Banking Sector

Document Sample
Banking Sector Powered By Docstoc
					                                                                                             Banking | 3QFY2012 Result Review
                                                                                                                       February 22, 2012



 Banking
 Sector rerated in line with improving macro
                                                                                         Banking indicators
 Save for few PSU banks, pre-provisioning performance was moderate; divergence
                                                                                         Particulars*                                     (%)
 continued at the asset quality level: NIM trends were volatile for several of the PSU   Latest yoy credit growth                       16.5
 banks due to corresponding volatility in their asset quality. However, excluding        Latest yoy deposit growth                      15.7
 four of the worst-hit banks, for the rest of the PSU banks, pre-provisioning profits    Latest credit-to-deposit ratio                 75.4
 registered healthy growth of 18.2% yoy, similar to private banks and largely in-        Monthly Avg. LAF (` cr)                   133,571
 line with expectations. SBI continued to outperform at the operating level.             Monthly Avg. 1 yr G-Sec yield                   8.1
                                                                                         Monthly Avg. 10 yr G-Sec yield                  8.2
 Higher than estimated fresh slippages lead to upsurge in NPA levels as a whole          Monthly Avg. 3M CP                             10.3
 for public sector banks. In spite of 18 out of 27 banks under coverage reporting        Monthly Avg. 12M CP                            10.5
 lower provision coverage qoq, provisioning costs for PSU banks as a whole were          Source: RBI, Bloomberg, Angel Research; Note*: Monthly
                                                                                         averages are on preceding 30 day basis
 still up by a significant 56.9% yoy, as against 12.8% yoy decline for private banks.
 Most PSU banks also registered 20-50% increase in restructuring qoq. Overall,
                                                                                         Policy rates
 earnings divergence remained stark, with private banks registering PBT growth of
                                                                                         Particulars                                      (%)
 25.6% yoy, while public banks witnessed a decline of 4.8% yoy.
                                                                                         Repo rate                                       8.5
 Sector rerated; best stocks still undervalued: In light of the improving macro-         Reverse repo rate                               7.5
 economic scenario including especially the declining inflation as well as reducing      MSF rate                                        9.5

 global overhang, the sector has been rerated and we continue to have a positive         Cash reserve ratio (CRR)                       5.50

 view. However, in our view, so far the rally in has been in all the ‘wrong’ stocks –    Statutory liquidity ratio (SLR)              24.00
                                                                                         Source: RBI, Angel Research
 those stocks which have weak ROE and asset quality profiles have rallied the most
 and become relatively expensive in P/ABV terms. However, going forward, we
 believe the next leg of this rally is likely to be driven by banks that have the
 strongest growth outlook.

 Accordingly, our top picks in the sector are Axis Bank and Yes Bank, which in our
 view are trading at an unjustified discount to Sensex/peers. In case of Yes Bank,
 taking the challenges of building a retail deposit base head-on, the bank has
 doubled its branch network in recent quarters and the 7% savings rate is a smart
 customer acquisition strategy; hence, in our view, valuations at 2.2x FY2013E ABV
 provide a better risk-return trade-off than in the past. In case of Axis Bank, we
 believe asset quality concerns are over-discounted (driven by inadequate
 anecdotal information in our view), even though its relatively low yield on
 advances indicate moderate risk profile. We maintain Buy with a Target Price of
 `1,733.

 In PSU Banks, we believe for few stocks such as Andhra Bank, UCO bank, Central
 bank and Vijaya, valuations exceed the fundamentals, warranting a switch in our
 view to Dena Bank, United Bank, Bank of Maharashtra and Syndicate Bank,                 Vaibhav Agrawal
 having relatively superior earnings quality outlook and cheaper valuations. Within      022 – 3935 7800 Ext: 6808
                                                                                         vaibhav.agrawal@angelbroking.com
 the large cap PSU banks as well, we continue to prefer SBI and BOB and would
 recommend a switch to these stocks from peers such as Bank of India.                    Varun Varma
                                                                                         022 – 3935 7800 Ext: 6847
                                                                                         varun.varma@angelbroking.com


Please refer to important disclosures at the end of this report                                                                            1
                                                                                                    3QFY2012 Results Review | Banking



                                                       Net Interest Income registered moderate growth
                                                       Movement in margins was divided during 3QFY2012 with 14 out of 27 banks
                                                       under our coverage reporting improved margins sequentially. On the whole, PSU
                                                       banks managed to give a reasonable 12.0% yoy growth on the Net income front
                                                       (NII), aided by a strong performance from SBI. Excluding SBI, NII for the PSU
                                                       banks increased by a relatively lower 6.6% yoy. Private Banks on the other hand
                                                       registered a healthy 18.0% yoy growth in their NII income, driven both by
                                                       sustained margins and healthy advances growth. The NII income for both PSU and
                                                       private universe were closely in line with our estimates.

                                                       NIM trends were volatile for several of the PSU banks due to corresponding
                                                       volatility in their asset quality. Four of the PSU Banks that saw the maximum hit on
                                                       their asset quality, viz., Central Bank, Vijaya Bank, IOB and IDBI, also registered
                                                       large hits on their NIMs. In fact excluding these banks, for the rest of the PSU
                                                       banks, pre-provisioning profits registered healthy growth of 18.2% yoy.

                                                       This was in line with our expectations that operating performance is likely to be
                                                       moderately healthy for both private and PSU banks in the near-term, with the
                                                       divergence mainly being at the asset quality level. In our view, this is partly due to
                                                       the fact that the largest banks such as SBI and ICICI Bank are more focused on
                                                       managing profitability rather than balance sheet growth at present, easing the
                                                       overall competitive scenario. In fact, SBI continued its impressive performance on
                                                       the margin front, registering the highest qoq rise (32bp) within the PSU banks.
                                                       Corporation Bank, United Bank and Dena Bank were amongst the other gainers.

                                                       On the CASA front, private banks continued to lead the charge, with a few such as
                                                       Axis Bank and Yes Bank registering strong growth. Especially, in case of Yes Bank
                                                       the impact of the savings rate increase was visible albeit on a low base, with the
                                                       bank registering 0.4% incremental market share in 3QFY2012, much higher than
                                                       its overall market share of 0.1%. Other than that, broadly most banks registered
                                                       low growth in CASA in line with the high interest rate environment.


