Disappointing performance; long term positive Result Update

Result Update
October 22, 2014
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Punjab National Bank (PUNBAN)
Buy
| 1060
12 months
14%
Disappointing performance; long term positive
What’s changed?
Target
EPS FY15E
EPS FY16E
Rating
Changed from | 1156 to | 1060
Changed from | 110 to | 103
Changed from | 138 to | 125.5
Unchanged
Quarterly performance
NII
Other
Income
PPP
PAT
Q2FY15
4,379.7
Q2FY14
3,907.5
YoY (%)
12.1
1,236.4
3,125.3
1,405
1,342.1
2,973.8
1,275.3
(7.9)
5.1
10.2
Q1FY15 QoQ (%)
4,001.8
9.4
1,396.9
3,173.4
806.3
-11.5
(1.5)
74.3
Key financials
| Crore
NII
PPP
PAT
FY13
14,857
10,907
4,748
FY14
16,146
11,384
3,343
FY15E
17,865
12,306
3,740
FY16E
19,903
13,402
4,544
FY14
10.1
11.5
678.6
1.6
0.6
9.7
FY15E
9.0
10.3
680.2
1.6
0.6
10.0
FY16E
7.4
8.4
820.4
1.3
0.7
11.1
Valuation summary
P/E
Target P/E
ABV
Target P/ABV
RoA (%)
RoE (%)
FY13
6.9
7.9
679.3
1.6
1.0
15.7
Stock data
Particular
Market Capitalisation
GNPA (Q2FY15)
NNPA (Q2FY15)
NIM (Q2FY15)
52 week H/L
Equity Capital
Face value
DII Holding (%)
FII Holding (%)
Amount
| 32959 Crore
| 20752 Crore
| 11618 Crore
3.2
1068 /474
| 362 Crore
| 10
19.6
17.4
Price performance
SBI
BOI
PNB
1M
-0.02
-10.0
-2.1
3M
0.3
-10.0
3.0
| 932
6M
27.3
18.7
22.7
12M
54.3
51.2
101.3
Analyst
Kajal Gandhi
kajal.gandhi@icicisecurities.com
Vasant Lohiya
vasant.lohiya@icicisecurities.com
Sheetal Ashar
sheetal.ashar@icicisecurities.com
ICICI Securities Ltd | Retail Equity Research
• PNB’s earnings were significantly below our & Street estimates
owing to higher provisions & opex. Profit grew 11.8% YoY (down
59% QoQ) to | 575 crore, vs. our estimate of | 1314 crore, which
factored in 155% YoY growth. Higher-than-expected provisions of
| 1768 crore (I-direct estimate: | 1100 crore) and opex of | 2834
crore (I-direct estimate: | 2515 crore) contributed to lower profits
• During Q2, provisions were higher as the bank made ~| 680 crore of
additional provisions, which was over & above the regulatory
provision required. Further, operating expenses were higher as the
bank made additional provision of | 273 crore with regard to AS-15
• Slippages were higher at | 3974 crore vs. 2958 crore in Q1FY15
while fresh RA were at | 3297 crore vs. | 1300 crore in Q1FY15
• Credit & deposits grew higher than estimated at 13.8% YoY and
16.7% YoY, respectively. Margins declined to 3.18% from 3.42%
mainly on account of an interest reversal of | 294 crore
Third largest PSU bank, grappling with surge in NPA, RA
PNB is the third largest bank in terms of advances among PSU banks
(| 313852 crore) with 4.94% market share (September 2013), declining
from 5.45% in September 2010. It lost the No.2 position to BoB. PNB has
an extensive branch network of >6200 branches, with 50% in rural areas
giving it unparalleled advantage of domestic CASA of 40.7% since FY07
and consequent lower CoF. This has kept NIM high at ~3.5-4%. The bank
grew credit at 23-29% in FY06-11 and at 16.3% CAGR in FY10-13. Loss of
market share in deposit & loans happened due to a change in focus to
manage rising NPAs (5.2% of credit from 1.9% in September 2010). This
impacted profit significantly over time.
