Result Update Rating matrix Rating : Buy Target : 16 Target Period : 12 months Potential Upside : 1% What s changed? Target Changed from 138 to 16 EPS Changed from 14.6 to 8.3 EPS Changed from 21.2 to 12.3 Rating Changed from Hold to Buy Quarterly performance YoY QoQ NII 3,73.8 4,119.6-9.4 3,879.9-3.8 Other Income 2,513.5 1,67.6 5.5 2,387.9 5.3 PPP 3,154.6 2,917.9 8.1 3,312. (4.8) PAT 27.2 51. 36.2 549.4 (62.3) Key financials Crore FY16 NII 16,556 15,314 15,96 17,452 PPP 11,955 12,215 13,855 14,474 PAT 3,62 (3,974) 1,768 2,621 Valuation summary FY16 P/E 7.1-5.8 14.2 9.6 Target P/E 8.4 (6.8) 16.6 11.2 ABV 118.8 18.3 33.6 51.5 Target P/ABV 1.2 7.5 4.1 2.7 RoA.5 -.6.3.3 RoE 8.2 (1.3) 4.4 5.9 Stock data Particular Amount Market Capitalisation 28443 Crore GNPA () 55628 crore NNPA () 34994 crore NIM () 2.3% 52 week H/L 164 /69 Net Worth 4248 Crore Face value 2 DII Holding 18.3 FII Holding 1.4 Price performance 1M 3M 6M 12M SBI 12.73 9.72 18.84 61. BOI 2. 21.7 2.5 3. PNB 25.9 6.6 22. 59. Research Analyst Kajal Gandhi kajal.gandhi@icicisecurities.com Vishal Narnolia vishal.narnolia@icicisecurities.com Vasant Lohiya vasant.lohiya@icicisecurities.com Moderation in asset quality pain... February 9, 217 Punjab National Bank (PUNBAN) 145 Asset quality pressure was controlled with fresh slippages at ~ 48 crore vs. 589 crore in. GNPA declined marginally QoQ to 55627 from 56466 crore. NNPA ratio was stable at 9.9% down to 34993 crore vs. 35722 crore QoQ. Restructured assets (RA) of the bank declined further to 17216 crore in vs. 1894 crore in. Stressed book (GNPA + RA) remains high at 18.2% of assets PAT came in below our estimate at 27 crore (I-direct estimate: 517 crore), led by higher-than-expected provisions. Provision rose QoQ to 2936 crore vs. 2534 crore, with NPA provisions higher at 3363 crore leading to provision coverage ratio also improving to 54.96% from 53.32% QoQ NII declined 9.5% YoY to 3731 crore while global NIM dipped ~2 bps QoQ to 2.31% with domestic NIM declining 1 bps QoQ to 2.78% vs. 2.86%. Credit growth turned negative at -1.8% vs. 3.4% to 385764 crore, below estimated 1.7% growth. However, with demonetisation, deposit grew 6.5%QoQ, 11.6%YoY to 61218 crore Third largest PSU bank, NPA woes remain steady PNB is the third largest bank in terms of advances among PSU banks ( 393731 crore) with ~4.8% market share, declining from 5.45% in September 21. It lost the No.2 position to BoB. PNB has an extensive branch network of >68 branches, with 5% in rural and semi-urban areas giving it unparalleled advantage of domestic CASA of ~4% since FY7 and consequent lower CoF. The bank grew credit at 23-29% in FY6-11 and at 11% CAGR in FY11-16. Loss of market share in deposit & loans happened due to a change in focus to manage rising NPAs (GNPA at 13.75% in FY16 from 1.9% in Q2FY1), significantly impacting profit. Asset quality pressure surges in FY16; outlook remains positive RA had grown from 1 crore to 