Exhibit 1: SBI leads in margin* performance during 3QFY12                   Exhibit 2: Pvt. Banks* and SBI outperform on NII front yoy

  40.0                                                                       28.0
  30.0
                                                                             24.0
  20.0
  10.0                                                                       20.0
    -                                                                        16.0
 (10.0)
                                                                             12.0
 (20.0)
 (30.0)                                                                       8.0
 (40.0)
                                                                                       16.8




                                                                                                      26.0




                                                                                                                       12.0




                                                                              4.0
                                                                                              6.8




                                                                                                             9.9




                                                                                                                              4.5




                                                                                                                                       6.6

                                                                                                                                             2.3




 (50.0)
 (60.0)                                                                       0.0
                                                                                       Large Pvt      Other Pvt          PSU        PSU (excl. SBI)
            UTDBK
            FEDBK
            CRPBK




              AXSB
          DENABK




          HDFCBK




             YESBK
                BOI




               PNB
            SYNBK




             J&KBK




                IOB
           UCOBK




          CENTBK
                 SBI




           ANDBK




           CANBK
             UNBK




              BOM




               IDBI
                 SIB

             ALLBK




            INDBK
               BOB
           ICICIBK
              OBC




            VIJAYA




                                                                                                     % chg (yoy)   % chg (qoq)


Source: Company, Angel Research, Note:*Domestic NIMs for SBI, BOB and BOI   Source: Company, Angel Research, Note:*For banks under our coverage




February 22, 2012                                                                                                                                     2
                                                                                             3QFY2012 Results Review | Banking



 Exhibit 3: Yield on advances for banks under our coverage
  Bank           YoA - 9MFY2012       YoA – 9MFY2011          Chg (bps)   Bank        YoA - 9MFY2012      YoA – 9MFY2011   Chg (bps)
  FEDBK                      12.7                11.2              156    CNTBK                  10.8                9.8        105
  YESBK                      12.3                10.5              176    UCOBK                  10.8                9.6        119
  ANDBK                      12.1                10.5              167    IOB                    10.8                9.2        157
  SIB                        12.1                10.4              172    CANBK                  10.7                9.1        158
  ALBK                       11.8                10.0              183    DENABK                 10.6                9.5        114
  JKBK                       11.6                10.5              109    UTDBK                  10.5                9.5         98
  INDBK                      11.5                10.0              151    CRPBK                  10.2                9.1        116
  OBC                        11.4                10.0              139    AXSB                   10.2                8.6        160
  IDBI                       11.3                 9.8              149    UNBK                   10.1                9.0        107
  HDFCBK                     11.2                10.2              100    SBI                     9.8                8.6        122
  BOM                        11.1                 9.1              205    ICICIBK                 9.2                8.2        105
  PNB                        11.1                 9.9              113    BOB                     8.9                8.1         78
  SYNDBK                     10.9                 9.3              166    BOI                     8.8                8.2         56
  Source: Company, Angel Research




Exhibit 4: CASA yearly growth rate trends
                               SA -       SA -       yoy           CA -      CA -      yoy    CASA -     CASA -      yoy     CASA
Bank
                           3QFY12      3QFY11     growth        3QFY12    3QFY11    growth   3QFY12     3QFY11    growth     Ratio
YESBK                        1,203        604       99.2          4,711     3,433     37.2     5,914      4,037     46.5      12.6
IDBI                        16,958      11,588      46.3         17,881   11,020     62.3     34,839     22,608     54.1      19.7
J&KBK                       14,974      11,760      27.3          4,621     4,415      4.7    19,595     16,175     21.1      40.2
FEDBK                       11,102       8,843      25.5          2,084     1,877    11.1     13,186     10,720     23.0      28.2
SIB                          6,058       4,966      22.0          1,222     1,079    13.3      7,280      6,045     20.4      21.5
AXSB                        47,297      39,132      20.9         39,459   26,799     47.2     86,756     65,931     31.6      41.6
BOB                         71,842      61,540      16.7         22,981   20,456     12.3     94,823     81,996     15.6      34.1
SBI                        367,896    319,006       15.3         79,462   80,401     (1.2)   447,358    399,407     12.0      47.9
HDFCBK                      70,330      61,038      15.2         40,576   36,024     12.6    110,906     97,062     14.3      47.7
ALLBK                       36,936      32,290      14.4          7,558     7,940    (4.8)    44,494     40,230     10.6      30.6
PNB                        102,705      89,860      14.3         23,260   22,945       1.4   125,965    112,805     11.7      35.3
BOI                         63,606      55,667      14.3         14,965   13,621       9.9    78,571     69,287     13.4      32.4
ANDHBK                      20,729      18,212      13.8          5,532     5,216      6.1    26,261     23,428     12.1      26.6
ICICIBK                     73,498      64,577      13.8         40,039   31,667     26.4    113,537     96,244     18.0      43.6
INDBK                       29,489      25,972      13.5          6,430     6,358      1.1    35,919     32,330     11.1      30.2
OBC                         26,264      23,317      12.6          8,541     9,271    (7.9)    34,805     32,588      6.8      22.3
BOM                         22,145      19,743      12.2          6,528     5,493    18.8     28,673     25,236     13.6      41.0
DENABK                      18,293      16,398      11.6          5,554     5,008    10.9     23,848     21,406     11.4      34.9
CORPBK                      17,115      15,352      11.5          9,641     8,622    11.8     26,756     23,974     11.6      21.1
CENTBK                      51,004      46,084      10.7         10,076   10,823     (6.9)    61,080     56,907      7.3      32.5
UTDBK                       25,646      23,194      10.6          7,293     6,229    17.1     32,939     29,423     11.9      39.8
SYNBK                       32,994      29,992      10.0         11,020   11,281     (2.3)    44,014     41,273      6.6      30.8
IOB                         33,376      30,346      10.0         10,300     8,385    22.8     43,676     38,731     12.8      26.2
UCOBK                       25,741      23,616          9.0       6,190     4,272    44.9     31,931     27,888     14.5      22.3
CANBK                       63,361      58,558          8.2      11,096   17,938    (38.1)    74,457     76,496    (2.7)      23.6
UNIONBK                     48,500      46,416          4.5      18,310   15,690     16.7     66,810     62,106      7.6      32.5
Source: Company, Angel Research



February 22, 2012                                                                                                                 3
                                                                                        3QFY2012 Results Review | Banking



                                                Fee income growth driven by higher forex gains

                                                Fee income performance of banks under our coverage was healthy in 3QFY2012,
                                                registering growth of 20.3% yoy. However, compared to FY2011, most banks
                                                witnessed a decline in fee income to average assets in 9MFY2012 (average decline
                                                of ~8bp for our coverage universe).

                                                Private Banks, particularly large ones continued to fare better on the non-income
                                                front. While the commission and brokerage income for most banks remained
                                                subdued during 3QFY2012, higher forex income on account of rupee volatility led
                                                to strong forex related fee income for most banks.

                                                For 4QFY2012, most banks are expected to report higher treasury gains on
                                                account of declining bond yields. The G-sec 10Yr bond yields have eased off
                                                considerably (current 8.2% levels from ~9.0% levels registered in November 2011
                                                and 8.6% as of December 2011) following the moderating inflation levels.