Margins improving, profit ratios to remain muted
PNB has been in a consolidation stage in FY14, when credit grew 13.1%
YoY to | 349269 crore. The loan book is dominated by large corporate
(26%) & MSME (13.4%) segment and has 10% in international. The
management is aiming to grow credit at ~15% in FY15E, which seem
achievable. On the deposit front, we saw 18.2% CAGR to | 346510 crore
in FY10-13 while FY14 growth was 15.3%. Going ahead, the management
guided for NIM to be maintained at ~3.25-3.5%. We expect NII to grow at
a marginal 11% CAGR to | 19902 crore after growth of 9% in FY14 and
21% in FY10-13. PAT is expected to grow steadily at 17% CAGR after a
sharp cut of 25% in FY14 to reach | 4544 crore by FY16E.
Asset quality under pressure relative to large peers
The restructured book (RA) has grown from | 10000 crore to | 35000
crore in FY10-14, | 36793 crore as on Q2FY15 (10% of advances vs. ~67% for industry). The GNPA ratio in the past seven years has grown from
lows of 1.6% to 5.65% at | 20752 crore. We expect GNPA and NNPA
ratios to hover around~5% and 2.7%, respectively, by FY16E.
Maintain BUY from long term perspective but reduced target price
PNB had highest RoA, RoE among PSU banks in FY08-10 but took a huge
knock as deteriorating asset quality led to elevated provisioning. Return
ratios improvement is unlikely in the near term on provision for stressed
assets. PNB will be a major beneficiary of MTM reversal on investment
book (AFS book proportion of 29%). We have raised our NPA estimates &
accordingly the provisioning cost. Thus, our PAT CAGR in FY14-16E falls
to 17% from 22% earlier. We maintain our BUY rating from a long term
perspective but reduce TP to | 1060 based on 1.3x revised ABV of | 820.
Variance analysis
Q2FY15 Q2FY15E
NII
Q2FY14
Q1FY15
YoY (%) QoQ (%)
4,151
4,449
4,016
4,380
3.4
-5.2
3.2
3.3
3.5
3.4
-29 bps
-24 bps
Other Income
1,558
1,030
899
1,236
73.3
26.0
Net Total Income
Staff cost
Other Operating Expenses
5,710
2,034
799
5,479
1,758
757
4,915
1,659
721
5,616
1,767
723
16.2
22.6
10.8
1.7
15.1
10.5
PPP
2,876
2,963
2,535
3,125
13.5
-8.0
Provision
PBT
Tax Outgo
PAT
Key Metrics
1,768
1,108
533
575
1,099
1,865
559
1,305
1,890
645
131
515
928
2,198
793
1,405
-6.4
71.8
307.9
11.8
90.6
-49.6
-32.8
-59.1
NIM (%)
GNPA
NNPA
20,752
11,618
20,203
11,064
16,526
9,609
19,603
10,464
25.6
20.9
5.9
11.0
Total Restructured assets
36,793 35,500
Source: Company, ICICIdirect.com Research
34,816
34,013
5.7
8.2
Comments
There was income reversal of | 294 crore as NII growth was subdued at 3.4% YoY
Interest reversal and higher traction in retail segment wherein interest rates were
nearer to the base rate led to a decline in NIM during the quarter
Strong other income is largely owing to robust recovery income of | 483 crore vs.
| 91 crore in Q1FY15
Provisions were higher as the bank made ~| 680 crore of additional provisions,
which was over & above the regulatory provision required
GNPA and NNPA ratio rose to 5.65% & 3.3% vs. 5.48% & 3.02%, respectively, in
Q1FY15. As per management, going ahead, slippages should be lower than seen
in Q2FY15.
PCR maintained at ~60%
RA as a percentage of advances now stands at 10.3%. As per management, no
major RA pipeline is expected in future.
