24.1 26.3 Net Income 70.7 71.6 83.5 97.4 Change (%) 11.3 1.3 16.5 16.7 Operating Expenses 29.2 31.4 35.2 39.9 Pre Provision Profits 41.6 40.3 48.3 57.5 Change (%) 12.6-3.1 19.9 19.2 Provisions (excl tax) 25.8 23.5 23.9 25.3 PBT 15.8 16.8 24.3 32.2 Tax 4.4 3.7 7.9 10.8 Tax Rate (%) 27.9 22.0 32.5 33.5 Profits for Equity SH 11.4 13.1 16.4 21.4 Change (%) -14.2 14.7 25.6 30.4 Equity Dividend (Incl tax) 2.7 3.0 3.8 5.0 Core PPP* 31.2 30.5 36.8 46.1 Change (%) 10.4-2.3 20.7 25.3 Balance Sheet (INR Billion) Y/E Mar 2014 2015E 2016E 2017E Equity Share Capital 3.0 3.0 3.0 3.0 Reserves & Surplus 131.3 141.1 153.4 169.6 Net Worth 134.3 144.1 156.4 172.6 Deposits 1,934.9 2,051.0 2,338.1 2,759.0 Change (%) 10.0 6.0 14.0 18.0 of which CASA Dep 470.4 499.9 574.9 661.1 Change (%) 8.9 6.3 15.0 15.0 Borrowings 78.6 70.7 75.0 78.0 Other Liabilities & Prov. 55.2 66.2 79.6 96.2 Total Liabilities 2,203.0 2,331.9 2,649.2 3,105.7 Current Assets 142.7 125.0 144.7 175.1 Investments 614.7 645.5 710.0 816.5 Change (%) 5.0 5.0 10.0 15.0 Loans 1,390.8 1,502.1 1,727.4 2,038.3 Change (%) 7.9 8.0 15.0 18.0 Fixed Assets 12.6 12.9 13.7 14.4 Other Assets 42.3 46.5 53.5 61.5 Total Assets 2,203.0 2,331.9 2,649.2 3,105.7 Ratios Y/E Mar 2014 2015E 2016E 2017E Spreads Analysis (%) Avg. Yield-Earning Assets 9.7 9.7 9.4 9.5 Avg. Yield on loans 10.9 10.8 10.4 10.5 Avg. Yield on Investments 7.2 7.3 7.3 7.3 Avg. Cost-Int. Bear. Liab. 7.2 7.4 7.1 7.0 Avg. Cost of Deposits 7.2 7.4 7.0 6.9 Interest Spread 2.5 2.2 2.3 2.4 Net Interest Margin 2.6 2.4 2.5 2.6 Profitability Ratios (%) RoE 9.2 9.8 11.4 13.5 RoA 0.5 0.6 0.7 0.7 Int. Expense/Int.Income 73.0 75.0 73.1 72.1 Fee Income/Net Income 24.0 23.4 23.2 22.2 Non Int. Inc./Net Income 27.5 28.6 28.9 27.0 Efficiency Ratios (%) Cost/Income* 41.2 43.8 42.2 41.0 Empl. Cost/Op. Exps. 57.5 55.5 54.5 53.8 Busi. per Empl. (Rs m) 163.0 169.0 177.4 191.2 NP per Empl. (Rs lac) 0.6 0.6 0.8 0.9 Asset-Liabilty Profile (%) Loans/Deposit Ratio 71.9 73.2 73.9 73.9 CASA Ratio 24.3 24.4 24.6 24.0 Investment/Deposit Ratio 31.8 31.5 30.4 29.6 G-Sec/Investment Ratio 75.3 79.4 82.3 84.5 CAR 11.0 11.0 10.4 9.7 Tier 1 8.9 8.9 8.6 8.1 Valuation Y/E Mar 2014 2015E 2016E 2017E Book Value (INR) 426.2 459.6 501.6 556.4 Change (%) 2.8 7.8 9.1 10.9 Price-BV (x) 0.6 0.6 0.5 0.5 Adjusted BV (INR) 335.0 341.2 383.6 436.9 Price-ABV (x) 0.8 0.8 0.7 0.6 EPS (INR) 38.0 43.6 54.8 71.4 Change (%) -16.5 14.7 25.6 30.4 Price-Earnings (x) 7.0 6.1 4.9 3.7 Dividend Per Share (INR) 7.6 8.7 11.0 14.3 Dividend Yield (%) 2.8 3.3 4.1 5.4 Asset Quality (INR Billion) Y/E Mar 2014 2015E 2016E 2017E GNPA 56.2 70.9 72.9 73.2 NNPA 39.0 50.7 50.6 51.2 GNPA Ratio 4.0 4.7 4.2 3.6 NNPA Ratio 2.8 3.4 2.9 2.5 PCR (Excl Tech. write off) 30.5 28.5 30.7 30.1 PCR (Incl Tech. Write off) 60.2 58.3 62.4 65.3 29 October 2014 9
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