banking 3q fy2013 result review, february 2013

7/29/2019 Banking 3Q FY2013 Result Review, February 2013

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Please refer to important disclosures at the end of this report 1

3QFY2013 snapshot - Asset quality stress continues, as slippages remainelevated; but the extent of asset quality deterioration shows diminishing signs:Annualized slippage ratio for PSU banks under our coverage moderated to 2.8%,

from 3.5% in 2QFY2013. Considering different disclosure practices being

followed by banks, wherein some net-off any inter-quarter movement of NPAs,

while some dont, to corroborate our understanding that the extent of asset quality

deterioration is increasingly reflecting diminishing signs, during 9MFY2013 the

increase in annualized slippage ratio was 43bp yoy, lower than the increase of

91bp yoy witnessed in 1HFY2013. Most of our coverage PSU banks witnessed

moderate performance on the recoveries & upgrades, which led to an 8.0% qoq

increase in gross NPAs for them.

Private banks continue to perform relatively much better vis--vis PSU banks on

the asset quality front, as they not only reported sequentially lower slippages, but

also posted better recoveries and upgrades performances, which aided them to

limit the sequential increase in their gross NPA levels to just 1.2% in 3QFY2013,

much lower compared to an increase of 3.7% witnessed in last quarter.

Asset quality pressures continued to reflect on the sectors margins during the

quarter, as nearly half of our coverage banks reported sequentially lower

margins, primarily due to higher interest reversals/lower income recognition

during 3QFY2013 on increased slippages/elevated gross NPA inventory.

Overall, PSU banks reported a weak performance during 3QFY2013, as interestreversals/lower interest recognition and higher provisioning led to a 5.1% yoy

decline in bottom-line. Private banks continued to report impressive

performances, with an operating profit growth of 25.1% yoy. On the earnings

front, new private banks reported a strong growth of 28.7% yoy, while old private

banks witnessed a healthy growth of 20.3% yoy.

Given the economic environment, continue to prefer Private banks: Deceleratingeconomic growth environment, policy woes in select sectors and elevated inflation

and interest rates point towards further economic stress and are not suggesting

any conclusive trigger for improvement in asset quality in the near-term. Hence,

we prefer private banks, given their favorable cyclical and structural outlook, with

Axis Bank and ICICI Bank being our top picks. But with the risk of highercompetitive intensity in light of higher number of likely new entrants, the upsides

are expected to be relatively more moderate than estimated earlier.

Due to cyclical macro concerns, PSU banks are already trading at depressed

valuations. Even, higher number of likely new entrants in the sector, create a

structural impediment for PSU banks medium-term re-rating, as we expect them

to lose market share in any case, considering their capital crunch. Upsides in

these stocks would largely depend on an eventual economy turn-around, which

would lead to lower re-pricing of high-cost deposits (relative benefit for low-CASA

banks) and higher recoveries (relative benefit for banks that have experienced

maximum asset quality pain, and importantly, also provided for it already).

Screening for these criteria, as well as Tier-1 capital adequacy and trailingadjusted valuations, in our view, PSU banks that would stand to gain the most

from an eventual turn-around include State Bank of India (SBI) and Punjab

National Bank (PNB) among the large-caps and United Bank, Corporation Bank

and Indian Bank among the mid-caps.

Banking indicatorsParticulars* (%)Latest yoy credit growth 16.4

Latest yoy deposit growth 13.2

Latest credit-to-deposit ratio 77.6

Monthly Avg. LAF (`cr) 108,649

Monthly Avg. 1 yr G-Sec yield 7.8

Monthly Avg. 10 yr G-Sec yield 7.9

Monthly Avg. 3M CP 9.3

Monthly Avg. 12M CP 9.5Source: RBI, Bloomberg, Angel Research; Note*: Monthlyaverages are on preceding 30 day basis

Policy ratesParticulars (%)Repo rate 7.75

Reverse repo rate 6.75

MSF rate 8.75

Cash reserve ratio (CRR) 4.00

Statutory liquidity ratio (SLR) 23.00

Source: RBI, Angel Research

Vaibhav Agrawal022 3935 7800 Ext: 6808

[email protected]

Sourabh Taparia022 3935 7800 Ext: 6872

[email protected]

Banking - 3QFY2013 Result ReviewEconomic environment remains challenging

Result Review | Banking

February 26, 2013


2/26

Banking | Result Review

February 26, 2013 2

Asset quality pressures continue to reflect on margins

Asset quality pressures continue to reflect on the banking sectors margins during

the quarter, as nearly half of our coverage banks reported sequentially lower

margins. Canara Bank (CANBK), Bank of Baroda (BOB) and Federal Bank (FEDBK)

witnessed the highest sequential margin compression; primarily due to higher

interest reversals/lower income recognition during 3QFY2013 on increased

slippages/elevated gross NPA inventory (slippages for BOB and FEDBK were

higher by 40.9% and 193.1% qoq, respectively).

Exhibit 1:Margins compressed for most banks

Source: Company, Angel Research, Note:*Domestic NIMs for SBI, BOB and BOI

Exhibit 2:New Pvt. Banks* continue to outperform on NII front

Source: Company, Angel Research, Note: *our coverage banks

Exhibit 3:Our coverage banks performance on reported margins frontBank 3QFY2013 2QFY2013 Chg (bps) Bank 3QFY2013 2QFY2013 Chg (bps)HDFCBK 4.10 4.20 (10.0) UNBK 2.95 3.02 (7.0)

J&KBK 4.07 3.94 13.0 BOM 2.89 2.99 (10.0)

SBI 3.63 3.68 (5.0) DENABK 2.88 2.86 2.0

AXSB 3.57 3.46 11.0 OBC 2.84 2.79 5.0

FEDBK 3.47 3.58 (11.0) BOI 2.80 2.84 (4.0)

PNB 3.47 3.50 (3.0) UTDBK 2.68 2.60 8.0

ANDBK 3.35 3.13 22.0 CENTBK 2.64 2.68 (4.0)

SYNBK 3.29 3.33 (4.0) IOB 2.51 2.33 18.0

SIB 3.20 3.09 11.0 CANBK 2.36 2.53 (17.0)

BOB 3.08 3.23 (15.0) CRPBK 2.35 2.23 12.0

INDBK 3.07 3.12 (5.0) UCOBK 2.32 2.24 8.0

ICICIBK 3.07 3.00 7.0 IDBI 2.30 2.05 25.0

ALLBK 3.02 2.80 22.0 VIJAYA 2.08 2.10 (2.0)

YESBK 3.00 2.90 10.0

Source: Company, Angel Research, Note: *domestic margins for SBI, BOB, BOI

(20)

(15)

(10)

(5)

-

5

10

15

20

25

30

IDBI

ANDBK

ALLBK

IOB

J&KBK

CRPBK

SIB

AXSB

YESBK

UTDBK

UCOBK

ICICIBK

OBC

DENABK

VIJAYA

PNB

CENTBK

SYNBK

BOI

INDBK

SBI

UNBK

BOM

HDFCBK

FEDBK

BOB

CANBK 2

4.1

5.3 4

.1

9.3

4.7

5.0

3.0

3.4

0.0

5.0

10.0

15.0

20.0

25.0

30.0

New Pvt. Old Pvt. Mid PSUs Large PSUs

% chg (yoy) % chg (qoq)


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February 26, 2013 3

Exhibit 4:CD ratio expanded sequentially for most of the banks under our coverageBank CD ratio 2QFY13 CD Ratio 3QFY13 Chg (bps) Bank CD ratio 2QFY13 CD Ratio 3QFY13 Chg (bps)CRPBK 68.3 74.4 611 SIB 73.2 74.6 142

IOB 79.3 84.9 561 UNBK 76.5 77.7 119UTDBK 66.1 70.0 382 CENTBK 73.7 74.7 96

PNB 73.6 77.1 351 BOM 73.8 74.6 84

CANBK 64.1 67.4 330 INDBK 72.4 73.3 83

DENABK 70.4 73.7 324 SYNBK 81.3 82.1 71

FEDBK 73.3 76.5 322 BOB 71.6 72.2 58

SBI 81.8 84.6 280 HDFCBK 84.5 85.0 49

VIJAYA 69.1 71.9 277 AXSB 73.1 73.4 36

ICICIBK 97.7 100.1 238 J&KBK 62.4 62.5 8

BOI 77.0 79.2 220 IDBI 92.4 91.6 (78)

ALLBK 68.4 70.6 217 YESBK 80.4 77.8 (260)

ANDHBK 78.5 80.3 179 UCOBK 72.6 69.9 (269)

OBC 71.8 73.4 161

Source: Company, Angel Research,

CASA deposits growth remains moderate

Growth in savings deposits for our coverage banks (excluding Indian Bank

[INDBK], due to unavailability of data) remained moderate at 12.8%, on back of

persistent high differential between savings and term deposit rates. The growth in

current deposits for our coverage banks (excluding INDBK, due to unavailability of

data), at 9.9% yoy, was also moderate considering the decelerating economicenvironment.