35 crore in FY1- and declined to 2 crore in FY16. GNPA ratio in the past seven years has risen from lows of 1.6% to 12.9% at 55818 crore with surge in slippages in Q4 at 23545 crore, led by AQR and massive slippages from RA book. The management builds some respite in a few sectors, ambiguity over incremental stress asset formation continues. Accordingly, we factor a gradual improvement in GNPA to 11.9% by to 57352 crore. Loan growth to stay muted; NIMs pressured with excess funds too PNB s credit book grew 8.4% YoY in FY16 to 412326 crore (-1.8% in ). The loan book is dominated by large corporate (28%) & MSME (19%) segment & has ~12% in international. Deposits saw 19% CAGR to 51379 crore in FY1-15 while FY16 growth was 1.3%. In FY17-18E, we raised deposits CAGR to 11.3% due to demonetisation. We expect credit to be muted at 4.9% CAGR to 49423 crore. Expect NII to grow at 8.6% CAGR to 18158 crore, after growth of 1% in FY1-16 with NIM at ~2.4%. We have revised PAT lower to 177 crore & 2621 crore in,, respectively building in higher provisions. Moderation expected ahead; HF subsidiary adds value, BUY PNB had highest RoA, RoE among PSU banks in FY8-1. However, it has taken a huge knock as deteriorating asset quality led to elevated provisioning, loss of net interest income. In Q2,, NPA accretion moderation has come as positive sign with GNPA, NNPA ratio stable at 13.7%, 9.1%, respectively. Valuing the standalone bank at 1.5x ABV and housing finance subsidiary at 2x ABV, we revise our target price upwards to 16 and upgrade from HOLD to BUY. ICICI Securities Ltd Retail Equity Research
Variance analysis Q3Y17E YoY QoQ Comments NII continues to be under pressure due to asset quality pain and negative credit NII 3,731 3,7 4,12 3,88-9.4-3.8 growth NIM 2.3 2.5 2.9 2.5-54 bps -18 bps Margin declines 18bps led by writeoffs and asset quality pains contuning Other Income 2,513 2,41 1,671 2,388 5.5 5.3 Net Total Income 6,244 6,11 5,79 6,268 7.8 -.4 Staff cost 2,12 2,36 1,991 1,967 5.6 6.9 Other Operating Expenses 988 1,28 881 989 12.1 -.1 PPP 3,155 3,37 2,918 3,312 8.1-4.8 Provision 2,936 2,298 3,776 2,534-22.2 15.9 Higher NPA provisions dent operating performance flowing to PAT PBT 219 739-858 778-125.5-71.9 Tax Outgo 12 222-99 229-11.3-95. Higher writeoffs leading to lower tax outgo in the quarter PAT 27 517 51 549 36.2-62.3 Key Metrics GNPA 55,628 56,966 34,338 56,466 62. -1.5 Recovery and writeoffs assist absolute GNPA decline QoQ, GNPA ratio increased by ~7 bps QoQ to 13.7%. Slippages at 48 crore NNPA 34,994 36,122 22,983 35,722 52.3-2. NNPA ratio is flat QoQ at 9.1% Total Restructured assets 17,216 18,74 35,4 18,94-5.8-4.9 Change in estimates ( Crore) Old New % Change Old New % Change Net Interest Income 16,461 15,96-3.4 18,158 17,452-3.9 Margins take a knock with excess funds of demonetisation with no credit growth Pre Provision Profit 13,416 13,855 3.3 14,264 14,474 1.5 NIM (calculated) 2.5 2.4-9 bps 2.5 2.4-9 bps PAT 3,17 1,768-43.1 4,513 2,621-41.9 Higher provisions incorporated leading to lower PAT ABV per share ( ) 54 34-37.5 14 52-5.6 Assumptions Current Earlier FY16 Credit growth 9. 