Change in estimates
(| Crore)
Net Interest Income
Pre Provision Profit
NIM(%) (calculated)
PAT
ABV per share (|)
Old
17,865
12,306
3.2
3,977
703
FY15E
New % Change
17,865
0.0
12,306
0.0
3.2
0 bps
3,881
-2.4
700
-0.4
Old
19,903
13,402
3.1
4,984
855
FY16E
New % Change
19,903
0.0
13,402
0.0
3.1
0 bps
4,697
-5.7
844
-1.2
Source: Company, ICICIdirect.com Research
Assumptions
Credit growth (%)
Deposit growth (%)
CASA ratio - calculated (%)
NIM calculated (%)
Cost to income ratio (%)
GNPA (| crore)
NNPA (| crore)
Slippage ratio (%)
Credit cost (%)
FY13
5.1
3.2
39.2
3.3
42.8
13,466
7,237
2.9
1.2
FY14
13.1
15.3
38.3
3.3
45.1
18,880
9,917
3.5
1.4
Current
FY15E
FY16E
14.2
13.1
14.4
14.9
38.5
38.4
3.2
3.1
46.1
47.2
22,785
22,455
12,667
12,064
2.7
2.5
1.5
1.3
Earlier
FY15E
FY16E
14.2
13.1
14.4
14.9
38.5
38.4
3.2
3.1
46.1
47.2
21,988
21,566
12,077
11,499
2.5
2.4
1.5
1.3
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 2
Company Analysis
Relative underperformance in past due to NPA concerns…
Concerns about the bank’s asset quality are generally raised owing to its
exposure to stressed sectors (20% to infrastructure) and troubled
corporates. Power alone (included in infra) forms 10% (| 27651 crore) of
the loan book. The GNPA ratio in the past five years has grown from 1.6%
to 5%. Further, the calculated provision coverage ratio (PCR) has dropped
to 45% from 89% earlier. Credit costs have stayed above 1.1% for the
past two years. The pace of slippages is declining but is still high. We
estimate asset quality will moderate as seen in the last two quarters to
hover around ~5% GNPA and 2.7% NNPA by FY16E after staying high at
5.7% and 3.2%, respectively, in FY15.
19602.8
10463.6
20751.9
11617.8
22785.4
12667.3
Q1FY15
Q2FY15
FY15E
22455.5
12063.9
18880.1
9917.0
FY14
GNPA
FY16E
16595.8
9084.0
15090.6
9060.0
Q1FY14
Q3FY14
13465.8
7236.5
FY13
16526.3
9609.0
13997.8
7586.2
Q3FY13
Q2FY14
14023.9
7883.4
The PCR remained close to 60% in Q2FY15
Q2FY13
| 2948 crore sequentially
(| Crore)
Fresh slippages were at elevated levels of | 3974 crore vs.
20000.0
18000.0
16000.0
14000.0
12000.0
10000.0
8000.0
6000.0
4000.0
2000.0
0.0
9988.2
4917.0
The GNPA ratio rose to 5.65% from 5.48% while the NNPA
ratio increased from 3.0% to 3.2%
Q1FY13
Exhibit 1: GNPA and NNPA decline still not seen
NNPA
Source: Company Quarterly Presentation, ICICIdirect.com Research
Exhibit 2: NNPA rises from bottom of 0.2% in FY09 to 3.2% in Q2FY15
5.5
5.7
2.8
3.0
3.3
5.7
5.0
2.7
1.5
GNPA ratio
FY16E
0.8
3.2
FY15E
0.5
1.8
2.3
Q2FY15
1.7
FY12
0.2
FY09
0.0
1.6
FY11
1.0
3.0
FY13
3.0
2.0
5.4
4.4
4.0
FY10
(%)
5.0
Q1FY15
6.0
FY14
7.0
NNPA ratio
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 3
Loans dominated by corporates, retail and international book picking up
The bank’s loan book was largely skewed towards the large corporate
segment with 33% exposure in FY12. However, it has also shifted its
focus towards the retail & SME segments with their share growing up.
Since then, the retail loans proportion has risen to 11.1% as on FY14 from
9.9% in FY12.
We expect 14% CAGR in advances over FY14-16E to | 451068 crore. The
bank has requested capital from the government. Post that, further
dilution can be seen.
Exhibit 3: Consolidation phase over as per management strategy, business to pick up pace…
700000
600000
77
80
79
78
77
78
77
77
75
74
500000
76
75
70
(%)
400000
326133
420647
349269
451397
347485
444920
357093
473511
398722
516257
451069
592941
FY14
Q1FY15
Q2FY15
FY15E
FY16E
313852
405699
Q2FY14
Q3FY14
311611
396828
Q1FY14
297313
385785
Q3FY13
308725
391560
294747
400747
100000
Q2FY13
200000
Q1FY13
300000
299429
385355
(| Crore)
grew 13.8% YoY to | 347485
79
FY13
PNB net advances growth picked up during Q2FY15 as it
78
Advances
Deposits
65
60
C D Ratio (RHS)
The outstanding bulk deposits declined from | 88297 crore in FY12 to
| 22512 crore in FY14. Deposits grew 15% YoY to | 451397 crore in FY14.