Private banks continue to outperform their PSU peers on the savings deposits (SA)

front, with a growth of 16.8% yoy. Amongst our coverage Private banks, Yes Bank

witnessed the highest SA growth (significant traction being witnessed post the hike

in savings rate to 6-7%). Within large private banks, while Axis Bank (AXSB) and

HDFC Bank (HDFCBK) fared well and reported a healthy growth of 21.6% and

16.5%, yoy respectively, ICICIBK witnessed a moderate growth of 10.8% yoy.

Amongst PSU banks, the top two performers on the SA front were IDBI Bank

(20.6% yoy growth on account of traction post waiver of CASA charges during

FY2012) and Jammu & Kashmir Bank (J&K Bank; 16.7% yoy growth consideringinsulation from competition in its parent state of J&K).

On the current deposits (CA) front, UCO Bank registered a strong performance, as

its CA deposits more than tripled on a yoy basis, due to substantial float being

made available on opening of rupee accounts with the bank for facilitating Indo-

Iran trade payments. Amongst other PSU banks, the top two performers on the CA

front were Bank of Maharashtra (BOM; 28.1% yoy growth) and Oriental Bank of

Commerce (OBC; 23.0% yoy growth). PSU banks managed to outperform their

private counterparts on the CA front this time around, with a growth of 12.7% yoy,

compared to a subdued growth of 3.7% yoy for Private banks, whose performance

on the CA front was dragged by a 10.9% yoy decline witnessed by ICICI Bank(ICICIBK) and subdued growth of 2.0% yoy registered by AXSB.


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February 26, 2013 4

Exhibit 5:CASA yearly growth rate trendsBank SA -3QFY13 SA -3QFY12 yoygrowth CA -3QFY13 CA -3QFY12 yoygrowth CASA -3QFY13 CASA -3QFY12 yoygrowth CASARatioYESBK 4,905 1,203 307.8 5,436 4,711 15.4 10,341 5,914 74.9 18.3

UCOBK 28,350 25,741 10.1 19,341 6,190 212.5 47,691 31,931 49.4 28.1

IDBI 20,445 16,958 20.6 21,124 17,881 18.1 41,569 34,839 19.3 22.3

BOM 25,341 22,145 14.4 8,359 6,528 28.1 33,700 28,673 17.5 33.9

HDFCBK 81,942 70,330 16.5 47,048 40,576 15.9 128,990 110,906 16.3 45.4

ALBK 42,534 36,936 15.2 9,002 7,558 19.1 51,536 44,494 15.8 30.2

OBC 29,724 26,264 13.2 10,505 8,541 23.0 40,229 34,805 15.6 23.9

FEDBK 12,324 11,102 11.0 2,879 2,084 38.1 15,203 13,186 15.3 29.5

JKBK 17,479 14,974 16.7 5,027 4,621 8.8 22,506 19,595 14.9 39.4

BOB 79,980 71,842 11.3 27,958 22,981 21.7 107,938 94,823 13.8 32.2

PNB 117,097 102,705 14.0 25,345 23,260 9.0 142,442 125,965 13.1 36.9

AXSB 57,521 47,297 21.6 40,236 39,459 2.0 97,757 86,756 12.7 40.0

BOI 72,000 63,606 13.2 15,972 14,965 6.7 87,972 78,571 12.0 32.8

UNBK 54,470 48,500 12.3 20,331 18,310 11.0 74,801 66,810 12.0 31.3

UTDBK 28,997 25,646 13.1 7,822 7,293 7.3 36,819 32,939 11.8 40.0

ANDBK 22,679 20,729 9.4 6,585 5,532 19.0 29,265 26,261 11.4 26.0

CNTBK 57,101 51,004 12.0 10,898 10,076 8.2 67,999 61,080 11.3 32.0

DENABK 20,216 18,293 10.5 6,083 5,554 9.5 26,299 23,848 10.3 31.0

SIB 6,500 6,058 7.3 1,500 1,222 22.7 8,000 7,280 9.9 20.5

SYNBK 36,930 32,994 11.9 11,430 11,020 3.7 48,360 44,014 9.9 29.5

SBI 410,906 367,896 11.7 80,094 79,462 0.8 491,000 447,358 9.8 45.5

VIJBK 14,163 13,012 8.8 4,531 4,199 7.9 18,694 17,211 8.6 20.9

CANBK 68,689 63,361 8.4 12,473 12,059 3.4 81,162 75,420 7.6 25.1

CRPBK 18,904 17,115 10.5 9,818 9,641 1.8 28,722 26,756 7.3 20.5

INDBK NA 29,489 NA NA 6,430 NA 38,268 35,919 6.5 28.3

IOB 36,733 33,376 10.1 9,606 10,300 (6.7) 46,339 43,676 6.1 25.0

ICICIBK 81,463 73,498 10.8 35,674 40,039 (10.9) 117,137 113,537 3.2 40.9

Source: Company, Angel Research

Exhibit 6:CASA ratio and Investment-to-deposits ratio for our coverage PSU banks as of 3QFY2013

Source: Company, Angel Research, Note: For INDBK, Investment-to-deposits ratio as of 2QFY2013

18 2

2

41

20

21 2

52

9

24 2

8

25

21

30

26 2

8

39

31

40

31

37

34

40

32

29 3

332

45 46

63

41

58

38

34 3

7 38

33

31

32

27

36

30 3

340

31

41

32 3

4 35 3

7

30

26

25

25

34

31

0

10

20

30

40

50

60

70

YESBK

IDBI

ICICIBK

CORPBK

VIJBK

CANBK

FEDBK

OBC

UCOBK

IOB

SIB

ALLBK

ANDHBK

INDBK

J&KBK

UNIONBK

AXSB

DENABK

PNB

BOM

UTDBK

CENTBK

SYNBK

BOI

BOB

HDFCBK

SBI

CASA ratio - (%) Investments to Deposits - (%)


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February 26, 2013 5

Exhibit 7:Yield on advances# for banks under our coverageBank 9MFY13 9MFY12 Chg (bps) Bank 9MFY13 9MFY12 Chg (bps)YESBK 12.8 12.3 54 CRPBK 10.9 10.2 69

SIB 12.5 12.2 28 AXSB 10.9 10.2 71JKBK 12.3 11.6 71 PNB 10.9 11.1 (21)

FEDBK 12.0 12.7 (76) UTDBK 10.8 10.5 30

ANDBK 11.8 12.1 (35) CANBK 10.8 10.7 17

HDFCBK 11.7 11.2 50 IOB 10.6 10.7 (10)

OBC 11.6 11.4 27 BOM 10.6 11.1 (58)

DENABK 11.4 10.6 74 SYNDBK 10.4 10.9 (53)

INDBK 11.1 11.5 (36) UNBK 10.3 10.1 22

UCOBK 11.1 10.8 31 ICICIBK* 10.1 9.2 82

ALBK 11.1 11.8 (73) SBI* 9.7 9.8 (6)

IDBI 11.1 11.3 (23) BOB* 8.8 8.9 (8)

VIJBK 11.0 11.2 (26) BOI* 8.7 8.8 (7)

CNTBK 10.9 10.8 10

Source: Company, Angel Research, Note:*including international operations, #Calculated

Exhibit 8:Risk adjusted yield on assets# for banks under our coverageBank 9MFY13 9MFY12 Chg (bps) Bank 9MFY13 9MFY12 Chg (bps)SIB 9.8 9.5 35 PNB 8.1 7.9 16

YESBK 9.8 9.1 63 CNTBK 8.1 7.9 12

JKBK 9.3 8.5 80 IOB 8.0 7.7 32

ANDBK 9.2 8.8 34 UNBK 8.0 7.3 71FEDBK 9.1 9.0 5 SYNDBK 7.9 8.0 (9)

DENABK 8.9 8.3 67 BOM 7.8 7.8 (1)

HDFCBK 8.9 8.2 67 IDBI 7.8 8.4 (64)

INDBK 8.5 8.6 (6) UCOBK 7.7 7.6 15

VIJBK 8.5 8.1 38 SBI* 7.7 7.1 63

OBC 8.4 8.1 30 ICICIBK* 7.5 7.2 23

CANBK 8.4 8.0 39 UTDBK 7.2 7.2 (1)

ALBK 8.3 8.5 (13) BOI* 6.8 6.7 15

CRPBK 8.2 7.6 56 BOB* 6.6 6.7 (9)

AXSB 8.1 7.7 48

Source: Company, Angel Research, Note:*including international operations, #Calculated

Subdued performance continues on the non-interest income

(excluding treasury) front

Our coverage banks performance on the non-interest income (excluding treasury)

front in 3QFY2013, remained subdued at 5.0% yoy, similar to the modest growth

of 4.7% yoy during the last quarter, largely due to muted performance on the fee

income front. Most banks reported a sluggish performance on the fee income

front, largely due to slowed credit off-take and waiver of processing charges for

various products, both on the assets and liabilities side.