8.4 4.9 1.1 8.9 1.1 Deposit growth 11.1 1.3 13.1 9.5 8.9 9.4 CASA ratio - calculated 36.7 37.2 44.3 44.6 37.3 37.6 NIM calculated 3. 2.5 2.4 2.4 2.5 2.5 Cost to income ratio 46.7 44.9 44.3 44.8 45.2 45.3 GNPA ( crore) 25,695 55,81 57,427 57,352 52,44 48,913 NNPA ( crore) 15,397 33,79 34,14 33,917 31,59 25,899 Slippage ratio 4.8 11.1 3.8 3.3 3.9 3.3 Credit cost 2.2 4.3 2.5 2.2 2. 1.6 ICICI Securities Ltd Retail Equity Research Page 2
Company Analysis NPA concerns moderating; performance improves relatively Asset quality pressure was controlled with fresh slippages at ~ 48 crore vs. 589 crore in. Absolute GNPA declined marginally QoQ to 55627 from 56466 crore (GNPA ratio increased ~7 bps to 13.7%, a numerical surge mainly due to a dip in credit growth). NNPA ratio was stable at 9.9% declining to 34993 crore vs. 35722 crore QoQ. Restructured assets of the bank declined further to 17216 crore in vs. 1894 crore in and 1899 crore in. The stressed asset (GNPA + restructured asset) continues to remain high at 18.2% of assets. Concerns about the bank s asset quality are generally raised owing to its exposure to stressed sectors (15% to infrastructure) and troubled corporates. Power alone (included in infra) forms a major proportion of the loan book. The GNPA ratio in the past seven years has grown from 1.6% to >13%, with a spurt seen in last two fiscals. Further, calculated provision coverage ratio (PCR) had dropped to ~45% from 89% earlier and now brought up to 54%. Credit costs have stayed above 1.1%. The management has indicated at recognition of majority of asset quality issues. Recovery guidance has been maintained at 15-2 crore for. Going ahead, we expect gradual improvement in asset quality. Hence, we have factored in GNPA ratio at 11.8% in from current 13.7% and NNPA ratio of 7.1% from 9.1% during the same period. Exhibit 1: Fresh slippages witness decline but still remain higher The GNPA ratio is expected at 11.8% and NNPA at 7.1% by 7. 6. 5. 4. 3. 2. 1.. Q2 2751.9 11617.8 22211.4 13787.8 25694.9 15396.5 FY16E ( Crore) 25397.4 15393.6 24945.2 15187. 34338.2 22983.4 5589.8 3379.4 56654.1 35728.5 56465.6 35722.3 55627.5 34993.5 57426.7 3413.9 57352. 33917.5 GNPA NNPA Source: Company Quarterly Presentation, ICICIdirect.com Research Exhibit 2: NNPA rises from bottom of.2% in FY9 to 9.1% in 16. 14. 12. 1. 8. 6. 4. 2.. 8.5 5.5 5.7 6. 6.5 6.5 6.4 5.9 4.4 5.2 3. 1.5 2.3 2.8 3. 3.3 3.8 4. 4.1 4. 13.2 13.8 13.6 13.7 12.9 11.8 8. 9.2 9.1 9.1 7.9 7.1 FY12 FY13 FY14 Q1 Q2 FY16E GNPA ratio NNPA ratio ICICI Securities Ltd Retail Equity Research Page 3