The bank has shed bulk deposits to 4.99% of deposit over time. This has
helped manage the cost of funds in FY14. The overall interest expense
was flat at | 27070 crore vs. FY13.
Exhibit 4: Growth tapering with slowing economy
40
50
19 19
3
18
3
13
10
5
Advances Growth YoY
FY13
Q3FY13
Q2FY13
Q1FY13
FY12
Q3FY12
Q2FY12
Q1FY12
FY11
Q3FY11
Q2FY11
0
4
1
6
14 15
20
10
13 12 14 14 13
10
0
-10
FY16E
20
21 23
12
FY15E
23
15
9
8
17
Q2FY15
30 30
30
19 17
Q1FY15
28
21
FY14
18
Q3FY14
25 27 25
23
Q1FY14
(%)
(%)
30
23
Q2FY14
40
Deposits Growth YoY (RHS)
Source: Company, ICICIdirect.com Research
Retail loans continue to grow at a healthy pace of 20% as
on Q2FY15 and housing remains a large contributor at |
18454 crore
ICICI Securities Ltd | Retail Equity Research
Page 4
Exhibit 5:Services
Domestic credit: Q2FY15
& Others ,
58793,
19%
Exhibit 6: Domestic credit: Q2FY14
NBFC,
12850,
4%
CRE,
7115, 2%
Services
& Others ,
54365,
19%
Agri,
50492,
16%
NBFC,
11692,
4%
Agri,
40947,
14%
CRE,
8453, 3%
Industry ,
139794,
46%
Retail,
40976,
13%
Industry ,
133348,
48%
Retail,
34226,
12%
Source: Company Quarterly Presentation,
ICICIdirect.com Research
Source: Company Quarterly Presentation,
ICICIdirect.com Research
Strong deposit franchise ensuring CASA and NIM performance
Exhibit 7: CASA ratio stabilising at 40-41% range...
45
250000
41
37
(%)
(| Crore)
350000
36
36
36
37
38
40
41
40
40
40
38
39
38
40
35
150000
30
Saving + Current
Term
Total
FY16E
FY15E
Q2FY15
Q1FY15
FY14
Q3FY14
Q2FY14
Q1FY14
FY13
Q3FY13
Q2FY13
Q1FY13
FY12
Q3FY12
Q2FY12
50000
Domestic CASA (RHS)
Source: Company Quarterly Presentation, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 5
Exhibit 8: NIM comes under pressure during quarter
15
6.3
6.5
6.7
6.8
7.0
6.9
6.8
6.6
6.4
6.4
6.3
6.1
6.1
6.1
3.8
4.0
3.9
3.5
3.6
3.5
3.5
3.5
3.5
3.5
3.6
3.2
3.4
3.2
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
9.9
Q2FY13
3
10.3
Q1FY13
6
9.9
Q4FY12
9
(%)
and support NIM
11.4 11.9 12.0 11.4 11.5 11.1 10.9
10.7 10.5 10.4 10.6
Q3FY12
to grow its business again post the consolidation phase
Q2FY12
12
between ~3.25% and 3.5%, going ahead. The bank intends
Q1FY12
The management has guided that reported NIM will settle
Yield on Advances
Cost of Deposits
Q2FY15
Q1FY15
Q4FY14
0
NIM (RHS)
Source: Company Quarterly Presentation, ICICIdirect.com Research
Non interest income consistently adding to bottomline
Exhibit 9: Non interest income remains strong
Trading Income
Commision, exchange and brokerage
Recovery
Dividend from liquid MF
Total
Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
53
48
53
87
159
88
59
73
267
284
53
24
189
149
125
750
795
693
768
862
943
688
702
721
911
783
775
850
925
822
221
109
68
92
241
87
60
145
130
85
69
86
274
91
483
120
126
52
8
6
48
81
50
54
63
30
41
72
70
103
1145
1084
889
954
1276
1166
905
971
1174
1342
899
938
1397
1236
1558
Source: Company, ICICIdirect.com Research
Exhibit 10: Cost to income ratio rose to ~50% owing to higher opex
50
50
39 40
42 42
40
44
41 41 42 40
40
40
42
43 42 43
45 44
46 47
36
(%)
32
30
Cost to Income ratio
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 6
FY16E
FY15E
Q2FY15
Q1FY15
FY14
FY13
Q4FY13
Q3FY13
Q2FY13
FY12
Q1FY13
Q4FY12
Q3FY12
Q2FY12
Q1FY12
FY11
Q4FY11
Q3FY11
Q2FY11
Q1FY11
FY10
Q4FY10
20
Earnings profile deteriorating sharply
PNB had the highest RoA and RoE among PSU banks in FY08-10.