Even, the performance of Private banks on the non-interest income (excluding

treasury) front moderated to 7.9% yoy, but they were able to comfortably

outperform the coverage PSU banks, which saw a modest growth of 3.6% yoy.


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February 26, 2013 6

Amongst PSU banks, despite a yoy decline witnessed in three of seven banks (BOB,

CANBK and PNB), 72.4% yoy growth in IDBI Bank, aided the larger PSU banks

pack to register a growth of 4.2% yoy, much better than the marginal growth of

2.0% yoy witnessed in the mid-PSU banks, whose performance was dragged byyoy decline witnessed in nearly one-third of our coverage mid-PSUs. Amongst mid-

PSU banks, the better performers were Oriental Bank of Commerce (OBC), United

Bank (UTDBK) and Indian Overseas Bank (IOB); (OBC and IOB witnessed

significant jump in recoveries from written-off accounts, income from exchange

transactions increased substantially for UTDBK), whereas the worst performers

were INDBK and Allahabad Bank (ALBK).

Exhibit 9:Non-interest income (excl. treasury) performance for banks under our coverageBank 3QFY2013 2QFY2013 % chg (qoq) 3QFY2012 % chg (yoy) As % to avg. assets Chg (bps)9MFY2012 9MFY2013AXSB 1,456 1,386 5.1 1,312 11.0 1.78 1.88 (11)

HDFCBK 1,663 1,451 14.6 1,502 10.7 1.69 1.69 0

ICICIBK 1,964 1,871 5.0 1,957 0.3 1.53 1.68 (15)

YESBK 313 277 13.2 211 48.1 1.46 1.21 25

SBI 3,230 3,117 3.7 3,216 0.4 0.92 1.05 (14)

IDBI 662 650 1.9 384 72.4 0.84 0.64 20

BOI 851 791 7.6 781 9.0 0.79 0.75 4

OBC 316 355 (11.0) 259 22.1 0.79 0.61 18

PNB 848 765 10.7 859 (1.3) 0.76 0.85 (9)

IOB 455 375 21.3 376 20.9 0.73 0.77 (4)

CRPBK 320 280 14.3 330 (3.1) 0.71 0.78 (6)

UNBK 528 471 12.0 491 7.4 0.70 0.70 (1)

INDBK 206 333 (38.1) 263 (21.5) 0.66 0.80 (14)

CANBK 595 534 11.4 622 (4.4) 0.61 0.74 (13)

UTDBK 145 143 1.4 118 22.9 0.54 0.48 6

FEDBK 118 104 13.6 122 (3.8) 0.68 0.79 (11)

ANDHBK 209 214 (2.4) 219 (4.5) 0.66 0.63 3

BOM 156 162 (3.3) 140 11.7 0.61 0.77 (16)

BOB 705 716 (1.6) 764 (7.7) 0.60 0.71 (11)

ALLBK 288 255 12.8 327 (12.1) 0.56 0.74 (18)

SIB 53 62 (14.6) 54 (2.4) 0.54 0.50 3DENABK 121 115 5.9 124 (2.0) 0.50 0.65 (15)

SYNBK 234 245 (4.4) 235 (0.5) 0.49 0.58 (9)

J&KBK 72 65 10.8 65 10.7 0.45 0.47 (2)

CENTBK 289 282 2.4 284 1.6 0.44 0.46 (2)

VIJAYA 115 106 9.2 102 13.4 0.44 0.49 (5)

UCOBK 177 168 5.4 198 (10.9) 0.41 0.45 (4)



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February 26, 2013 7

Asset quality stress continues as slippages remain elevated; but

the extent of asset quality deterioration shows diminishing signs

Asset quality concerns, which had made FY2012 a challenging year for the

banking sector (specifically for the PSU banks), continue to plague the sector s

fundamentals even in 9MFY2013. Considering the weak economic growth

environment, inflation persisting at stubborn levels, and continuing burden of high

interest servicing costs, incremental slippages have remained elevated and much

above comfort levels; however, the extent of asset quality deterioration has shown

signs of moderation.

During 3QFY2013, the annualized slippage ratio for banks under our coverage

(excl. HDFCBK and YESBK, due to unavailability of data), moderated to 2.6%, from

3.3% in 2QFY2013 and 3.1% in 1QFY2013. However, considering different

disclosure practices being followed by banks, wherein some net-off any inter-

quarter movement of NPAs (within the same year), while some dont, we alsocompare cumulative reported slippages on a yoy basis, which also corroborates

our understanding that the extent of asset quality deterioration is increasingly

reflecting diminishing signs. While the annualized slippage ratio was higher by

38bp yoy from 2.6% in 9MFY2012 to 3.0% in 9MFY2013, the increase was,

however, lower than what was witnessed in 1HFY2013, when the annualized

slippage ratio increased by 57bp yoy to 3.2% from 2.6% in 1HFY2012.

Exhibit 10:Gross NPA trend (%) for the banking industry


Exhibit 11:Net NPA trend (%) for the banking industry


Exhibit 12:Gross NPA trends (%) Private vs. PSU


Exhibit 13:Net NPA trends (%) Private vs. PSU


2.402.28

2.43

2.732.85 2.80

3.09

3.423.49

2.10

2.30

2.50

2.70

2.90

3.10

3.303.50

3.70

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

1.00 0.991.04

1.281.36

1.30

1.49

1.741.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

2.702.57

2.36 2.33

2.24 2.172.01

2.05 2.06 2.00

2.42 2.35 2.272.45

2.85

3.022.98

3.34

3.76 3.87

1.50

2.00

2.50

3.00

3.50

4.00

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Pvt Banks PSU Banks

0.790.69

0.56 0.56 0.54 0.54 0.46 0.49 0.54 0.55

1.131.07

1.09 1.16

1.47 1.56 1.501.73

2.04 2.12

0.00

0.50

1.00

1.50

2.00

2.50

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Pvt Banks PSU Banks


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February 26, 2013 8

Exhibit 14:Slippages moderate sequentially in 3QFY13; even the increase in 9MFY13 is lower than in 1HFY13Bank 3QFY13 2QFY13 chg (bps) 9MFY13 9MFY12 chg (bps) 1HFY13 1HFY12 chg (bps)ALLBK 3.6 6.2 (261) 4.0 1.8 216 4.2 1.4 272

UCOBK 4.2 5.3 (111) 4.2 2.1 208 4.2 2.1 210INDBK 6.3 3.3 304 3.5 1.5 203 2.1 1.5 69

PNB 4.0 7.0 (297) 3.5 2.1 136 5.0 1.8 319

SIB 0.8 3.4 (267) 1.9 0.7 117 2.4 0.7 170

IOB 3.1 5.3 (216) 3.6 2.6 103 3.9 2.6 122

BOB 2.8 2.0 81 2.2 1.2 96 1.9 1.0 88

BOM 1.8 1.5 25 2.1 1.2 96 2.3 1.2 113

SYNBK 2.9 3.3 (34) 3.2 2.3 93 3.3 2.5 87

CRPBK 2.8 1.8 102 2.5 1.6 88 2.3 1.5 79

CENTBK 3.3 4.8 (155) 4.0 3.4 62 4.4 2.8 154

CANBK 2.3 3.3 (105) 2.7 2.2 54 2.9 2.5 49

DENABK 1.7 2.0 (36) 1.7 1.4 27 1.7 1.4 34

J&KBK 1.4 1.2 18 1.2 0.9 26 1.1 1.0 7

ANDHBK 2.2 3.7 (152) 3.3 3.2 8 3.8 3.7 10

SBI 3.8 3.3 49 4.0 3.9 7 4.1 3.8 39

ICICIBK 1.3 1.9 (58) 1.5 1.5 6 1.6 1.4 23

AXSB 1.3 1.5 (20) 1.3 1.2 3 1.3 1.1 16

YESBK NA NA NA NA NA NA NA NA NA

HDFCBK NA NA NA NA NA NA NA NA NA

BOI 2.0 4.4 (243) 3.1 3.1 (9) 3.6 4.2 (63)