Exhibit 5: Other income (excl. treasury) performance for banks under our coverage
 Bank             3QFY12       2QFY12      % chg (qoq)    3QFY2011       % chg (yoy)   FY2011      1HFY2012      9MFY12      Diff.
 AXSB               1,312          1,207          8.7          1,013           29.5       2.02          1.87        1.88    (0.13)
 HDFCBK             1,502          1,213         23.8          1,159           29.6       1.77          1.60        1.69    (0.08)
 ICICIBK            1,957          1,820          7.5          1,728           13.2       1.74          1.65        1.68    (0.07)
 YESBK                211           214          (1.2)          162            30.8       1.40          1.25        1.28    (0.12)
 SBI                3,216          3,399         (5.4)         3,094            4.0       1.28          1.10        1.05    (0.23)
 PNB                8,591          7,839          9.6          7,532           14.1       0.98          0.87        0.85    (0.13)
 INDBK              2,629          3,213        (18.2)         2,217           18.6       0.93          0.82        0.80    (0.12)
 FEDBK                122           103          18.9           113             7.8       0.99          0.75        0.79    (0.20)
 CRPBK              3,301          2,755         19.8          2,321           42.3       0.87          0.75        0.78    (0.10)
 BOM                1,401          1,470         (4.7)         1,107           26.6       0.63          0.80        0.77     0.14
 IOB                3,761          3,781         (0.5)         3,284           14.5       0.72          0.77        0.77     0.05
 BOI                7,810          6,874         13.6          5,890           32.6       0.74          0.70        0.75     0.01
 ALLBK              3,274          3,022          8.3          2,376           37.8       0.89          0.71        0.74    (0.14)
 CANBK              6,221          6,793         (8.4)         5,076           22.5       0.82          0.74        0.73    (0.09)
 BOB                7,638          7,242          5.5          5,914           29.2       0.74          0.69        0.71    (0.03)
 UNBK               4,911          4,009         22.5          3,850           27.6       0.73          0.66        0.70    (0.03)
 DENABK             1,240          1,094         13.3          1,131            9.7       0.79          0.66        0.65    (0.15)
 IDBI               3,838          4,331        (11.4)         3,942           (2.6)      0.81          0.67        0.64    (0.16)
 ANDHBK             2,190          1,557         40.7          1,886           16.1       0.76          0.57        0.63    (0.13)
 OBC                2,588          2,591         (0.1)         2,000           29.4       0.59          0.61        0.61     0.01
 SYNBK              2,354          2,324          1.3          2,087           12.8       0.60          0.58        0.58    (0.02)
 SIB                   54            42          30.0             40           35.7       0.54          0.45        0.50    (0.03)
 UTDBK              1,178          1,147          2.7          1,203           (2.1)      0.53          0.48        0.48    (0.04)
 J&KBK                648           627           3.3           597             8.6       0.59          0.46        0.47    (0.12)
 CENTBK             2,844          2,794          1.8          2,065           37.7       0.49          0.43        0.46    (0.02)
 UCOBK              1,983          1,618         22.6          1,972            0.6       0.55          0.44        0.45    (0.11)
 Source: Company, Angel Research




February 22, 2012                                                                                                              4
                                                                                                                                                       3QFY2012 Results Review | Banking



                                                                                        Asset quality issues aggravate further

                                                                                        NPA levels continue to rise

                                                                                        Asset quality pressures for Public sector banks were expected to marginally abate
                                                                                        post the switchover to system based NPA recognition in 2QFY2012 as higher
                                                                                        recoveries and upgrades (technical as well as cash) were expected to keep NPA
                                                                                        levels under control. However, continued chunky NPAs from the corporate sector
                                                                                        (aviation, telecom, mining, textiles, etc.) as well as from agriculture led to higher
                                                                                        than estimated fresh slippages from these segments during 3QFY2012, leading to
                                                                                        upsurge in NPA levels as a whole for public sector banks.

Exhibit 6: Gross NPA trends (%) – Pvt vs. PSU                                                                       Exhibit 7: Net NPA trends (%) – Pvt vs. PSU
                                                                                                                                                                                                                         1.69
  3.60                                                                                                                1.70                                                                                    1.53
          3.19                    3.20                                                                   3.29                 1.39
                      3.12                       3.06                                                                 1.50
  3.30                                                                                                                                                                                    1.26      1.28
                                                             2.89                             2.96                                                                 1.21       1.18
  3.00                                                                                                                1.30                1.15
                                                                        2.65                                                                        1.05
                                                                                   2.55                                                   1.26      1.27
  2.70                                                                                                                1.10      1.22
  2.40                            2.64                                             2.71                               0.90
          2.53        2.56                       2.58        2.59       2.61                  2.45                                                                 0.90
  2.10                                                                                                   2.41         0.70                                                    0.78
  1.80                                                                                                                0.50                                                               0.62       0.62      0.59      0.60
  1.50                                                                                                                0.30
            3QFY10


                        4QFY10


                                    1QFY11


                                                   2QFY11


                                                              3QFY11


                                                                          4QFY11


                                                                                     1QFY12


                                                                                                2QFY12


                                                                                                           3QFY12




                                                                                                                                3QFY10


                                                                                                                                           4QFY10


                                                                                                                                                      1QFY11


                                                                                                                                                                     2QFY11


                                                                                                                                                                                3QFY11


                                                                                                                                                                                           4QFY11


                                                                                                                                                                                                     1QFY12


                                                                                                                                                                                                               2QFY12


                                                                                                                                                                                                                          3QFY12
                                             Pvt Banks                 PSU Banks                                                                               Pvt Banks                 PSU Banks

Source: Company, Angel Research                                                                                     Source: Company, Angel Research



Exhibit 8: Gross NPA trend (%) for the banking industry                                                             Exhibit 9: Net NPA trend (%) for the banking industry

 3.10                                                                                                                1.50
                                                                                                         2.86                                                                                                             1.36
 2.90                                                                                                                1.40
                                                                                              2.73                                                                                                            1.28
                                                                                                                     1.30
 2.70
                                                                                                                             1.16
         2.46                                   2.47                                                                 1.20
                                 2.43                       2.40                   2.43                                                  1.09       1.08
 2.50                2.36                                                                                                                                         1.07
                                                                                                                     1.10                                                                           1.04
                                                                       2.27                                                                                                   1.00       0.98
 2.30                                                                                                                1.00

 2.10                                                                                                                0.90
         3QFY10


                     4QFY10


                                 1QFY11


                                                 2QFY11


                                                            3QFY11


                                                                        4QFY11


                                                                                   1QFY12


                                                                                              2QFY12


                                                                                                         3QFY12




                                                                                                                             3QFY10


                                                                                                                                         4QFY10


                                                                                                                                                    1QFY11


                                                                                                                                                                   2QFY11


                                                                                                                                                                               3QFY11


                                                                                                                                                                                          4QFY11


                                                                                                                                                                                                     1QFY12


                                                                                                                                                                                                               2QFY12


                                                                                                                                                                                                                          3QFY12




Source: Company, Angel Research                                                                                     Source: Company, Angel Research

                                                                                        While most banks chose to let their provision coverage ratios deteriorate (18 out of
                                                                                        27 banks under our coverage reported lower PCR qoq) to reduce the impact of
                                                                                        higher slippages, provisioning costs for PSU banks as a whole were still up by a
                                                                                        significant 56.9% yoy (59.8% yoy for Large PSUs and 52.2% yoy for medium PSUs).

                                                                                        Private Banks, on the contrary which have sharply improved their asset quality over
                                                                                        the past two years saw their provisioning costs decline by 12.8% yoy (down 13.1%
                                                                                        yoy for New Pvt. and down 11.3% yoy for Old Pvt.). Consequently, while PSU
                                                                                        banks saw a 12.1% qoq and 12.7% qoq increase in their gross and net NPA
                                                                                        levels, private banks only witnessed a 1.3% qoq and 4.1% qoq rise in their gross
                                                                                        and net NPA levels, respectively.