However, return ratios have taken a huge knock as a deteriorating asset
quality has led to elevated provisioning and loss of net interest income.
We believe return ratios are unlikely to improve in the near term on
provision for stressed assets, impacting PAT.
Exhibit 11: DuPont Analysis (%)
Net interest income/ avg. total avg. total assets
Non-interest income/ avg. total assets
Non-operating profit/ avg. total assets
Operating expenses/ avg. total assets
Operating profit/ avg. total assets
Provisions/ Avg. total assets
Return on avg. total assets
Leverage (x)
Return on equity
FY06
3.4
0.9
4.4
2.2
2.1
0.7
1.1
15.5
16.4
FY07
3.4
1.1
4.5
2.2
2.4
0.9
1.0
15.5
15.5
FY08
3.1
1.1
4.2
2.0
2.2
0.4
1.1
15.7
17.8
FY09
3.1
1.4
4.4
1.9
2.6
0.4
1.4
16.2
22.4
FY10
3.1
1.3
4.5
1.8
2.7
0.5
1.4
16.6
23.9
FY11
3.5
1.1
4.6
1.9
2.7
0.7
1.3
17.2
22.6
FY12
3.2
1.0
4.2
1.7
2.5
0.9
1.2
16.9
19.8
FY13
3.2
0.9
4.1
1.7
2.3
0.9
1.0
15.5
15.7
FY14
3.1
0.9
4.0
1.8
2.2
1.3
0.6
15.0
9.7
FY15E
3.0
0.8
3.9
1.8
2.1
1.2
0.6
15.8
10.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 7
FY16E
3.0
0.8
3.8
1.8
2.0
1.0
0.7
16.4
11.1
Valuation
PNB had the highest RoA, RoE among PSU banks in FY08-10 but has
taken a huge knock as deteriorating asset quality led to elevated
provisioning and loss of net interest income. We believe return ratios are
unlikely to improve in the near term on provision for stressed assets,
impacting PAT. PNB will be a major beneficiary of MTM gains on
investment book (AFS book proportion of 29%, modified duration of
3.5%) if interest rates fall. We have raised our NPA estimates and,
accordingly, the provisioning cost. Thus, our PAT CAGR over FY14-16E
falls to 17% from 22% earlier. We maintain our BUY recommendation
from a long term perspective but reduce the target price to | 1060 based
on 1.3x revised ABV of | 820.