UTDBK 4.3 2.8 147 3.0 3.4 (41) 2.4 3.8 (141)

UNBK 1.5 1.8 (26) 2.3 2.8 (46) 2.7 3.4 (70)

IDBI 1.6 1.4 20 1.8 2.4 (61) 1.8 2.0 (13)

FEDBK 4.5 1.5 295 3.0 3.8 (81) 2.3 3.7 (139)

OBC 2.9 2.3 58 2.6 3.6 (100) 2.4 3.9 (150)

VIJAYA 2.1 3.8 (174) 3.1 4.7 (160) 3.6 4.4 (80)

Aggregate level

PSU 2.8 3.5 (72) 3.2 2.8 43 3.4 2.5 91

Mid PSU 2.5 3.3 (82) 3.2 2.9 26 3.5 2.9 56

Large PSU 3.2 3.8 (53) 3.2 2.5 73 3.2 2.5 75

Pvt. 1.5 1.8 (30) 1.6 1.5 4 1.6 1.5 16

New Pvt. 1.3 1.7 (43) 1.4 1.4 5 1.5 1.3 20Old Pvt. 2.9 2.3 59 2.5 2.6 (7) 2.3 2.5 (18)


Amongst large PSU banks, while PNB, CANBK, Union Bank of India (UNBK) and

Bank of India (BOI), witnessed a sequential reduction in their quarterly slippage

ratios (PNB and BOI, which had witnessed sharp jump in slippages in 2QFY2013,

managed to lower their slippages the most), quarterly slippage ratio came in

higher sequentially for SBI and BOB and was largely stable for IDBI Bank. Large

PSU banks, as a segment, saw a reduction in the extent of asset quality

deterioration, as the increase in annualized slippage ratio during 9MFY2013 came

in at 26bp yoy to 3.2% (from 2.9% in 9MFY2012) compared to an increase of56bp yoy in 1HFY2013 to 3.5% (2.9% in 1HFY2012).


9/26


February 26, 2013 9

Amongst the mid-PSU banks, ALBK, IOB, Vijaya Bank (VIJBK), Central Bank

(CNTBK) and Andhra Bank (ANDBK), which had seen a sharp jump in slippages in

1HFY2013, managed to lower their annualized slippage ratio by ~100-200bp.

Banks such as INDBK and UTDBK witnessed a sharp increase in slippages. Hence,the overall mid-PSU segment saw similar extent of asset quality deterioration as the

increase in annualized slippage ratio during 9MFY2013 came in at 73bp yoy,

compared to an increase of 75bp yoy witnessed in 1HFY2013.

Segment-wise, slippages for most of the PSU banks continue to emanate largely

from the mid corporate and SME segments. Sectorally, a higher chunk of NPAs for

most of the PSU banks came from textiles, iron and steel and infrastructure. Unlike

last quarter, this time around, neither there were any prominent common names

on the slippage front, nor any of our coverage banks reported any major slippage

on account of classification differences arising at the Reserve Bank of India (RBI) s

annual financial inspection.

Despite increased recoveries/upgrades efforts, considering the challenges in

economic environment, most PSU banks reported a moderate performance on the

recoveries/upgrades front, even after taking into account increased inventory of

slippages. Hence, gross NPA levels for our coverage PSU banks were higher

sequentially by 7.9% during the quarter (the increase for large PSU banks was

6.6% qoq, lower compared to 10.6% qoq increase for mid-PSU banks).

Even worse, this was accompanied by a significant decline in the provisioning

coverage for most of our coverage PSU banks, with the few exceptions being

Syndicate Bank (SYNDBK) and BOM (in line with our relatively positive view on

asset quality compared to peers) as well as UNBK, IDBI Bank, PNB, JKBK, VIJBKand CNTBK, which led to a sequentially higher increase in net NPA levels at 8.6%

during the quarter.

On the other hand, Private banks continue to perform relatively much better vis--

vis PSU banks on the asset quality front, as they not only reported sequentially

lower slippages, but also posted better recoveries and upgrades performances,

which aided them to limit the sequential increase in their gross and net NPA levels

to just 1.2% and 6.7%, respectively in 3QFY2013, much lower compared to an

increase of 3.7% and 12.9% qoq, respectively witnessed in gross and net NPA

levels during 2QFY2013.

Going forward, considering the weakening GDP growth environment and withdownward movement in interest rates expected to be relatively much slower than

earlier estimated, the mid-corporate and SMEs are expected to remain vulnerable

to being NPAs going ahead as well, in our view.


10/26


February 26, 2013 10

Exhibit 15:Asset quality continue to deteriorate during 3QFY2013GNPA(` cr) NNPA(` cr) PCR (%)

Bank 3QFY13 2QFY13 qoq (%) 3QFY13 2QFY13 qoq (%) 3QFY13 2QFY13 chg (bps)INDBK 3,180 1,980 60.6 2,142 1,260 70.0 61.2 71.0 (974)BOB 7,321 5,879 24.5 3,363 2,385 41.0 70.9 75.7 (484)

UTDBK 2,902 2,418 20.0 1,416 1,188 19.2 67.3 69.2 (190)

CRPBK 2,284 1,949 17.2 1,698 1,351 25.6 58.0 60.4 (242)

HDFCBK 2,432 2,133 14.0 496 387 28.2 79.6 81.9 (225)

UCOBK 6,711 5,888 14.0 3,927 3,468 13.2 48.9 49.1 (25)

DENABK 1,317 1,171 12.5 817 721 13.4 70.6 72.5 (190)

IOB 6,516 5,930 9.9 3,595 3,378 6.4 59.0 58.5 47

ANDHBK 3,302 3,014 9.6 2,023 1,831 10.5 52.4 53.2 (71)

IDBI 6,401 5,848 9.5 3,302 3,395 (2.7) 69.2 65.8 339

FEDBK 1,564 1,435 9.0 362 245 47.8 76.9 82.9 (608)

SBI 53,458 49,202 8.6 25,370 22,615 12.2 61.5 62.8 (129)

CANBK 6,090 5,610 8.6 5,134 4,569 12.4 61.0 63.0 (202)

ALLBK 3,532 3,311 6.7 2,478 2,331 6.3 61.0 60.8 17

OBC 3,690 3,466 6.5 2,611 2,393 9.1 63.6 64.5 (92)

J&KBK 582 552 5.4 50 55 (10.5) 94.2 93.3 91

CENTBK 8,938 8,507 5.1 5,864 5,696 2.9 41.2 39.9 134

AXSB 2,275 2,191 3.8 679 654 3.7 70.2 70.1 3

PNB 13,998 14,024 (0.2) 7,586 7,883 (3.8) 56.0 54.3 166

VIJAYA 1,889 1,897 (0.4) 1,098 1,116 (1.6) 63.0 61.8 117

SYNBK 3,160 3,179 (0.6) 1,141 1,164 (2.0) 83.0 82.3 75

BOM 1,284 1,292 (0.6) 487 559 (12.9) 82.8 80.1 270

UNBK 6,384 6,470 (1.3) 3,169 3,559 (11.0) 66.2 61.5 476

ICICIBK 9,763 10,036 (2.7) 2,182 2,134 2.2 77.7 78.7 (108)

BOI 8,625 8,899 (3.1) 5,455 5,228 4.3 60.7 61.0 (22)

SIB 475 496 (4.3) 197 242 (18.7) 58.6 51.2 735

YESBK 76 103 (25.9) 16 20 (22.7) 79.6 80.4 (85)


Exhibit 16:Aggregate gross NPA levelsPrivate BanksBank (` cr) 3QFY13 2QFY13 3QFY12 %yoy %qoqPvt. New 15,709 15,613 14,674 7.1 0.6

Pvt. Old 4,956 4,719 3,944 25.7 5.0

Total 20,665 20,332 18,618 11.0 1.6Source: Company, Angel Research

Exhibit 17:Aggregate gross NPA levels PSU BanksBank (` cr) 3QFY13 2QFY13 3QFY12 %yoy %qoqPSU Large 102,277 95,931 70,669 44.7 6.6

PSU Mid 50,586 45,622 31,333 61.4 10.9


Exhibit 18:Aggregate net NPA levels Private BanksBank (` cr) 3QFY13 2QFY13 3QFY12 %yoy %qoqPvt. New 3,820 3,651 3,460 10.4 4.6

Pvt. Old 1,861 1,695 1,134 64.2 9.8


Exhibit 19:Aggregate net NPA levels PSU BanksBank (` cr) 3QFY13 2QFY13 3QFY12 %yoy %qoqPSU Large 53,380 49,634 36,325 47.0 7.5

PSU Mid 30,283 27,285 16,166 87.3 11.0



11/26



Accretion to the restructuring book moderates

Fresh addition to the restructuring book moderated during 3QFY2013, compared

to what was witnessed in the last few quarters (where restructuring of discoms

contributed a larger chunk). Amongst our coverage PSU banks, PNB, BOI, IDBIBK,

UNBK, CNTBK and UTDBK witnessed higher sequential increases in their

restructuring books during the quarter, compared to the increase witnessed in last

quarter. While in case of PNB, higher restructuring during the quarter was on

account of restructuring of a chunky Suzlon advance; textile and steel sector

advances contributed a large part of the increase in restructuring book in case of

BOI and UNBK, respectively.