Small ticket loans including retail to remain in focus now The bank s loan book is largely skewed towards the large corporate segment, which comprises 28% of the total loan book. With a shift in focus towards retail & SME segments, their share has been inching northwards. Since then, the retail loans proportion has risen to 15% as on from 9.9% in FY12. In FY17, growth has not picked up yet with credit declining 1.8% YoY. We expect the same to remain moderate owing to the slower pace of corporate credit demand and due to the fact that the focus is still high on recovery and cleaning up the balance sheet. In FY16, retail and MSME loans grew at a healthy pace of 19.4% and 19.6% YoY, respectively. On the other hand, the corporate book growth remained in single digits at 5.3% YoY to 111866 crore. The management had indicated credit growth to be good for small ticket loans including retail, agri and MSME in. These three sectors in all saw just 4.9% growth while retail credit saw 12.3% growth in. Hence, we have factored in further moderation in credit growth at 4.9% YoY from 9% earlier for FY17 and a CAGR of 7.5% in FY17-18E to 47665 crore. Exhibit 3: Moderate credit offtake expected ahead Advances growth turned negative sequentially at -1.8% YoY vs. 3.4% YoY to 385764 crore, below our estimate of 1.7% YoY growth. However, considering demonetisation, deposits grew 6.5% QoQ and 11.6% YoY to 61218 crore ( Crore) 8 7 6 5 4 79 79 77 78 77 78 75 76 75 74 71 72 75 71 68 69 69 8 75 7 3 2 1 38725 39156 311611 396828 313852 45699 326133 42647 349269 451397 347485 44492 35793 473511 362496 484138 38534 51379 3888 517733 38958 539924 392937 548532 412327 55352 391574 553952 393731 574884 385764 61218 432482 625738 47666 685255 63 65 6 FY13 Q1FY14 Q2FY14 Q3FY14 FY14 Q1 Q2 FY16 Advances Deposits C D Ratio (RHS) Retail loans grew 12.3% YoY to 6135 crore and agri grew 4% with MSME at.5%. Small ticket advances form 56.6% of credit vs. 55% a year earlier. Retail loans growth was led by housing segment, which increased 18%% YoY moderating from 22% earlier to 29597 crore Retail loans grew 12.3% YoY to 6135 crore and Agri grew 4% with MSME at.5% in. Small ticket advances form 56.6% of credit vs. 55% a year earlier. Retail loans growth was led by housing segment, which increased 18% YoY moderating from 22% earlier to 29597 crore Large corporate loans continue to be flat QoQ to 113698 crore Exhibit 4: Domestic credit: Retail loans, 15% Others, 9% Large industry, 35% Exhibit 5: Domestic credit: Retail loans, 17% Others, 1% Large industry, 31% MSME, 23% Agri, 18% MSME, 24% Agri, 18% Source: Company Quarterly Presentation, ICICIdirect.com Research Source: Company Quarterly Presentation, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 4