February 22, 2012                                                                                                                                                                                                                  5
                                                                                                  3QFY2012 Results Review | Banking



Exhibit 10: Aggregate gross NPA levels – Pvt. Banks                        Exhibit 11: Aggregate gross NPA levels – PSU Banks
Bank            3QFY12     2QFY12      3QFY11          %yoy    %qoq        Bank             3QFY12       2QFY12        3QFY11      %yoy     %qoq
Pvt. New        14,674      14,670         14,574       0.7      0.0       Psu Large         70,669          61,866     44,646     58.3      14.2
Pvt. Old          3,944      3,706          3,573      10.4      6.4       Psu Med           31,333          29,148     22,066     42.0       7.5
Total           18,618      18,376         18,147       2.6      1.3       Total            102,001          91,014     66,712     52.9      12.1
Source: Company, Angel Research                                            Source: Company, Angel Research


Exhibit 12: Aggregate net NPA levels – Pvt. Banks                          Exhibit 13: Aggregate net NPA levels – PSU Banks
Bank            3QFY12     2QFY12      3QFY11          %yoy    %qoq        Bank             3QFY12      2QFY12        3QFY11       %yoy    %qoq
Pvt. New          3,460      3,405          3,933     (12.0)    1.6        Psu Large         36,325      32,091        20,873      74.0     13.2
Pvt. Old          1,134      1,010           938       20.8    12.3        Psu Med           16,166      14,502         9,554      69.2     11.5
Total             4,594      4,414          4,871      (5.7)    4.1        Total             52,491      46,593        30,427      72.5     12.7
Source: Company, Angel Research                                            Source: Company, Angel Research


Exhibit 14: Asset quality continued to weaken during 3QFY2012
                          Slippages (%)       Slippages (%)    change         qoq (%)       qoq (%)     PCR                 PCR           change
Bank
                              3QFY012            2QFY2012        (bps)         GNPA          NNPA 3QFY12 (%)          2QFY12 (%)            (bps)
Punjab National Bank                 2.8               1.6        114              25.1        38.9            70.0         75.1            (5.1)
Federal Bank                         4.1               3.3         81               9.1        24.5            82.1         84.3            (2.2)
IDBI Bank                            3.1               2.4         79              19.3        25.2            69.1         70.1            (1.0)
Central Bank                         4.5               3.8         68              28.2        52.1            48.1         56.8            (8.7)
Bank of Baroda                       1.7               1.0         65              14.5        14.5            80.5         82.0            (1.5)
Bank of Maharashtra                  1.1               0.8         36              (4.5)       (4.4)           87.0         86.0             1.0
Allahabad Bank                       2.5               2.2         32              10.0        19.9            78.0         79.6            (1.6)
ICICI Bank                           1.6               1.5         17              (3.0)       (6.2)           78.9         78.2             0.7
Dena Bank                            1.5               1.4         16               6.6         6.7            76.6         77.1            (0.6)
South Ind. Bank                      0.7               0.5         14               1.6        (0.3)           75.2         74.7             0.5
Axis Bank                            1.5               1.4         11               9.8        24.4            75.3         77.7            (2.4)
UCO Bank                             2.2               2.1         10               4.3         5.4            51.2         52.0            (0.8)
State Bank of India                  4.3               4.2             8           18.1        16.6            62.5         63.5            (1.0)
J&K Bank                             0.7               0.8         (2)              0.6       (24.3)           94.1         92.0             2.1
Indian Bank                          1.6               2.0        (46)             13.6        16.7            76.5         79.4            (2.8)
Corporation Bank                     1.7               2.4        (63)             15.7        18.8            62.9         64.7            (1.9)
Canara Bank                          1.6               2.3        (70)              5.4         4.8            67.9         68.6            (0.8)
Indian Overseas Bank                 2.5               3.6      (111)               1.9         6.3            71.7         71.8            (0.1)
Syndicate Bank                       1.9               3.6      (176)              (1.8)       (5.6)           78.5         78.5                -
United Bank                          2.7               4.6      (193)               1.6        (2.0)           66.5         65.0             1.5
Union Bank                           1.5               4.8      (332)               1.4        (2.7)           63.1         60.5             2.6
Oriental Bank                        2.9               6.3      (336)               3.9         4.2            63.3         63.8            (0.5)
Andhra Bank                          2.1               6.1      (399)              (5.2)      (13.2)           65.4         61.7             3.7
Bank of India                        1.0               5.3      (432)              (2.5)       (3.6)           60.9         59.1             1.7
Source: Company, Angel Research




February 22, 2012                                                                                                                               6
                                                             3QFY2012 Results Review | Banking



                    Substantial restructuring; NPV loss only in few cases

                    Almost all banks resorted to higher restructuring during 3QFY2012 with loans to
                    SEBs and GTL being the primary contributors. Within PSU banks, BOM (up 55.0%
                    qoq) and Central bank (up 50.5% qoq) witnessed highest sequential rises in their
                    restructured books. Banks with exposure to GTL also had to take NPV hits in their
                    P&L (ranging from 10%-20% of the total loan advances) during 3QFY2012,
                    denting their bottom-line.

                    The CDR cases that were approved during 3QFY2012 stand at ~`20,000cr and
                    with restructuring of Air India and other SEBs also likely to be approved soon, the
                    restructuring books of banks are expected to fatten further in the coming few
                    quarters. That said, while loans to Air India and state power utilities will lead to
                    higher standard provisioning (2.0% instead of 0.4%), we do not expect material
                    NPV losses or chances of slippages from these accounts.

                    Exhibit 15: Restructuring book (in `cr) as of 3QFY2012
                    Bank           3QFY12       2QFY12      Ch.qoq (%)    Advances (` cr)   % of advances
                    BOM               3,100       2,000           55.0           49,872              6.2
                    CENTBK            9,880       6,566           50.5          133,317              7.4
                    OBC               6,086       4,119           47.7          110,698              5.5
                    IOB             10,082        7,179           40.4          132,549              7.6
                    UNBK              8,643       6,601           30.9          156,202              5.5
                    ANDHBK            3,676       2,810           30.8           79,169              4.6
                    ALLBK             3,823       2,941           30.0          100,448              3.8
                    BOB               9,945       7,829           27.0          260,661              3.8
                    BOI             13,674       11,115           23.0          230,355              5.9
                    ICICIBK           3,070       2,501           22.8          246,157              1.2
                    CRPBK             4,539       3,798           19.5           92,378              4.9
                    UTDBK             2,255       1,995           13.0           59,100              3.8
                    PNB             16,888       14,995           12.6          262,605              6.4
                    CANBK             9,555       8,519           12.2          219,253              4.4
                    AXSB              2,701       2,410           12.1          148,739              1.8
                    INDBK             5,573       5,126            8.7           87,337              6.4
                    IDBI              9,522       8,860            7.5          156,217              6.1
                    SBI             37,610       35,422            6.2          846,266              4.4
                    UCOBK             7,100       6,790            4.6          105,919              6.7
                    HDFCBK              777           754          3.1          194,303              0.4
                    YESBK               176           176          0.1           35,868              0.5
                    SYNBK             1,943       2,171          (10.5)         114,817              1.7
                    Source: Company, Angel Research




February 22, 2012                                                                                       7
                                                                                             3QFY2012 Results Review | Banking



                                                   PSU banks disappoint on earnings, Private banks continue
                                                   impressive track record

                                                   On PBT basis, private banks managed to grow by 25.6% yoy, while public banks
                                                   witnessed a decline of 4.8% yoy. Tax benefits accruing to most PSU banks aided
                                                   PAT numbers to an extent, with net PAT growing by 0.4%. In case of private banks
                                                   up to 3QFY2012, not just the new private banks but also the older private banks
                                                   such as South Indian Bank and Federal Bank, amongst others, continued to
                                                   register healthy earnings growth; however, going forward these two banks are
                                                   likely to experience headwinds from the substantial increase in NRE FD rates.