During the quarter, all banks provided for 75bp increase in provisioning

requirement on standard restructured advances. Recently RBI has, in its draft

prudential guidelines on restructuring of advances, proposed to increase the

provisioning on outstanding standard restructured stock as of March 31, 2013

(calculated after upgrading accounts based on two years of satisfactory

performance) from the current 2.75% to 3.75% by FY2014 (spread over four

quarters of FY2014) and to 5% by FY2015 (spread over four quarters of FY2015).

However, in case of any fresh restructuring after April 1, 2013, provisioning at the

rate of 5% has to be made.

Though many banks have stated that they expect no major restructuring to be in

the pipeline, however, as indicated by their Managements, restructuring pipeline

appears substantial for banks like SBI (~`8,000cr, which will include Suzlon

advance worth ~`3,500cr) and UNBK (~`1,700cr). Even, fresh approvals through

the CDR route (`24,581cr in 3QFY2013 vs. `18,925cr in 2QFY2013) and

pending cases amounting to `23,065cr are likely to keep the restructuring pipeline

for most banks active.


12/26



Exhibit 20:Restructuring book as of 3QFY2013Bank (` cr) Rest.book as of3QFY13

Rest.book as of2QFY13 Ch.qoq (%)% tototal adv. Comments

CENTBK 22,182 21,199 4.6 14 Outstanding restructured bookANDHBK 10,382 9,077 14.4 11 Outstanding restructured book

ALLBK 13,069 12,748 2.5 11 Outstanding restructured book

INDBK 10,650 10,349 2.9 11 Outstanding restructured book, stated borrower-wise

PNB 30,329 27,852 8.9 10 Outstanding restructured book, stated borrower-wise

IOB 15,608 14,775 5.6 10 Outstanding restructured book, stated borrower-wise

OBC 11,798 11,483 2.7 10 Outstanding restructured book

IDBI 15,133 12,534 20.7 9 Outstanding restructured book

CRPBK 8,895 8,867 0.3 9

UNBK 15,565 14,360 8.4 8 Cumulative restructured book

BOI 21,766 20,874 4.3 8 Outstanding restructured book

BOB 22,993 21,078 9.1 8 Cumulative restructured book

DENABK 4,700 4,500 4.4 8

SYNBK 9,800 9,263 5.8 7

BOM 5,266 NA NA 7

UTDBK 4,557 4,214 8.1 7

UCOBK 8,333 7,310 14.0 7 Outstanding standard restructured book

VIJAYA 4,352 4,294 1.4 7

FEDBK 2,670 2,538 5.2 7

CANBK 14,501 14,895 (2.6) 7 Outstanding restructured book

SIB 1,348 1,293 4.3 5

SBI 34,783 40,454 (14.0) 4 restructured book revised in 3QFY13, after upgrading satisfactory advances

AXSB 4,257 4,068 4.6 2

ICICIBK 4,169 4,158 0.3 1

YESBK 189 192 (1.6) 0

Source: Company, Angel Research.


13/26



Exhibit 21:CDR SnapshotYear (` cr) Referred Approved

No. of cases Additions No. of cases AdditionsFY10 31 20,175 31 17,763FY11 49 22,614 27 6,615

1QFY12 18 4,595 10 8,141

2QFY12 18 21,095 7 2,095

3QFY12 23 19,187 17 21,364

9MFY12 59 44,877 34 31,600

4QFY12 28 23,012 16 8,001

FY12 87 67,889 50 39,601

1QFY13 41 20,528 17 17,957

2QFY13 33 18,907 18 18,925

3QFY13 25 20,957 35 24,581

9MFY13 99 60,392 70 61,463

Outstanding 491 266,885 362 211,978Source: Company, Angel Research

Exhibit 22:Fund-based sectoral exposures across PSU banks, as of 1HFY2013Bank Fund Based Exposures Fund Based Exp. as % to total dom. loansInfra

+ PowerMetals &

MiningTextiles

Metals+ Textiles

Total Dom.loan book

Infra+ Power

Metals &Mining

TextilesMetals

+ Textiles

CNTBK 51,015 7,149 4,942 12,091 150,069 34.0 4.8 3.3 8.1

IDBIBK 53,122 20,523 9,528 30,051 161,408 32.9 12.7 5.9 18.6

UCOBK* 34,266 13,945 6,452 20,397 105,937 32.3 13.2 6.1 19.3

ANDBK 20,901 5,280 4,624 9,904 85,299 24.5 6.2 5.4 11.6

CANBK 46,081 17,742 10,893 28,635 205,549 22.4 8.6 5.3 13.9

DENABK* 11,869 3,085 2,227 5,312 56,693 20.9 5.4 3.9 9.4

VIJBK* 12,096 3,236 439 3,674 57,904 20.9 5.6 0.8 6.3

UNBK 33,918 11,064 4,952 16,016 164,002 20.7 6.7 3.0 9.8

OBC 24,187 9,956 6,212 16,167 117,821 20.5 8.4 5.3 13.7

PNB 54,578 20,706 7,308 28,014 272,957 20.0 7.6 2.7 10.3

INDBK 17,752 4,844 3,793 8,637 89,898 19.7 5.4 4.2 9.6

UTDBK 11,841 5,279 1,283 6,563 61,416 19.3 8.6 2.1 10.7

ALBK* 20,380 7,777 3,278 11,055 106,423 19.2 7.3 3.1 10.4BOI 32,543 17,087 8,349 25,436 180,940 18.0 9.4 4.6 14.1

CRPBK 17,305 4,758 4,191 8,949 98,161 17.6 4.8 4.3 9.1

IOB 21,488 11,933 6,474 18,406 133,322 16.1 9.0 4.9 13.8

BOB 32,773 15,235 4,616 19,851 205,453 16.0 7.4 2.2 9.7

SYNDBK 17,287 4,461 1,986 6,447 111,774 15.5 4.0 1.8 5.8

BOM 9,713 3,315 1,464 4,779 63,839 15.2 5.2 2.3 7.5

J&KBK 4,697 2,796 719 3,514 34,272 13.7 8.2 2.1 10.3

Source: Company, Angel Research, Note- *as of FY2012


14/26



New Private banks continue to shine on earnings front, while

performance of PSU banks remained weak, dented by persistent

asset quality stress

During 3QFY2013, PSU banks reported a weak performance, primarily dented by

persistent asset quality pressures, as interest reversals/lower income recognition

and higher provisioning impacted the bottom-line performance of large PSU

banks, whereas for mid-PSU banks earnings declined by 16.0% yoy.

On the NII front, large PSU banks registered a subdued growth of 3.5% yoy,

whereas the growth in the mid-PSU banks segment was moderate at 7.3% yoy, on

account of reduced interest rates across various retail and other products (as

almost all large and many mid-PSUs had reduced interest rates so as to garner

more of higher risk-adjusted yield offering assets) and also due to persistent asset

quality pressures.

Hence, while the growth in operating income remained moderate (growth of 5.7%

and 6.4%, respectively for large PSU banks and mid-PSU banks), the increase in

operating expenses was higher (growth of 12.4% and 11.4% yoy, respectively for

large PSU banks and mid-PSU banks), which resulted in the operating profit

growing at a subdued pace of 1.0% and 2.6% yoy, respectively for large PSU

banks and mid-PSU banks.