Relatively better deposit franchise, CASA surges on demonetisation Exhibit 6: Growth tapers with slowing economy, demonetisation helps deposits 5 4 4 3 3 2 1-1 19 17 23 18 8 13 3 3 5 4 17 15 15 16 14 12 13 11 9 1 11.6 13.1 9.5 13 14 7. 6.5 12 6 1 11 1 9 1 1.1 8 8 7 2.8 3.4 4.9-1.8 Q1FY13 Q2FY13 Q3FY13 FY13 Q1FY14 Q2FY14 Q3FY14 FY14 Q1 Q2 FY16 Advances Growth YoY Deposits Growth YoY (RHS) 2 1-1 Deposits grew 1.3% YoY to 55351 crore in FY16. However, H1FY17 saw slower deposits pace, but demonetisation pushed up savings growth in. Outstanding bulk deposits declined from 88297 crore in FY12 to 12123 crore in and further to 1354 crore (.24% of deposit) in FY16. This has helped manage the cost of funds in FY16. CASA ratio remained strong but moderated further in the last few years. However, excess deposits flowing to savings bank due to demonetisation boosted CASA ratio to 47% in from 42% in and ~4% in FY16. We expect the same to stay around 44% in next couple of years. Exhibit 7: CASA ratio surging in FY17-18E... ( Crore) 8 7 6 5 4 3 2 1 4 38 4 4 39 37 39 4 4 37 42 42 47.9 44 45 5 45 4 35 3 25 2 15 1 5 Q3FY14 FY14 Q1 Q2 FY16 Saving + Current Term Total Domestic CASA (RHS) Source: Company Quarterly Presentation, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 5
Exhibit 8: Margin moderates further to 2.3%, excess liquidity and low growth impacting NIM 15 12 9 6 3 1.7 1.5 1.4 1.6 9.9 1.3 9.9 9.9 9.5 9.6 9.8 9.5 9.1 8.5 8.5 8.3 6.6 6.4 6.4 6.3 6.1 6.1 6.1 6.1 6. 6. 6. 5.9 5.9 5.5 5.4 5.3 3.5 3.5 3.5 3.6 3.2 3.4 3.2 3.2 2.8 2.9 2.9 2.9 2.6 2.5 2.5 2.3 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1 Q2 Q4 Q4FY16 Yield on Advances Cost of Deposits NIM (RHS) Source: Company Quarterly Presentation, ICICIdirect.com Research Non-interest income consistently adding to bottomline Exhibit 9: Non interest income remains healthy led by higher recovery and treasury gains Q2FY14 Q3FY14 Q4FY14 Q1 Q2 Q4 Q4FY16 Trading Income 53 24 189 149 125 211 538 163 217 233 114 61 654 298 Commision, exchange and brokerage 783 775 85 925 822 888 85 943 784 823 92 122 9 823 Recovery 69 86 274 91 483 19 335 217 236 519 1326 727 8 519 Dividend from liquid MF 3 41 72 7 13 77 85 74 111 75 91 Total 899 938 1397 1236 1558 1291 185 1397 1357 1671 2452 2355 2388 2513 Exhibit 1: Cost to income ratio remains near ~45% in FY17-18E 6 5 4 42 4 36 4 42 44 43 42 43 45 44 5 5 47 43 48 5 45 46 47 49 44 45 3 2 1 Q2FY12 Q3FY12 Q4FY12 FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 FY13 FY14 Q1 Q2 FY16 Cost to Income ratio Exhibit 11: DuPont Analysis FY8 FY9 FY1 FY11 FY12 FY13 FY14 FY16 Net interest income/ avg. total avg. total assets 3.1 3.1 3.1 3.5 3.2 3.2 3.1 2.9 2.4 2.3 2.2 Non-interest income/ avg. total assets 1.1 1.4 1.3 1.1 1..9.9 1. 1.1 1.3 1.1 Non-operating profit/ avg. total assets 4.2 4.4 4.5 4.6 4.2 4.1 4. 3.9 3.5 3.5 3.4 Operating expenses/ avg. total assets 2. 1.9 1.8 1.9 1.7 1.7 1.8 1.8 1.6 1.6 1.5 Operating profit/ avg. total assets 2.2 2.6 2.7 2.7 2.5 2.3 2.2 2.1 1.9 2. 1.9 Provisions/ Avg. total assets.4.4.5.7.9.9 1.3 1.4 2.8 1.6 1.4 Return on avg. total assets 1.1 1.4 1.4 1.3 1.2 1..6.5 -.6.3.3 Leverage (x) 15.7 16.2 16.6 17.2 16.9 15.5 15. 15.4 16.5 17.5 17.5 Return on equity 17.8 22.4 23.9 22.6 19.8 15.7 9.7 8.2-1.3 4.4 5.9 ICICI Securities Ltd Retail Equity Research Page 6