Exhibit 12: Return ratios to remain subdued on elevated provisioning, lower growth
2.0
1.3
1.0
20.9 21.6
1.2
1.2
(%)
(%)
1.5
22.1
19.6
1.1
25
21.6
18.0
17.4
14.9
1.3
1.1
0.9
1.1
20
15.7 16.0
1.0
1.0
6.1
0.5
0.4
8.9
9.7 10.0
0.6
0.6
0.6
11.1
0.7
15
10
5
0.0
ROA
FY16E
FY15E
FY14
Q3FY14
Q2FY14
Q1FY14
FY13
Q3FY13
Q2FY13
Q1FY13
FY12
Q3FY12
Q2FY12
Q1FY12
FY11
0
ROE (RHS)
Source: Company Quarterly Presentation, ICICIdirect.com Research
Exhibit 13: Valuations
P/E (x)
Price / Book (x)
ABV (|)
Price / Adj Book (x)
GNPA (%)
NNPA (%)
RoNA (%)
RoE (%)
FY09
9.5
2.2
417.7
2.2
1.6
0.2
1.4
22.4
FY10
7.5
1.8
483.6
1.9
1.7
0.5
1.4
23.9
FY11
7.5
1.5
568.1
1.6
1.8
0.8
1.3
22.6
FY12
7.5
1.2
646.1
1.4
3.0
1.5
1.2
19.8
FY13
6.9
1.1
679.3
1.4
4.4
2.3
1.0
15.7
FY14E
10.1
1.0
678.6
1.4
5.4
2.8
0.6
9.7
FY15E
9.0
0.9
680.2
1.4
5.7
3.2
0.6
10.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 8
FY16E
7.4
0.8
820.4
1.1
5.0
2.7
0.7
11.1
Company snapshot
1,600
1,400
Target price: | 1060
1,200
1,000
800
600
400
200
Oct-15
Apr-15
Oct-14
Apr-14
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-06
Apr-06
Oct-05
Apr-05
Oct-04
Apr-04
0
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Mar-05
Mar-06
Mar-09
Event
Huge losses in treasury book due to G-sec yields surging kept share prices low
Credit growth took off for all banks as economy boomed, and for PNB it was in 23-29% range for FY06-08
Higher business led to strong NII and profit with return ratios
Dec-10
Most PSU banks, including PNB made new peak in stock, profit grew 50% in FY09 and 26% in FY10
Apr-11
For Kingfisher restructuring, the consortium including State Bank of India, ICICI Bank, IDBI Bank, Bank of Baroda and Punjab National Bank was alloted shares at
conversion rate of | 64.5 per share, when market price was one-third of that, leading to losses
Pension provisions and rising NPAs started impacting bank
Announces acquisition of 30% stake on MetLife Insurance
High power and infra exposure led to increase in restructed assets, with a spurt in March, 2012 quarter adding >| | 8601 crore taking total to | 29826 crore
forming 10% of advances
G-Sec yields spiked 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
Completes acquisition of 30% stake on MetLife Insurance for undisclosed sum, now named PNB Metlife
Post liquidity tightening measures like MSF reversed by RBI, stock saw respite
Asset quality saw marginal improvement
NPA addition again surge with slippage of | 4450 crore in a single quarter
May-11
Jul-11
Mar-12
May-13
Oct-13
Oct-13
Jan-14
May-14
Source: Company, ICICIdirect.com Research
Top 10 Shareholders
Shareholding Pattern
Rank
1
2
3
4
5
6
7
8
9
10
(in %)
Promoter
FII
DII
Others
Name
Latest Filing Date % O/S Position (m) Change (m)
Government of India
30-Jun-14 58.87
213.2
0.0
LIC Nomura Mutual Fund Asset Management Company Ltd.
30-Jun-14 12.08
43.7
-2.2
Lazard Asset Management, L.L.C.
30-Sep-14 5.00
18.1
0.3
HDFC Asset Management Co., Ltd.
31-Aug-14 2.20
8.0
0.1
ICICI Prudential Asset Management Co. Ltd.
31-Aug-14 0.97
3.5
0.8
UTI Asset Management Co. Ltd.
31-Jul-14 0.51
1.8
0.7
The Vanguard Group, Inc.
30-Sep-14 0.50
1.8
0.1
Franklin Advisers, Inc.
30-Jun-14 0.49
1.8
1.8
Franklin Templeton Asset Management (India) Pvt. Ltd.
31-Aug-14 0.44
1.6
0.1
M & G Investment Management Ltd.
31-Mar-14 0.41
1.5
0.0
Sep-13 Dec-13 Mar-14
57.87
58.87
58.87
17.9
17.5
17.2
18.4
18.5
18.7
5.9
5.1
5.3
Jun-14
58.87
17.4
19.5
4.3
Sep-30
58.87
17.4
19.6
4.1
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
Franklin Advisers, Inc.
HSBC Global Asset Management (Hong Kong) Limited
JM Financial Asset Management Pvt. Ltd.
ICICI Prudential Asset Management Co. Ltd.