Exhibit 23:Large PSU banks P&LParameter (` cr) 3QFY13 2QFY13 % chg(qoq) 3QFY12 % chg(yoy)NII 25,330 24,738 2.4 24,484 3.5Other Income 8,752 7,811 12.0 7,754 12.9

Operating Income 34,082 32,549 4.7 32,239 5.7Operating Expenses 15,082 14,704 2.6 13,420 12.4

Pre provision profit 18,999 17,845 6.5 18,819 1.0Provisions 7,861 6,501 20.9 7,633 3.0

PBT 11,138 11,344 (1.8) 11,185 (0.4)

Tax 3,192 3,318 (3.8) 3,284 (2.8)

Net Profit 7,946 8,026 (1.0) 7,902 0.6Source: Company, Angel Research

Exhibit 24:Mid-PSU banks P&LParameter (` cr) 3QFY13 2QFY13 % chg(qoq) 3QFY12 % chg(yoy)NII 14,432 13,538 6.6 13,449 7.3Other Income 3,810 3,680 3.5 3,688 3.3


Pre provision profit 9,962 9,363 6.4 9,706 2.6Provisions 5,858 4,380 33.7 4,514 29.8

PBT 4,104 4,982 (17.6) 5,192 (21.0)

Tax 736 1,102 (33.2) 1,177 (37.5)

Net Profit 3,368 3,880 (13.2) 4,015 (16.1)Source: Company, Angel Research

Continued asset quality stress (evident in 44.7% and 61.4% yoy increase in gross

NPA levels for large PSU banks and mid-PSU banks respectively), led to

provisioning expenses growing by 29.8% yoy for mid-PSU banks and only 3.0%

yoy for large PSU banks (SBI, PNB and UNBK had high base of provisioning

expenses in 3QFY2012 and hence provisioning expenses for these banks were

lower yoy).

Higher provisioning expenses resulted in PBT declining by 21.0% yoy for mid-PSU

banks, while it remained flattish for large PSU banks. However, tax expenses for

mid-PSU banks declined by 37.5% yoy (excl. Syndicate Bank, which reported a tax

write-back during the quarter, tax expenses for other mid-PSUs declined by 19.9%

yoy), primarily due to higher provisioning expenses, which limited the decline in

bottom-line to 16.1% yoy. Large PSU banks posted a flat performance on the

earnings front.


15/26



Exhibit 25:New Private banks P&LParameter (` cr) 3QFY13 2QFY13 % chg(qoq) 3QFY12 % chg(yoy)NII 11,778 11,222 5.0 9,478 24.3

Other Income 6,603 5,829 13.3 5,500 20.0


Pre provision profit 10,446 9,330 12.0 8,316 25.6Provisions 1,241 1,462 (15.1) 1,189 4.4

PBT 9,205 7,868 17.0 7,127 29.2

Tax 2,778 2,392 16.1 2,131 30.3

Net Profit 6,428 5,476 17.4 4,996 28.7Source: Company, Angel Research

Exhibit 26:Old Private banks P&LParameter (` cr) 3QFY13 2QFY13 % chg(qoq) 3QFY12 % chg(yoy)NII 2,206 2,056 7.3 1,883 17.1

Other Income 818 714 14.6 681 20.2


Pre provision profit 1,507 1,318 14.4 1,242 21.3Provisions 313 153 105.0 297 5.5

PBT 1,194 1,165 2.5 945 26.3

Tax 351 351 0.2 245 43.4

Net Profit 842 814 3.4 700 20.3Source: Company, Angel Research

Private banks continued to outperform their PSU counterparts and reported

impressive performance during 3QFY2013, with operating profit growth of 25.1%

yoy. They faced relatively much lower asset quality pressures than their PSU peers,

with sequential increase in gross NPAs limited to 1.6% for private banks compared

to increase of 8.0% for PSU banks. Hence, provisioning expenses for the new and

old private banks were higher by only 4.4% and 5.5% yoy, respectively. On the

overall earnings front, new private banks reported a strong growth of 28.7% yoy,

while old private banks witnessed a healthy growth of 20.3% yoy.

Exhibit 27:Advances growth (%)Banks-Type 3QFY13 2QFY13 % chg (qoq) 3QFY12 % chg (yoy)Large PSU 2,465,295 2,362,139 4.4 2,134,319 15.5

Mid PSU 1,466,608 1,397,964 4.9 1,246,167 17.7

New Pvt. 844,291 805,746 4.8 698,750 20.8

Old Pvt. 182,380 173,401 5.2 151,657 20.3

Grand Total 4,958,574 4,739,249 4.6 4,230,893 17.2Source: Company, Angel Research; Note:*excluding DHB

Exhibit 28:Deposits growth (%)Banks-Type 3QFY13 2QFY13 % chg(qoq) 3QFY12 % chg(yoy)Large PSU 3,056,267 3,018,180 1.3 2,711,836 12.7

Mid PSU 1,949,912 1,890,139 3.2 1,698,085 14.8

New Pvt. 974,061 936,706 4.0 827,662 17.7

Old Pvt. 239,734 231,054 3.8 207,006 15.8

Grand Total 6,219,974 6,076,078 2.4 5,444,590 14.2Source: Company, Angel Research; Note:*excluding DHB


16/26



Tier-I CAR remain low for many PSU banks

As of 3QFY2013, amongst our coverage, Bank of Maharashtra, Central Bank and

Indian Overseas Bank had the lowest tier-I CAR at 6.0%, 7.0% and 7.3%,

respectively (excluding 9MFY2013 profits). Even after considering 9M profits,

governments capital infusion (a sum total of `12,377cr) reported so far via

exchange fillings, the core equity tier-I capital adequacy (calculated, adjusting for

non-core equity as of 1HFY2013) for BOM and UCOBK is likely to remain one of

the lowest in the industry at 6.0% and 7.1%, respectively.

Exhibit 29:PSU banks Capital adequacy, as of 3QFY2013Bank Total CAR Tier-I CAR Exp. Core EquityTier-I CAR* Bank Total CAR Tier-I CAR Exp. Core EquityTier-I CAR*BOM 10.70 6.00 6.03 ALBK 11.96 8.75 8.51

UCOBK 13.19 8.03 7.06 CRPBK 12.57 8.08 8.5

VIJBK 11.78 8.80 7.32 ANDBK 11.86 8.06 8.8

CNTBK 10.75 7.02 7.36 OBC 12.25 9.14 9.2

IOB 11.65 7.33 7.82 SBI 12.21 8.66 9.4

BOI 10.59 7.64 7.89 PNB 11.66 8.62 9.5

UTDBK 11.88 8.49 7.93 CANBK 12.64 9.76 10.01

IDBI 14.19 8.01 8.09 BOB 12.66 9.33 10.1

UNBK 10.78 7.40 8.10 INDBK 13.07 10.75 11.7

SYNDBK 11.38 7.76 8.34 JKBK 13.82 11.80 13.8

DENABK 11.47 7.61 8.38

Source: Company, Angel Research, Note: *as of 3QFY2013, adjusting for non-core equity tier-I as of 1HFY2013 and taking into account nine-months profit

and capital infusion plans informed to the exchanges

Exhibit 30:DuPont analysisPvt. New* PSU Large PSU Mid

Parameter FY12 9MFY13 FY13E FY14E FY12 9MFY13 FY13E FY14E FY12 9MFY13 FY13E FY14ENII 3.1 3.2 3.2 3.3 2.8 2.7 2.7 2.8 2.7 2.6 2.5 2.6

(-) Prov. Exp. 0.4 0.4 0.4 0.4 0.8 0.8 0.7 0.7 0.9 0.9 0.9 0.7

Adj NII 2.7 2.8 2.8 2.9 2.0 2.0 2.0 2.1 1.7 1.7 1.7 1.9

Other Inc. 1.7 1.7 1.6 1.6 0.9 0.9 0.8 0.8 0.6 0.7 0.6 0.6

Op. Inc. 4.4 4.5 4.6 4.6 2.9 2.8 2.9 3.0 2.5 2.4 2.4 2.5

Opex 2.2 2.2 2.2 2.2 1.6 1.6 1.6 1.6 1.5 1.5 1.5 1.5

PBT 2.2 2.3 2.4 2.4 1.3 1.3 1.3 1.4 1.0 0.9 0.9 1.1

Taxes 0.7 0.7 0.7 0.8 0.4 0.4 0.4 0.4 0.2 0.2 0.2 0.3

ROA 1.5 1.6 1.6 1.6 0.9 0.9 0.9 1.0 0.8 0.7 0.7 0.7Leverage 10.9 10.9 11.2 11.7 18.6 16.9 17.5 17.6 21.0 19.8 20.5 20.6

ROE 16.5 17.5 18.2 19.1 17.2 15.0 15.6 16.7 16.0 14.5 14.3 15.0Source: Company, Angel Research, Note: *our coverage universe only


17/26



Given the economic environment, continue to prefer Private

banks

A decelerating economic growth environment, policy woes in select sectors, and

elevated inflation and interest rates point towards further economic stress and arenot suggesting any conclusive trigger for improvement in asset quality in the near-

term. Hence, we prefer private banks, given their favourable cyclical and structural

outlook, with Axis Bank and ICICI Bank being our top picks. But with the risk of

higher competitive intensity in light of higher number of likely new entrants, the

upsides are expected to be relatively more moderate than estimated earlier.