Valuation PNB had the highest RoA, RoE among PSU banks in FY8-1. However, the bank has taken a huge knock as deteriorating asset quality led to elevated provisioning and loss of net interest income. In and, NPA accretion moderation has come as a positive sign with GNPA, NNPA ratio stable at 13.7% and 9.1%, respectively. However, uncertainty still looms over continuance of recoveries. Hence, we expect credit cost to stay high in the near term. Thus, return ratios are expected to still stay low at 5-6% in FY17-18E. However, resolution of fews large assets are expected to gradually improve the industry scenario. Valuing the standalone bank at 1.5x ABV and housing finance subsidiary at 2x ABV, we revise our target price upwards to 16 and upgrade our recommendation on the stock from HOLD to BUY. Exhibit 12: Return ratios expected to improve gradually over FY17-18E 1.2 1..8.6.4.2. -.2 -.4 -.6 -.8 18. 1.1 14.9.9 Q1FY13 Q2FY13 17.4 1.1 15.7 16. 1. 1. Q3FY13 FY13 Q1FY14 8.9 9.7 8.2.6 7.5 6.1.6 6.1.5 5.9.4.5 4.4.4.5.3.3. Q2FY14 Q3FY14 FY14 FY16 -.6 ROA ROE (RHS) -1.3 2 15 1 5-5 -1-15 Source: Company Quarterly Presentation, ICICIdirect.com Research Exhibit 13: Valuations FY1 FY11 FY12 FY13 FY14E FY16 P/E (x) 1..9.9 4.4 6.4 7.1-5.8 14.2 9.6 Price / Book (x) 1.1.9.8.7.6.6.6.6.6 ABV ( ) 96.7 113.6 129.2 135.9 135.7 118.8 18.3 33.6 51.5 Price / Adj Book (x) 1.2 1..9.9.9 1. 6.4 3.5 2.3 GNPA 1.7 1.8 3. 4.4 5.2 6.5 13.2 12.9 11.8 NNPA.5.8 1.5 2.3 2.8 4. 8. 7.9 7.1 RoNA 1.4 1.3 1.2 1..6.5 -.6.3.3 RoE 23.9 22.6 19.8 15.7 9.7 8.2-1.3 4.4 5.9, From FY16 FV of equity is reduced to 2 from 1 per share ICICI Securities Ltd Retail Equity Research Page 7
Recommendation history vs. Consensus 4 8. 7. 3 6. 5. ( ) 2 4. 3. 1 2. 1. Jan-15 Mar-15 Jun-15 Aug-15 Oct-15 Jan-16 Mar-16 Jun-16 Aug-16 Nov-16. Jan-17 Price Idirect target Consensus Target Mean % Consensus with SELL Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Mar-6 Credit growth takes off for all banks as economy booms, and for PNB it was in 23-29% range for FY6-8 Mar-9 Higher business leads to strong NII and profit with return ratios Dec-1 Most PSU banks, including PNB make new peak in stock, profit grew 5% in FY9 and 26% in FY1 Apr-11 For Kingfisher restructuring, the consortium including State Bank of India, IDBI Bank, Bank of Baroda and Punjab National Bank was alloted shares at conversion rate May-11 Pension provisions and rising NPAs start impacting bank Jul-11 Announces acquisition of 3% stake on MetLife Insurance Mar-12 High power and infra exposure lead to increase in restructed assets, with a spurt in March, 212 quarter adding > 861 crore taking total to 29826 crore forming 1% of advances May-13 G-Sec yields spike post Fed announcement on May 22 of its intention to taper QE and tight liquidity measures by RBI of MSF rate hike etc, impacting PSU banks on treasury and wholesale funded banks on cost of funds Oct-13 Completes acquisition of 3% stake on MetLife