                                                   In case of PSU banks, including five of the PSU banks with the worst asset quality
                                                   surprise (Union Bank, Central Bank, Vijaya Bank, IOB and IDBI), ex-SBI earnings
                                                   growth registered an 4.2% yoy decline, which was almost 4% below our estimates.


Exhibit 16: Large PSU P&L                                            Exhibit 17: Mid PSU P&L
                                       % chg        % chg                                                           % chg             % chg
Parameter                3QFY12 2QFY12       3QFY11                  Parameter                3QFY12 2QFY12               3QFY11
                                       (qoq)         (yoy)                                                          (qoq)              (yoy)
NII                       24,484   23,090    6.0    21,431   14.2    NII                        13,449    13,200      1.9    12,436
Other Income               7,754    7,701    0.7     7,014   10.6    Other Income                3,688     3,406      8.3     2,897     27.3
Operating Profit          32,239   30,791    4.7    28,444   13.3    Operating Profit           17,137    16,606      3.2    15,333     11.8
Operating Expenses        13,420   13,293    1.0    12,181   10.2    Operating Expenses          7,430     7,235      2.7     6,647     11.8
Pre provision profit      18,819   17,497    7.6    16,263   15.7    Pre provision profit        9,706     9,370      3.6     8,685     11.8
Provisions &                                                         Provisions &
                           7,633    7,230    5.6     4,777   59.8                                4,514     4,352      3.7     2,966     52.2
Contingencies                                                        Contingencies
PBT                       11,185   10,267    8.9    11,486   (2.6)   PBT                         5,192     5,018      3.5     5,719     (9.2)
Tax                        3,284    2,874   14.2     3,707 (11.4)    Tax                         1,177     1,202     (2.1)    1,634   (28.0)
Net Profit                 7,902    7,393    6.9     7,779    1.6    Net Profit                  4,015     3,817      5.2     4,085     (1.7)
Source: Company, Angel Research                                      Source: Company, Angel Research



Exhibit 18: New Pvt P&L                                              Exhibit 19: Old Pvt P&L
                                       % chg        % chg                                                          % chg              % chg
Parameter                3QFY12 2QFY12       3QFY11                  Parameter               3QFY12 2QFY12               3QFY11
                                       (qoq)         (yoy)                                                         (qoq)               (yoy)
NII                        9,478    8,868    6.9     8,045   17.8     NII                     1,883      1,779       5.9     1,587     18.7
Other Income               5,500    4,852   13.4     4,581   20.1     Other Income              681       636        7.2      593      14.8
Operating Profit          14,978   13,720    9.2    12,626   18.6     Operating Profit        2,564      2,414       6.2     2,180     17.6
Operating Expenses         6,662    6,366    4.6     5,636   18.2     Operating Expenses      1,322      1,238       6.8     1,042     26.9
Pre provision profit       8,316    7,354   13.1     6,991   19.0     Pre provision profit    1,242      1,176       5.6     1,138      9.1
Provisions &                                                         Provisions &
                           1,189    1,173    1.3     1,368 (13.1)                               297       210       41.3      335     (11.3)
Contingencies                                                        Contingencies
PBT                        7,127    6,181   15.3     5,623   26.8     PBT                       945       966       (2.2)     803      17.6
Tax                        2,131    1,870   14.0     1,674   27.3     Tax                       245       286      (14.2)     249      (1.7)

Net Profit                 4,996    4,311   15.9     3,949   26.5     Net Profit                700       680        2.9      554      26.3

Source: Company, Angel Research                                      Source: Company, Angel Research




February 22, 2012                                                                                                                           8
                                                                                                   3QFY2012 Results Review | Banking



Exhibit 20: Advances growth (%)                                           Exhibit 21: Deposits growth (%)
                                           % chg                % chg                                                  % chg             % chg
 Banks-Type           3QFY12        2QFY12            3QFY11               Banks-Type            3QFY12      2QFY12            3QFY11
                                           (qoq)                (qoq)                                                  (qoq)             (qoq)
 Large PSU          2,131,559 2,036,842       4.7 1,819,346       17.2     Large PSU            2,711,836 2,625,803      3.3 2,302,281    17.8
 Mid PSU            1,199,810 1,144,603       4.8 1,001,110       19.8     Mid PSU              1,638,834 1,584,203      3.4 1,366,367    19.9
 New Pvt              697,265      665,636    4.8     575,856     21.1     New Pvt               827,662     789,056     4.9   664,164    24.6
 Old Pvt              161,210      156,091    3.3     129,279     24.7     Old Pvt               220,412     214,595     2.7   176,981    24.5
 Grand Total        4,189,844 4,003,173       4.7 3,525,591       18.8     Grand Total          5,398,745 5,213,658      3.6 4,509,792    19.7

 Source: Company, Angel Research                                           Source: Company, Angel Research



Exhibit 22: DuPont analysis
                                         Pvt. New                               PSU Large                                PSU Mid
 Parameter                  FY2011       9MFY2012      FY2013E      FY2011       9MFY2012        FY2013E     FY2011      9MFY2012     FY2013E
 NII                               3.1          3.0         3.0           2.8             2.8         2.8        2.8            2.8        2.7
 (-) Prov. Exp.                    0.6          0.4         0.4           0.7             0.9         0.8        0.8            0.9        0.8
 Adj NII                           2.5          2.6         2.6           2.1             1.9         2.0        2.1            1.9        1.9
 Other Inc.                        1.8          1.7         1.7           1.1             0.9         0.9        0.8            0.8        0.7
 Op. Inc.                          4.3          4.3         4.4           3.2             2.9         2.9        2.8            2.6        2.6
 Opex                              2.2          2.1         2.2           1.8             1.6         1.6        1.7            1.5        1.5
 PBT                               2.1          2.1         2.2           1.4             1.2         1.3        1.2            1.1        1.1
 Taxes                             0.6          0.6         0.7           0.5             0.4         0.4        0.3            0.3        0.4
 ROA                               1.5          1.5         1.5           0.9             0.9         0.9        0.9            0.8        0.7
 Leverage                       10.4           10.7        11.9          19.9            19.0        19.9       22.1           20.2      21.1
 ROE                            15.1           15.8        17.9          18.4            16.2        17.0       18.9           17.0      15.1
 Source: Company, Angel Research


                                                    Outlook and valuation

                                                    In our view, the rally in banking stocks has been in all the ‘wrong’ stocks so far –
                                                    those stocks which have weak ROE and asset quality profiles within the PSU space
                                                    have become more expensive in P/ABV terms than the ones with relatively better
                                                    fundamentals. In light of the improving macro-economic scenario and reducing
                                                    global overhang, we continue to have a positive view on the banking sector.
                                                    However, going forward, we believe the next leg of this rally is likely to be driven
                                                    by banks that have the strongest growth outlook, which are still trading close to
                                                    their average multiples since April 2005. Accordingly, our top picks in the sector
                                                    are Axis Bank and Yes Bank, where we expect significant rerating upsides.