Due to cyclical macro concerns, PSU banks are already trading at depressed

valuations. Even, higher number of likely new entrants in the sector, creates a

structural impediment for PSU banks medium-term re-rating, as we expect them to

lose market share in any case, considering their capital crunch. Upsides in these

stocks would largely depend on an eventual economy turn-around, which would

lead to lower re-pricing of high-cost deposits (relative benefit for low-CASA banks)and higher recoveries (relative benefit for banks that have experienced maximum

asset quality pain, and importantly, also provided for it already). Screening for

these criteria, as well as Tier-1 capital adequacy and trailing adjusted valuations,

in our view, PSU banks that would stand to gain the most from an eventual turn-

around include SBI and PNB in the large-caps as well as United Bank, Corporation

Bank and Indian Bank amongst the mid-caps.


18/26



Exhibit 31:Dashboard for our coverage PSU banksPSUBanks

(Prov + TW)* as% to 3QFY13Etotal assetsSub-std#as % toGNPA

CASA ratioas of 3QFY13Investmentsto Deposits ratioas of 3QFY13

Tier-ICAR Trailing^P/ABV (x) FY2014EP/ABV (x) FY2012ROE 9MFY2013ROELargeBOI 2.0 43.6 32.8 24.7 7.6 0.92 0.82 15.0 12.7

CANBK 2.1 31.8 25.1 36.7 9.8 1.00 0.87 17.0 13.2

IDBI 2.7 20.1 22.3 40.8 8.0 1.01 0.70 13.4 9.7

UNBK 2.2 33.7 31.3 31.4 7.4 1.12 0.96 14.8 13.3

PNB 2.1 53.9 36.9 33.8 8.6 1.07 0.90 21.1 17.1

BOB 1.7 47.7 32.2 24.6 9.3 1.08 0.99 20.6 15.6

SBI 2.8 38.1 45.5 31.1 8.7 1.82 1.53 16.5 16.5

MidUTDBK 2.7 42.1 40.0 36.9 8.5 0.66 0.55 16.4 9.8

IOB 2.2 56.3 25.0 32.1 7.3 0.69 0.58 11.1 6.1

CRPBK 1.4 44.2 20.5 38.0 8.1 0.76 0.65 20.4 16.3

BOM 2.0 35.6 33.9 35.4 6.0 0.78 0.73 12.9 15.6

INDBK 2.2 48.3 28.3 32.5 10.8 0.85 0.69 20.4 17.1

ALLBK 2.0 53.2 30.2 36.1 8.8 0.86 0.72 21.6 13.9

SYNBK 2.9 50.4 29.5 26.3 7.8 0.81 0.77 17.9 21.6

VIJAYA 1.8 56.4 20.9 34.3 8.8 0.84 0.77 12.6 12.2

DENABK 2.0 22.6 31.0 31.6 7.6 0.86 0.73 20.7 19.7

ANDHBK 1.7 49.2 26.0 29.9 8.1 0.88 0.79 19.2 15.9

CENTBK 1.7 60.4 32.0 29.6 7.0 0.95 0.71 5.4 13.2

OBC 2.4 38.4 23.9 32.6 9.1 0.97 0.76 10.7 12.1

UCOBK 2.0 NA 28.1 31.3 8.0 1.08 0.92 19.4 11.5

JKBK 1.3 22.2 39.4 39.7 11.8 1.28 1.15 21.2 23.9

Source: Company, Angel Research, Note: *Cumulative provisions including technically written-off, as of 3QFY2013, #substandard GNPA assets, as of

3QFY13, as % to total 3QFY2013 GNPA (including technically written-off), wherein technically written-off considered as part of loss assets), ^Equity Net

worth calculated on a trailing basis (i.e) including 3QFY2013 profits and adjusting for 75% PCR (incl. technical write-off)


19/26



Exhibit 32:Recommendation summaryCompany Reco. CMP(`) Tgt. price(`) Upside(%) FY2014EP/ABV (x) FY2014ETgt. P/ABV (x) FY2014EP/E (x) FY2012-14EEPS CAGR (%) FY2014ERoA (%) FY2014ERoE (%)AxisBk Buy 1,368 1,678 22.7 1.83 2.3 9.8 16.4 1.6 20.1

FedBk Accumulate 494 536 8.6 1.20 1.3 9.6 6.4 1.2 13.1

HDFCBk Neutral 649 - - 3.65 - 18.0 28.1 1.8 22.1

ICICIBk* Buy 1,064 1,302 22.4 1.70 2.1 12.6 22.8 1.5 15.9

SIB Buy 24 30 22.9 1.02 1.3 6.0 6.9 1.0 17.7

YesBk Accumulate 472 526 11.5 2.38 2.7 11.1 24.1 1.5 23.6

AllBk Buy 143 171 19.6 0.63 0.8 4.3 (5.2) 0.8 14.7

AndhBk Neutral 95 - - 0.65 - 4.3 (4.6) 0.8 13.8

BOB Buy 726 871 20.0 0.85 1.0 5.4 5.0 1.0 16.7

BOI Accumulate 329 350 6.6 0.82 0.9 5.0 18.2 0.8 16.0

BOM Accumulate 53 58 8.8 0.64 0.7 4.1 44.3 0.6 16.9

CanBk Accumulate 427 463 8.2 0.79 0.9 5.2 5.3 0.9 15.0CentBk Neutral 73 - - 0.66 - 3.6 95.5 0.5 14.3

CorpBk Buy 398 465 17.0 0.58 0.7 4.0 (3.1) 0.8 14.9

DenaBk Buy 95 111 16.9 0.58 0.7 3.9 3.5 0.8 15.9

IDBI# Buy 94 110 16.9 0.58 0.7 4.2 18.4 0.9 14.1

IndBk Buy 178 214 20.4 0.66 0.8 4.3 1.9 1.1 16.2

IOB Buy 73 88 21.4 0.49 0.6 3.6 23.9 0.6 13.4

J&KBk Accumulate 1,282 1,406 9.7 1.09 1.2 6.4 9.8 1.4 18.2

OBC Accumulate 275 314 14.3 0.61 0.7 4.6 23.2 0.8 13.5

PNB Buy 827 981 18.7 0.86 1.0 4.9 8.0 1.0 17.5

SBI* Accumulate 2,199 2,514 14.3 1.42 1.6 8.5 21.5 1.0 17.7

SynBk Accumulate 121 139 14.7 0.68 0.8 4.3 13.1 0.8 16.5

UcoBk Neutral 63 - - 0.76 - 4.2 2.5 0.5 13.8

UnionBk Buy 216 256 18.1 0.72 0.9 4.6 20.7 0.8 16.6

UtdBk Buy 66 78 18.8 0.48 0.6 3.1 19.1 0.7 16.3

VijBk Neutral 52 - - 0.61 - 4.8 9.7 0.5 12.6

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF,

CMP as of February 26, 2012.


20/26



Banking indicators watchExhibit 33:Credit and deposit growth trends


Exhibit 34:Investment-Deposit ratio


Exhibit 35:CP rates have eased considerably on a yoy basis...


Exhibit 36:...similar to CD rates

Source: Bloomberg, Angel Research

Exhibit 37:LAF borrowings trends


Exhibit 38:Forex reserves trends


10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

19.0

20.0

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Credit growth (%) Deposit growth (%)

27.0

28.0

29.0

30.0

31.0

32.0

70.0

72.0

74.0

76.0

78.0

80.0

82.0

Sep-1

1

Oct-11

Nov-1

1

Dec-1

1

Jan-1

2

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Credit/Depos it (%) Investment/Depos it (%) -RHS

6.07.0

8.0

9.0

10.0

11.0

12.0

13.0

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

(%) CP 3M CP 12M

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

(%) CD 3M CD 12M

(2,500)

(2,000)

(1,500)

(1,000)

(500)

-

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

(`bn)

240

260

280

300

320

340

Mar-12

Mar-12

Apr-12

May-1

2

May-1

2

Jun-1

2

Jul-12

Jul-12

Aug-1

2

Sep-1

2

Sep-1

2

Oct-12

Nov-1

2

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

US$ Bn


21/26



Exhibit 39:Corporate and government bond yields

Source: Bloomberg, Angel Research;

Exhibit 40:G-Sec yields spread vs. Repo rate


Sectoral and Industry-wise distribution of credit

Exhibit 41:Large industry, Agri and Personal loans aids credit growthSector Dec 2011 Dec 2012(` cr) % of total (` cr) % of total % chg (yoy)Agriculture 460,638 11.4 558,997 12.1 21.4