Insurance for undisclosed sum, now named PNB Metlife Oct-13 Post liquidity tightening measures like MSF reversed by RBI, stock saw respite Jan-14 Asset quality sees marginal improvement May-14 NPA addition again surges with slippage of 445 crore in a single quarter Sep-15 Government of India infuses 1732 crore of capital @ 158.84 per share Sep-16 Government of India infuses 2112 crore of capital @ 128.49 per share Top 1 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Government of India 3-Sep-216 65.% 1,383.46M +164.37M 2 LIC Mutual Fund Asset Management Company Ltd. 3-Sep-216 12.6% 267.37M -4.52M 3 Lazard Asset Management, L.L.C. 3-Nov-216 3.8% 8.77M 4 HDFC Asset Management Co., Ltd. 3-Sep-216 2.61% 55.48M +3.67M 5 Franklin Templeton Asset Management (India) Pvt. Ltd. 3-Nov-216.48% 1.3M +1.58M 6 The Vanguard Group, Inc. 3-Nov-216.4% 8.54M +.22M 7 DSP BlackRock Investment Managers Pvt. Ltd. 3-Nov-216.38% 8.2M +.82M 8 BlackRock Asset Management North Asia Limited 3-Sep-216.14% 2.99M +.94M 9 AllianceBernstein L.P. 3-Nov-216.13% 2.78M 1 UTI Asset Management Co. Ltd. 3-Nov-216.13% 2.7M Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Promoter 62.8 62.1 62.8 65.1 65.1 FII 12.1 1.4 1.4 11.1 1.4 DII 2.2 2.7 21. 18.2 18.3 Others 5.6 6.8 6.6 5.7 6.3 Recent Activity Buys Sells Investor name Value (m) Shares (m) Investor name Value (m) Shares (m) Government of India +347.53M +164.37M Eastspring Investments (Singapore) Limited -14.24M -7.47M HDFC Asset Management Co., Ltd. +7.76M +3.67M LIC Mutual Fund Asset Management Company Ltd. -9.55M -4.52M Franklin Templeton Asset Management (India) Pvt. Ltd. +3.17M +1.58M ICICI Prudential Asset Management Co. Ltd. -3.17M -1.57M BlackRock Asset Management North Asia Limited +1.99M +.94M Wellington Management Company, LLP -.62M -.4M DSP BlackRock Investment Managers Pvt. Ltd. +1.64M +.82M NNIP Advisors B.V. -.74M -.35M Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 8
Financial summary Profit and loss statement Crore (Year-end March) FY16 Interest Earned 46315.4 47424.4 5842.5 54756.9 Interest Expended 29759.8 3219.9 34936.2 3735.1 Net Interest Income 16555.6 15314.5 1596.3 17451.9 growth 2.5-7.5 3.9 9.7 Non Interest Income 589.7 6872.2 8952.2 8759. Fees and advisory 2744.9 3469.5 368.3 3788.7 Treasury Income 122.7 726.1 1815.4 189.2 Other income 2123.1 2676.5 3528.5 3881.1 Net Income 22446.3 22186.7 24858.4 2621.9 Staff cost 7336.9 6425. 7239. 7855.1 Other operating Expense 3154.6 3546.7 3764.4 3881.6 Operating Profit 11954.8 12215. 13855. 14474.1 Provisions 7997.5 17954.7 11329.7 188.9 PBT 3957.3-5739.7 2525.3 3665.2 Taxes 895.7-1765.5 757.6 144.6 Net Profit 361.6-3974.2 1767.7 262.6 growth -8.4-229.8 NA 48.2 EPS ( ) 16.5-2.2 8.3 12.3 Key Ratios (Year-end March) FY16 Valuation No. of Equity Shares 185.5 196.4 212.8 212.8 EPS (Rs.) 16.5-2.2 8.3 12.3 BV (Rs.) 21.8 186.8 193.4 21.9 ABV (Rs.) 118.8 18.3 33.6 51.5 P/E (x) 8.8-7.2 17.5 11.8 P/BV (x).7.8.7.7 P/ABV (x) 1.2 7.9 4.3 2.8 Yields & Margins Net Interest Margins 3. 