                                                    In case of Yes Bank, the stock’s growth premium has reduced over time due to
                                                    execution challenges in creating a retail deposit base (now trading at 2.2x vs. five-
                                                    year median of 2.3x). However, taking the challenges of building a retail deposit
                                                    base head-on, the bank has doubled its branch network over the past 18 months
                                                    to 305 branches and aggressively increased savings rate to 7% as a smart
                                                    customer acquisition strategy. While it has fallen short of its retail expansion goals
                                                    in the past and challenges remain significant, valuations at 2.2x FY2013E ABV in
                                                    our view provide a better risk-return trade-off than in the past and are at a
                                                    substantial discount to some of the other new private banks like IndusInd. Hence,
                                                    we recommend a Buy rating on the stock with a target price of `478.




February 22, 2012                                                                                                                           9
                                                              3QFY2012 Results Review | Banking



                    Ironically, while both Axis bank and Yes bank would rank amongst the top 3 banks
                    in the sector in terms of earnings growth taken from FY2008 up to FY2013E
                    (clocking in excess of 35% CAGR), however their stock returns since 1st January
                    2008 have lagged behind at 12th and 9th respectively and there remains some
                    degree of skepticism about their outlook. This is especially the case on the asset
                    quality front for Axis Bank (driven by unreliable anecdotal information in our view),
                    even though it has amongst the lowest yield on advances in the industry. This
                    skepticism can to an extent be gauged by the fact that since 2009, these are the
                    only two banks (amongst well-tracked ones) to have beaten consensus quarterly
                    earnings estimates for every single quarter (not counting HDFC Bank). To reiterate,
                    we expect these two banks to continue to posting healthy operating performance
                    going forward and at current valuations, we view them as being substantially
                    under-valued compared to Sensex/HDFC Bank/peers.

                    Coming to PSU Banks, the valuations for the entire pack have revived sharply over
                    the last month. This has led to a few specific cases (Andhra Bank, UCO bank,
                    Central bank and Vijaya bank) where in we believe the valuations have exceeded
                    the fundamentals. Hence, we recommend Neutral or Reduce on these stocks while
                    being positive on banks such as Dena bank, United bank, Bank of Maharashtra
                    and Syndicate bank, which we believe have a superior earnings quality outlook
                    compared to peers. Within the large cap PSU banks as well, we continue to prefer
                    SBI and BOB and would recommend a switch to these stocks from peers such as
                    Bank of India, which are trading at comparatively more expensive valuations, in
                    spite of weaker fundamentals in our view.




February 22, 2012                                                                                     10
                                                                                                  3QFY2012 Results Review | Banking



Exhibit 23: Recommendation summary
                                  CMP    Tgt. price    Upside   FY2013E         FY2013E     FY2013E      FY2011-13E      FY2013E     FY2013E
Company       Reco.
                                   (`)           (`)      (%)   P/ABV (x)   Tgt P/ABV (x)     P/E (x)   EPS CAGR (%)      RoA (%)     RoE (%)
AxisBk        Buy                1,217      1,733       42.3         2.0             2.8        10.6           18.2           1.5        20.2
FedBk         Neutral             424             -         -        1.1                -        9.2           16.2           1.2        13.2
HDFCBk        Neutral             532             -         -        3.6                -       18.5           30.4           1.8        21.0
ICICIBk*      Buy                 957       1,193       24.7         1.8             2.2        15.0           19.5           1.4        14.5
SIB           Neutral              27             -         -        1.3                -        8.0           13.5           0.9        17.5
YesBk         Buy                 347          478      38.0         2.2             3.0        11.5           20.1           1.4        20.6
AllBk         Accumulate          190          208        9.6        0.9             1.0         5.3               9.1        0.9        17.3
AndhBk        Neutral             124             -         -        0.9                -        5.8           (2.9)          0.9        15.1
BOB           Buy                 816          979      20.0         1.1             1.4         6.3               9.8        1.1        19.3
BOI           Accumulate          366          402        9.8        1.1             1.3         7.7               2.3        0.6        13.7
BOM           Buy                  54           63      16.8         0.7             0.9         5.1           31.2           0.7        16.9
CanBk         Accumulate          526          578        9.9        1.0             1.2         6.7           (7.4)          0.8        15.8
CentBk        Reduce              105           95      (9.8)        1.0             0.9         6.8          (25.1)          0.4        11.4
CorpBk        Buy                 489          570      16.5         0.8             1.0         5.3           (1.8)          0.8        15.5
DenaBk        Buy                  88          112      26.8         0.6             0.8         4.2               7.3        0.8        16.1
IDBI#         Accumulate          110          120        9.3        0.7             0.8         5.6               8.9        0.6        13.4
IndBk         Neutral             239             -         -        1.0                -        5.7               3.6        1.2        18.2
IOB           Neutral             107             -         -        0.7                -        5.6               5.3        0.5        12.8
J&KBk         Accumulate          807          877        8.8        0.8             0.9         4.7           16.7           1.4        19.0
OBC           Accumulate          287          313        8.9        0.7             0.8         6.3           (5.9)          0.7        11.3
PNB           Accumulate         1,026      1,165       13.5         1.2             1.4         6.5               6.4        1.0        19.4
SBI*          Accumulate         2,258      2,595       14.9         1.7             2.0        11.1           25.0           0.9        17.5
SynBk         Buy                 107          129      20.3         0.7             0.9         4.5           13.7           0.7        16.5
UcoBk         Neutral              84             -         -        1.0                -        5.5           10.9           0.6        15.4
UnionBk       Accumulate          249          265        6.4        1.0             1.1         6.3               0.1        0.7        15.8
UtdBk         Buy                  77           92      19.4         0.7             0.8         4.3           15.3           0.6        14.4
VijBk         Neutral              63             -         -        0.9                -        7.1               0.7        0.4        11.1
                                                                                                               #
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries),            Without adjusting for SASF,
CMP as of 22nd February, 2012.




February 22, 2012                                                                                                                         11
                                                                                                                                                                                                                                                                            3QFY2012 Results Review | Banking



                                                                                                                                                       Banking indicators watch

Exhibit 24: Credit and deposit growth trends                                                                                                                                                              Exhibit 25: Investment-Deposit ratio
                                                       Credit growth (%)                                                    Deposit growth (%)                                                                                 Credit-to-Deposit ratio (%)                                                                Inv-to-Dep ratio (% , RHS)
                                                                                                                                                                                                            78.0                                                                                                                                                                              32.0
   30.0

   25.0                                                                                                                                                                                                                                                                                                                                                                                       31.0
                                                                                                                                                                                                            76.0

   20.0                                                                                                                                                                                                                                                                                                                                                                                       30.0
                                                                                                                                                                                                            74.0
   15.0                                                                                                                                                                                                                                                                                                                                                                                       29.0
   10.0                                                                                                                                                                                                     72.0
                                                                                                                                                                                                                                                                                                                                                                                              28.0
    5.0
                                                                                                                                                                                                            70.0                                                                                                                                                                              27.0
        -




                                                                                                                                                                                                                               Dec-10




                                                                                                                                                                                                                                                                                                                                                                  Dec-11
                                                                                                                                                                                                                                                                                                    Jun-11
                                                                                                                                                                                                                                            Jan-11




                                                                                                                                                                                                                                                                                                                                                                            Jan-12
                                                                                                                                                                                                                                                                                                                      Aug-11
                                                                                                                                                                                                                                                                   Mar-11

                                                                                                                                                                                                                                                                            Apr-11




                                                                                                                                                                                                                                                                                                                                              Oct-11
                                                                                                                                                                                                                      Nov-10