Industry 1,858,502 45.9 2,114,030 45.7 13.7

- Micro & Small 246,781 6.1 271,678 5.9 10.1

- Medium 198,566 4.9 201,894 4.4 1.7

- Large 1,413,154 34.9 1,640,458 35.5 16.1

Services 984,688 24.3 1,085,805 23.5 10.3

Personal Loans 741,948 18.3 864,271 18.7 16.5

- Housing 378,601 9.4 440,790 9.5 16.4

- Vehicle 90,577 2.2 110,695 2.4 22.2

Non-food Credit 4,045,776 100.0 4,623,103 100.0 14.3Source: RBI, Angel Research

Exhibit 42:Chemicals, Infra, Metals & Food processing witness strong growthIndustry Dec 2011 Dec 2012(` cr) % of total (` cr) % of total % chg (yoy)Infrastructure 596,767 32.1 692,451 32.8 16.0Metals 247,712 13.3 296,432 14.0 19.7

Textiles 152,167 8.2 165,418 7.8 8.7

Engineering 108,553 5.8 124,615 5.9 14.8

Chemicals 104,555 5.6 124,648 5.9 19.2

Food Processing 92,253 5.0 109,861 5.2 19.1

Oil and Gas 66,478 3.6 69,829 3.3 5.0

Construction 54,406 2.9 57,159 2.7 5.1

Vehicles 52,897 2.8 58,859 2.8 11.3

Gems & Jewelry 48,288 2.6 57,273 2.7 18.6

Other Industries 334,424 18.0 357,485 16.9 6.9

Total 1,858,500 100.0 2,114,030 100.0 13.7Source: RBI, Angel Research

8.9

3

9.0

3

9.0

7

9.0

1

8.1

0

7.9

9

8.1

9

8.2

0

9.0

1

8.9

6

8.9

3

8.9

7

7.8

9

7.7

9

7.9

1

7.8

2

7.0

7.5

8.0

8.5

9.0

9.5

10.0

AAA 1 Yr AAA 3 Yr AAA 5 Yr AAA 10Yr

Gsec 1Yr Gsec 3Yr Gsec 5Yr Gsec10Yr

26-Nov-12 26-Feb-13%

0

2

4

6

8

10

(1.00)

-

1.00

2.00

3.00

4.00

Jun-0

5

Jan-0

6

Aug-0

6

Mar-07

Oct-07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-11

Nov-1

1

Jun-1

2

Jan-1

3

G sec 1yr and 10yr yie ld spread (%) Repo Rate (% ) - RHS


22/26



Valuation watch

Exhibit 43:Private banks* P/ABV trend

Source: Company, Angel Research; Note: *Pvt. banks under our coverage

Exhibit 44:Public sector banks P/ABV trend


Exhibit 45:New private* banks P/ABV trend

Source: Company, Angel Research; Note: *New Pvt. banks under our coverage

Exhibit 46:Large public sector banks P/ABV trend


Exhibit 47:Old private* banks P/ABV trend

Source: Company, Angel Research; Note: *Old Pvt. banks under our coverage

Exhibit 48:Mid-cap* public sector banks P/ABV trend

Source: Company, Angel Research, Note:*Mid and small PSU banks

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Apr-04

Nov-0

4

Jun-0

5

Jan-0

6

Aug-0

6

Mar-07

Oct-07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-11

Nov-1

1

Jun-1

2

Jan-1

3

P/ABV Median 15th percentile 85th percentile

0.30

0.60

0.90

1.20

1.50

1.80

2.10

Apr-04

Nov-0

4

Jun-0

5

Jan-0

6

Aug-0

6

Mar-07

Oct-07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-11

Nov-1

1

Jun-1

2

Jan-1

3


0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Apr-04

Nov-0

4

Jun-0

5

Jan-0

6

Aug-0

6

Mar-07

Oct-07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-11

Nov-1

1

Jun-1

2

Jan-1

3


0.60

0.90

1.20

1.50

1.80

2.10

Apr-04

Nov-0

4

Jun-0

5

Jan-0

6

Aug-0

6

Mar-07

Oct-07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-11

Nov-1

1

Jun-1

2

Jan-1

3


0.30

0.60

0.90

1.20

1.50

1.80

Apr-04

Nov-0

4

Jun-0

5

Jan-0

6

Aug-0

6

Mar-07

Oct-07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-11

Nov-1

1

Jun-1

2

Jan-1

3


0.30

0.60

0.90

1.20

1.50

1.80

Apr-04

Nov-0

4

Jun-0

5

Jan-0

6

Aug-0

6

Mar-07

Oct-07

May-0

8

Dec-0

8

Jul-09

Feb-1

0

Sep-1

0

Apr-11

Nov-1

1

Jun-1

2

Jan-1

3



23/26



Economy watch

Exhibit 49:Quarterly GDP trend

Source: CSO, Angel Research

Exhibit 50:IIP trend

Source: MOSPI, Angel Research

Exhibit 51:Monthly WPI inflation trend

Source: MOSPI, Angel Research

Exhibit 52:Manufacturing and services PMI

Source: Markit, Angel Research

Exhibit 53:Exports and imports growth trends


Exhibit 54:Policy rates - RBI

Source: Office of the Economic Adviser, Angel Research

3.5

5.7

9.0

7.5

11.2

8.5

7.68.2

9.2

8.0

6.76.1

5.3 5.5 5.3

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

(%)

1.0

4.3

(2.8)

(1.3)

2.5

(2.0)

(0.1)

2.0

(0.7)

8.3

(0.8) (0.6)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

Jan-1

2

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

(%)

7.6 7.7 7.5 7.6 7.6 7.58.0 8.1

7.3 7.2 7.26.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

(%)

48.0

50.0

52.0

54.0

56.0

58.0

60.0

Jan-1

2

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Mfg. PMI Services PMI

(30.0)

(15.0)

0.0

15.0

30.0

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Exports yoy growth Imports yoy growth(%)

7.75

6.75

4.00

3.50

4.50

5.50

6.50

7.50

8.50

9.50

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

Repo rate Reverse Repo rate CRR (%)


24/26



Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

DISCLAIMERThis document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investmentdecision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any wayresponsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. WhileAngel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in

the past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may haveinvestment positions in the stocks recommended in this report.


25/26



Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors

Disclosure of Interest Statement

Analyst ownership Angel and its Group companies Angel and its Group companies' Broking relationshipof the stock ownership of the stock Directors ownership of the stock with company covered

AxisBk No No No No

FedBk No No No No

HDFCBk No No No No

ICICIBk No No No No

SIB No No No No

YesBk No No No No

AllBk No No No No

AndhBk No No No No

BOB No No No No

BOI No No No No

BOM No No No No

CanBk No No No No

CentBk No No No No

CorpBk No No No No

DenaBk No No No No

IDBI No No No No

IndBk No No No No

IOB No No No No

J&KBk No No No No

OBC No No No No

PNB No No No No

SBI No No Yes No

SynBk No No No No

UcoBk No No No No

UnionBk No No No No

UtdBk No No No No

VijBk No No No No


26/26


6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai- 400 093. Tel: (022) 39357800

Research Team

Fundamental:Sarabjit Kour Nangra VP-Research, Pharmaceutical [email protected]

Vaibhav Agrawal VP-Research, Banking [email protected]

Bhavesh Chauhan Sr. Analyst (Metals & Mining) [email protected]

Viral Shah Sr. Analyst (Infrastructure) [email protected]

Sharan Lillaney Analyst (Mid-cap) [email protected]

V Srinivasan Analyst (Cement, FMCG) [email protected]

Yaresh Kothari Analyst (Automobile) [email protected]

Ankita Somani Analyst (IT, Telecom) [email protected]

Sourabh Taparia Analyst (Banking) [email protected]

Bhupali Gursale Economist [email protected]

Vinay Rachh Research Associate [email protected]

Amit Patil Research Associate [email protected]

Shareen Batatawala Research Associate [email protected]

Twinkle Gosar Research Associate [email protected]

Tejashwini Kumari Research Associate [email protected]

Technicals:

Shardul Kulkarni Sr. Technical Analyst [email protected]

Sameet Chavan Technical Analyst [email protected]

Sacchitanand Uttekar Technical Analyst [email protected]

Derivatives:

Siddarth Bhamre Head - Derivatives [email protected]

Institutional Sales Team:

Mayuresh Joshi VP - Institutional Sales [email protected]

Hiten Sampat Sr. A.V.P- Institution sales [email protected]

Meenakshi Chavan Dealer [email protected]

Gaurang Tisani Dealer [email protected]

Akshay Shah Sr. Executive [email protected]

Production Team:

Tejas Vahalia Research Editor [email protected]

Dilip Patel Production Incharge [email protected]

banking 3q fy2013 result review, february 2013

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