UTI Asset Management Co. Ltd.
Value
29.56m
12.86m
12.17m
10.37m
7.37m
Shares
1.79m
1.00m
0.82m
0.78m
0.66m
Sells
Investor name
LIC Nomura Mutual Fund Asset Management Company Ltd.
Coronation Fund Managers Limited
APG Asset Management
Sanlam Investment Management (Pty) Ltd.
PGGM Vermogensbeheer B.V.
Value
-36.95m
-10.45m
-7.26m
-6.75m
-4.95m
Shares
-2.24m
-0.84m
-0.67m
-0.66m
-0.49m
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 9
Financial summary
Profit and loss statement
(Year-end March)
Interest Earned
Interest Expended
Net Interest Income
growth (%)
Non Interest Income
Fees and advisory
Treasury Income
Other income
Net Income
Staff cost
Other operating Expense
Operating Profit
Provisions
PBT
Taxes
Net Profit
growth (%)
EPS (|)
| Crore
FY13
41893.3
27036.8
14856.5
10.8
4215.9
2337.3
486.6
1392.1
19072.4
5674.7
2490.3
10907.4
4385.6
6521.8
1774.1
4747.7
-2.8
134.3
FY14E
43223.3
27077.3
16146.0
8.7
4576.7
2579.4
549.3
1448.0
20722.7
6510.4
2827.8
11384.5
6693.9
4690.5
1347.9
3342.6
-29.6
92.3
FY15E
48995.7
31130.3
17865.4
10.6
4961.2
2837.3
494.4
1629.5
22826.6
7180.4
3339.8
12306.4
6806.3
5500.2
1760.1
3740.1
11.9
103.3
FY16E
55215.5
35312.6
19902.9
11.4
5459.0
3121.1
445.0
1893.0
25362.0
8060.2
3899.9
13401.8
6569.3
6832.5
2288.9
4543.6
21.5
125.5
Source: Company, ICICIdirect.com Research
Key Ratios
(Year-end March)
Valuation
No. of Equity Shares
EPS (Rs.)
BV (Rs.)
ABV (Rs.)
P/E (x)
P/BV (x)
P/ABV (x)
Yields & Margins (%)
Net Interest Margins
Yield on assets
Avg. cost on funds
Yield on average advances
Avg. Cost of Deposits
Quality and Efficiency (%)
Cost to income ratio
Credit/Deposit ratio
GNPA
NNPA
ROE
ROA
FY13
FY14E
FY15E
FY16E
35.3
134.3
884.0
679.3
6.9
1.1
1.4
36.2
92.3
952.5
678.6
10.1
1.0
1.4
36.2
103.3
1030.1
680.2
9.0
0.9
1.4
36.2
125.5
1153.6
820.4
7.4
0.8
1.1
3.3
9.4
6.4
10.6
6.6
3.3
8.8
5.8
9.8
6.0
3.2
8.6
5.8
10.0
6.0
3.1
8.6
5.8
9.9
5.9
42.8
78.8
4.4
2.3
15.7
1.0
45.1
77.4
5.4
2.8
9.7
0.6
46.1
77.2
5.7
3.2
10.0
0.6
47.2
76.1
5.0
2.7
11.1
0.7
FY14E
14.9
13.1
15.3
3.7
8.7
14.4
4.0
-29.6
10.4
-31.3
FY15E
13.8
14.2
14.4
12.9
10.6
12.7
9.0
11.9
8.1
11.9
FY16E
14.2
13.1
14.9
12.5
11.4
13.7
9.7
21.5
12.0
21.5
Source: Company, ICICIdirect.com Research
Balance sheet
| Crore
(Year-end March)
Sources of Funds
Capital
Reserves and Surplus
Networth
Deposits
Borrowings
Other Liabilities & Provisions
Total
FY13
FY14E
FY15E
FY16E
353.5
32323.4
32676.9
391560.1
39620.9
15019.1
478877.0
362.1
35533.0
35895.1
451396.0
48034.0
15093.0
550418.1
362.1
38341.4
38703.5
516257.5
53666.6
17885.4
626512.9
362.1
42815.5
43177.6
592941.2
60072.2
19114.9
715305.9
Application of Funds
Fixed Assets
Investments
Advances
Other Assets
Cash with RBI & call money
Total
3357.7
129896.2
308725.2
9762.6
27135.4
478877.0
3419.0
143785.0
349269.0
8727.0
22972.0
550418.1
3517.0
166054.3
398721.6
11432.5
46787.5
626512.9
3706.6
189969.9
451068.9
19043.4
51517.0
715305.9
Growth ratios
(Year-end March)
Total assets
Advances
Deposit
Total Income
Net interest income
Operating expenses
Operating profit
Net profit
Net worth
EPS
FY13
5.0
5.1
3.2
13.5
10.8
16.6
1.5
-2.8
18.5
-12.8
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
.