                                                                                                                                                                                                                                                        Feb-11




                                                                                                                                                                                                                                                                                                                                                        Nov-11
                                                                                                                                                                                                                                                                                                             Jul-11



                                                                                                                                                                                                                                                                                                                                  Sep-11
                                                                                                                                                                                                                                                                                        May-11
                               Jan-09




                                                                                      Jan-10




                                                                                                                                            Jan-11




                                                                                                                                                                                                 Jan-12
                                             Apr-09




                                                                                                      Apr-10




                                                                                                                                                        Apr-11
                  Oct-08




                                                                         Oct-09




                                                                                                                               Oct-10




                                                                                                                                                                                   Oct-11
                                                           Jul-09




                                                                                                                 Jul-10




                                                                                                                                                                     Jul-11




Source: RBI, Angel Research                                                                                                                                                                               Source: RBI, Angel Research



Exhibit 26: LAF borrowings                                                                                                                                                                                Exhibit 27: Wholesale rates remain steady
  (` bn)                                                                                                                                                                                                                                                                     CP 3M                                                  CP 12M
   1,000                                                                                                                                                                                                    12.0
     500                                                                                                                                                                                                    11.0
            -                                                                                                                                                                                               10.0
    (500)                                                                                                                                                                                                    9.0
  (1,000)                                                                                                                                                                                                    8.0

  (1,500)                                                                                                                                                                                                    7.0

  (2,000)                                                                                                                                                                                                    6.0




                                                                                                                                                                                                                                                                                                                                                                      Dec-11
                                                                                                                                                                                                                                                                             Jun-11




                                                                                                                                                                                                                                                                                                                                                                                     Jan-12
                                                                                                                                                                                                                                                                                                             Aug-11
                                                                                                                 Sep-11




                                                                                                                                                                                            Feb-12




                                                                                                                                                                                                                               Mar-11

                                                                                                                                                                                                                                               Apr-11
                                                                                  Jul-11




                                                                                                                                                                                                                                                                                                                                           Oct-11
                                                  May-11




                                                                                                                                                                                                                   Feb-11




                                                                                                                                                                                                                                                                                                                                                         Nov-11




                                                                                                                                                                                                                                                                                                                                                                                                   Feb-12
                                                                                                                                                                                                                                                                                             Jul-11




                                                                                                                                                                                                                                                                                                                         Sep-11
                                                                                                                                                           Dec-11




                                                                                                                                                                                                                                                                 May-11
                                                                    Jun-11




                                                                                                                                                                          Jan-12
                    Mar-11




                                                                                                    Aug-11
                                    Apr-11




                                                                                                                               Oct-11

                                                                                                                                              Nov-11




Source: RBI, Angel Research                                                                                                                                                                               Source: Bloomberg, Angel Research



Exhibit 28: Forex reserves                                                                                                                                                                                Exhibit 29: ECB demand trends
  (US$ Bn)                                                                                                                                                                                                 6.0                                                                                               5.6

  400
                                                                                                                                                                                                           5.0
                                                                                                                                                                                                                                                                                                                                                                  4.2
  320                                                                                                                                                                                                                                                                                                                                                                          3.7
                                                                                                                                                                                                           4.0                                                    3.4                                                                                  3.3
  240                                                                                                                                                                                                                3.0
                                                                                                                                                                                                                                                                              2.7                                                     2.7
                                                                                                                                                                                                           3.0                                                                                                                                                                                2.4
  160                                                                                                                                                                                                                                                                                                                  2.1
                                                                                                                                                                                                           2.0                                                                               1.4
                                                                                                                                                                                                                                                 1.1
   80                                                                                                                                                                                                                             0.8
                                                                                                                                                                                                           1.0
    -
                                                                                                                                                                                                           0.0
                           Oct-10




                                                                                                                                                       Oct-11
                Sep-10




                                                                     Feb-11




                                                                                                                                            Sep-11




                                                                                                                                                                                                Feb-12
                                    Nov-10




                                                                                                                                                                 Nov-11
                                                                                                     May-11
                                              Dec-10




                                                                                                               Jun-11




                                                                                                                                                                          Dec-11
                                                       Jan-11




                                                                                                                                                                                    Jan-12
                                                                                           Apr-11



                                                                                                                          Jul-11
                                                                                                                                   Aug-11
                                                                     Mar-11




                                                                                                                                                                                                                                                                                                 Feb-11
                                                                                                                                                                                                                      Sep-10




                                                                                                                                                                                                                                                                                                                                                                   Jul-11




                                                                                                                                                                                                                                                                                                                                                                                              Sep-11
                                                                                                                                                                                                                                                                                                                                       May-11
                                                                                                                                                                                                                                                                   Dec-10




                                                                                                                                                                                                                                                                                                                                                       Jun-11
                                                                                                                                                                                                                                                                               Jan-11




                                                                                                                                                                                                                                                                                                                                                                                Aug-11
                                                                                                                                                                                                                                                                                                             Mar-11

                                                                                                                                                                                                                                                                                                                        Apr-11
                                                                                                                                                                                                                                   Oct-10

                                                                                                                                                                                                                                                     Nov-10




Source: RBI, Angel Research                                                                                                                                                                               Source: RBI, Angel Research




February 22, 2012                                                                                                                                                                                                                                                                                                                                                                                      12
                                                                                                                                              3QFY2012 Results Review | Banking



Exhibit 30: Corporate and government bond yields                                    Exhibit 31: G-Sec yields indicating close to cyclical peak
   (%)                     17-Nov-11                 17-Feb-12                                                     G-Sec 1Yr and 10Yr Spread (%)                                                             Repo Rate (%, RHS)
                                                                                       4.0                                                                                                                                                                9.5
   10.0

    9.5                                                                                3.0                                                                                                                                                                8.5

    9.0                                                                                2.0                                                                                                                                                                7.5

    8.5                                                                                1.0                                                                                                                                                                6.5

    8.0                                                                                     -                                                                                                                                                             5.5
           9.67
           9.61

                    9.62
                    9.49

                             9.66
                             9.29

                                       9.72
                                       9.22

                                              8.82
                                              8.45

                                                       8.81
                                                       8.29

                                                                  8.85
                                                                  8.29

                                                                            8.86
                                                                            8.19
    7.5                                                                                (1.0)                                                                                                                                                              4.5




                                                                                                                            Sep-06
                                                                                                                                     Feb-07
                                                                                                                                              Jul-07




                                                                                                                                                                                                                                        Sep-11
                                                                                                                                                                                                                                                 Feb-12
                                                                                                                                                                May-08
                                                                                                                                                       Dec-07
                                                                                                 Jun-05




                                                                                                                                                                                                             Jun-10
                                                                                                                                                                                                    Jan-10
                                                                                                                                                                                  Mar-09
                                                                                                                                                                                           Aug-09
                                                                                                                   Apr-06




                                                                                                                                                                                                                               Apr-11
                                                                                                          Nov-05




                                                                                                                                                                         Oct-08




                                                                                                                                                                                                                      Nov-10
    7.0
                                 A        G                       G
          AAA 1 YrAAA 3 YrAAA 5 Yr AA 10 Yr sec 1YrGsec 5YrGsec 7Yr sec 10Yr


Source: Bloomberg, Angel Research                                                   Source: Bloomberg, Angel Research