2.5 2.4 2.4 Yield on assets 8.4 7.9 7.7 7.7 Avg. cost on funds 5.7 5.6 5.4 5.2 Yield on average advances 9.5 8.7 8.8 8.8 Avg. Cost of Deposits 5.8 5.7 5.5 5.3 Quality and Efficiency Cost to income ratio 46.7 44.9 44.3 44.8 Credit/Deposit ratio 75.9 74.6 69.1 69.5 GNPA 6.5 13.2 12.9 11.8 NNPA 4. 8. 7.9 7.1 ROE 8.2-1.3 4.4 5.9 ROA.5 -.6.3.3 Balance sheet Crore (Year-end March) FY16 Sources of Funds Capital 37.9 392.7 425.6 425.6 Reserves and Surplus 38445.2 37669.7 4212.8 45845.9 Networth 38816.1 3862.4 42546.4 46271.5 Deposits 51378.6 55352.3 625738.5 685255.3 Borrowings 4567.5 59751.2 58925.2 58194. Other Liabilities & Provisions 1724.9 16272.2 1833.5 21327.9 Total 637.2 667138.1 745243.5 81148.7 Application of Funds Fixed Assets 3551.5 5224.5 6377.3 6934.5 Investments 151282.3 157841.4 189284.8 19449. Advances 38534.4 412327.3 432482.1 47665.6 Other Assets 11767.8 18122.5 3652. 45391.4 Cash with RBI & call money 55934.2 73622.4 8597.4 88248.2 Total 637.2 667138.1 745243.5 81148.7 Growth ratios (Year-end March) FY16 Total assets 9.6 1.6 11.7 8.8 Advances 9. 8.4 4.9 1.1 Deposit 11.1 1.3 13.1 9.5 Total Income 9.2 4. 1.1 6.2 Net interest income 2.5-7.5 3.9 9.7 Operating expenses 12.4-5. 1.3 6.7 Operating profit.9 5.1 4.8 11.2 Net profit -8.4-229.8-144.5 48.2 Net worth 8.5-2. 12.2 9.1 EPS -1.6 NA NA 48.2. ICICI Securities Ltd Retail Equity Research Page 9
ICICIdirect.com coverage universe (Banking) CMP M Cap EPS ( ) P/E (x) P/ABV (x) RoA RoE Sector / Company ( ) TP( ) Rating ( Cr) FY16 FY16 FY16 FY16 FY16 Bank of Baroda (BANBAR) 183 18 Hold 42,27-23 1 23-7.8 18.1 8.1 2.1 1.9 1.4 -.8.3.7-13 6 12 Punjab National Bank (PUNBAN) 145 16 Buy 28,433-2 8 12-7.2 17.4 11.8 7.9 4.3 2.8 -.6.3.3-1 4 6 State Bank of India (STABAN) 274 31 Buy 2,4,337 13 13 26 21.4 2.7 1.5 2.4 1.7 1.4.5.4.8 7 6 11 Indian Bank (INDIBA) 298 35 Buy 14,31 15 28 34 2.1 1.8 8.8 1.4 1.4 1.3.4.6.7 5 8 9 Axis Bank (AXIBAN) 489 46 Hold 1,16,77 35 14 28 14.2 35.2 17.7 2.3 2.6 2.1 1.7.6 1.1 17 6 11 City Union Bank (CITUNI) 149 166 Buy 8,979 7 8 1 2.2 17.7 14.9 3.3 2.9 2.4 1.5 1.5 1.6 16 16 16 DCB Bank (DCB) 134 12 Hold 3,477 7 7 9 19.7 18. 15. 2.3 2.1 1.9 1.1 1. 1. 12 12 13 Federal Bank (FEDBAN) 84 87 Buy 14,48 3 5 6 3.4 18.4 13.1 2. 1.9 1.7.5.8.9 6 9 12 HDFC Bank (HDFBAN) 1,297 1,5 Buy 3,24,225 49 58 71 26.7 22.5 18.4 4.6 4. 3.5 1.9 1.9 1.9 18 19 2 IndusInd Bank (INDBA) 1,299 1,35 Buy 77,264 38 48 58 33.8 26.9 22.4 4.4 3.8 3.4 1.9 1.9 1.8 16 15 16 Jammu & Kashmir Bk(JAMKAS) 69 8 Buy 3,33 9-28 9 8. -2.4 7.4.8 1.5 1.4.5-1.6.5 7-23 8 Kotak Mahindra Bank (KOTMAH) 77 84 Hold 1,4,867 11 18 21 67.6 42.2 36.2 6.2 5.4 4.8 1.1 1.6 1.7 9 13 13 Yes Bank (YESBAN) 1,43 1,4 Hold 58,899 48 6 7 29.2 23.3 2.1 4.3 2.9 2.5 1.6 1.7 1.8 21 2 18 ICICI Securities Ltd Retail Equity Research Page 1
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 11
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