ICICI Securities Ltd | Retail Equity Research
Page 10
ICICIdirect.com coverage universe (Banking)
Sector / Company
Bank of India (BANIND)
Bank of Baroda (BANBAR)
Dena Bank (DENBAN)
Punjab National Bank (PUNBAN)
State Bank of India (STABAN)
Syndicate Bank (SYNBN)
Axis Bank (UTIBAN)
City Union Bank (CITUNI)
Development Credit Bank (DCB)
Federal Bank (FEDBAN)
HDFC Bank (HDFBAN)
Indusind Bank (INDBA)
Jammu & Kashmir Bank(JAMKAS)
Kotak Mahindra Bank (KOTMAH)
South Indian Bank (SOUIN0)
Yes Bank (YESBAN)
CMP
(|)
268
884
61
932
2,584
117
423
83
87
141
896
678
137
1,014
25
624
M Cap
EPS (|)
P/E (x)
P/ABV (x)
RoA (%)
RoE (%)
TP(|) Rating
(| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E
317
Buy 15,989
42
43
50 6.3
6.2
5.4 0.8 0.9 0.8 0.5 0.5 0.4
10
9
10
1,250
Buy 37,230 105 136 160 8.4
6.5
5.5 1.3 1.2 1.0 0.8 0.8 0.8
13
15
16
66 Hold
3,262
10
11
14 5.9
5.6
4.4 0.7 0.8 0.7 0.5 0.4 0.5
9
8
10
1,060
Buy 32,959
92 103 125 10.1
9.0
7.4 1.4 1.4 1.1 0.6 0.6 0.7
10
10
11
3,234
Buy 176,764 146 185 213 17.7 14.0 12.1 2.2 2.0 1.9 0.6 0.7 0.7
10
11
12
145 Hold
7,043
27
27
32 4.3
4.3
3.6 0.9 0.9 0.8 0.7 0.6 0.6
15
14
15
481
Buy 99,745
26
30
34 16.0 14.0 12.5 2.7 2.3 2.0 1.7 1.7 1.7
17
17
17
80 Hold
4,011
6
7
9 12.9 12.6
9.7 2.5 2.0 1.6 1.4 1.4 1.6
19
16
17
100
Buy
2,246
6
7
7 14.3 13.3 12.0 2.1 1.7 1.5 1.3 1.3 1.2
15
14
12
155
Buy 12,009
10
12
14 14.3 11.8
9.8 1.8 1.6 1.5 1.2 1.3 1.3
13
14
15
956 Hold 213,808
35
42
52 25.3 21.1 17.3 5.0 4.2 3.7 1.9 2.0 2.1
21
21
22
714
Buy 35,543
27
33
41 25.3 20.3 16.4 4.0 3.5 3.0 1.8 1.8 1.9
17
18
19
170 Hold
6,636
24
23
31 5.6
5.8
4.3 1.2 1.1 0.9 1.6 1.3 1.6
22
19
21
1,117 Hold 77,729
20
22
26 52.0 45.9 39.4 6.6 5.8 5.2 1.8 1.8 1.8
14
13
13
30 Hold
3,378
4
4
5 6.7
6.1
5.5 1.2 1.0 0.9 1.0 0.9 0.9
17
15
16
723
Buy 22,369
45
47
57 13.9 13.3 11.0 3.2 2.2 1.9 1.6 1.6 1.6
25
21
19
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 11
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%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% 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 – 400 093
research@icicidirect.com
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accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures:
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The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
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ICICI Securities Ltd | Retail Equity Research
Page 12