                                                              Sectoral and Industry-wise distribution of credit

                                                              Exhibit 32: Credit growth driven by industry sector
                                                                                                                     Dec 2010                                                                        Dec 2011
                                                                 Sector
                                                                                                            (` cr)                   % of total                                   (` cr)              % of total                        % chg (yoy)
                                                                 Agriculture                        436,355                                    12.5                      460,638                                  11.4                                     5.6
                                                                 Industry                       1,551,030                                      44.3                1,858,502                                      45.9                                    19.8
                                                                 - Micro & Small                    230,302                                       6.6                    246,781                                      6.1                                  7.2
                                                                 - Medium                           158,271                                       4.5                    198,566                                      4.9                                 25.5
                                                                 - Large                        1,162,456                                      33.2                1,413,154                                      34.9                                    21.6
                                                                 Services                           856,811                                    24.4                      984,688                                  24.3                                    14.9
                                                                 Personal Loans                     660,628                                    18.8                      741,948                                  18.3                                    12.3
                                                                 - Housing                          337,596                                       9.6                    378,601                                      9.4                                 12.1
                                                                 - Vehicle                                76,948                                  2.2                      90,577                                     2.2                                 17.7
                                                                 Non-food Credit                3,504,823                                     100.0                4,045,776                                   100.0                                      15.4
                                                              Source: RBI, Angel Research



                                                              Exhibit 33: Strong growth being witnessed in Metals
                                                                                                                   Dec 2010                                                                         Dec 2011
                                                                 Industry
                                                                                                            (` cr)               % of total                                       (` cr)            % of total                          % chg (yoy)
                                                                 Infrastructure                   495,179                                     31.9                       596,767                                 32.1                                     20.5
                                                                 Metals                           199,635                                     12.9                       247,712                                 13.3                                     24.1
                                                                 Textiles                         135,313                                       8.7                      152,167                                      8.2                                 12.5
                                                                 Engineering                          90,139                                    5.8                      108,553                                      5.8                                 20.4
                                                                 Chemicals                            95,490                                    6.2                      104,555                                      5.6                                  9.5
                                                                 Food Processing                      78,910                                    5.1                       92,253                                      5.0                                 16.9
                                                                 Oil and Gas                          64,187                                    4.1                       66,478                                      3.6                                  3.6
                                                                 Construction                         46,317                                    3.0                       54,406                                      2.9                                 17.5
                                                                 Vehicles                             43,740                                    2.8                       52,897                                      2.8                                 20.9
                                                                 Gems & Jewellery                     37,196                                    2.4                       48,288                                      2.6                                 29.8
                                                                 Other Industries                 264,925                                     17.1                       334,424                                 18.0                                     26.2
                                                                 Total                          1,551,031                                100.0                   1,858,500                                   100.0                                        19.8
                                                              Source: RBI, Angel Research




February 22, 2012                                                                                                                                                                                                                                           13
                                                                                                                                                                                           3QFY2012 Results Review | Banking



                                                                                                       Valuation watch
Exhibit 34: Private banks P/ABV trends*                                                                                                  Exhibit 35: Public sector banks P/ABV trends
                  P/ABV                   Median                     15th percentile                         85th percentile                               P/ABV                       Median                          15th percentile                                  85th percentile
  3.40
                                                                                                                                           2.00
  3.00
  2.60                                                                                                                                     1.70

  2.20                                                                                                                                     1.40
  1.80
                                                                                                                                           1.10
  1.40
                                                                                                                                           0.80
  1.00
  0.60                                                                                                                                     0.50




                                                                                                                                                                                                                                    Dec-08
                                                                                                                                                                              Jun-06




                                                                                                                                                                                                                                                                                          Jun-11
                                                                                                                                                                     Jan-06




                                                                                                                                                                                                                                                                                 Jan-11
                                                                                                                                                            Aug-05




                                                                                                                                                                                                                                                                        Aug-10
         Mar-05



                            Mar-06



                                              Mar-07



                                                                Mar-08



                                                                                  Mar-09



                                                                                                    Mar-10



                                                                                                                       Mar-11




                                                                                                                                                  Mar-05




                                                                                                                                                                                                Apr-07




                                                                                                                                                                                                                                                               Mar-10
                                                                                                                                                                                                                                                      Oct-09
                                                                                                                                                                                       Nov-06




                                                                                                                                                                                                                  Feb-08




                                                                                                                                                                                                                                                                                                   Nov-11
                   Sep-05



                                     Sep-06



                                                       Sep-07



                                                                         Sep-08



                                                                                           Sep-09



                                                                                                              Sep-10



                                                                                                                                Sep-11




                                                                                                                                                                                                         Sep-07



                                                                                                                                                                                                                           Jul-08



                                                                                                                                                                                                                                             May-09
Source: Company, Angel Research; Note: Private banks under our coverage                                                                  Source: Company, Angel Research



Exhibit 36: Large private banks P/ABV trends                                                                                             Exhibit 37: Large public sector banks P/ABV trends
                  P/ABV                   Median                     15th percentile                         85th percentile                               P/ABV                       Median                          15th percentile                                  85th percentile
  3.40
                                                                                                                                           2.50
  3.00
                                                                                                                                           2.20
  2.60
                                                                                                                                           1.90
  2.20
  1.80                                                                                                                                     1.60

  1.40                                                                                                                                     1.30

  1.00                                                                                                                                     1.00

  0.60                                                                                                                                     0.70


                                                                                                                                                                                                                                    Dec-08
                                                                                                                                                                              Jun-06




                                                                                                                                                                                                                                                                                          Jun-11
                                                                                                                                                                     Jan-06




                                                                                                                                                                                                                                                                                 Jan-11
                                                                                                                                                            Aug-05




                                                                                                                                                                                                                                                                        Aug-10
         Mar-05



                            Mar-06



                                              Mar-07



                                                                Mar-08



                                                                                  Mar-09



                                                                                                    Mar-10



                                                                                                                       Mar-11




                                                                                                                                                  Mar-05




                                                                                                                                                                                                Apr-07




                                                                                                                                                                                                                                                               Mar-10
                                                                                                                                                                                                                                                      Oct-09
                                                                                                                                                                                       Nov-06




                                                                                                                                                                                                                  Feb-08




                                                                                                                                                                                                                                                                                                   Nov-11
                   Sep-05



                                     Sep-06



                                                       Sep-07



                                                                         Sep-08



                                                                                           Sep-09



                                                                                                              Sep-10



                                                                                                                                Sep-11




                                                                                                                                                                                                         Sep-07



                                                                                                                                                                                                                           Jul-08



                                                                                                                                                                                                                                             May-09

Source: Company, Angel Research                                                                                                          Source: Company, Angel Research



Exhibit 38: Small private banks P/ABV trends*                                                                                            Exhibit 39: Mid-cap* public sector banks P/ABV trends
                  P/ABV                   Median                     15th percentile                         85th percentile                               P/ABV                       Median                          15th percentile                                  85th percentile
  2.30

  1.90                                                                                                                                     1.50

  1.50                                                                                                                                     1.20

  1.10                                                                                                                                     0.90

  0.70                                                                                                                                     0.60

  0.30                                                                                                                                     0.30
                                                                                                                                                                                                                                    Dec-08
                                                                                                                                                                              Jun-06




                                                                                                                                                                                                                                                                                          Jun-11
                                                                                                                                                                     Jan-06




                                                                                                                                                                                                                                                                                 Jan-11
                                                                                                                                                            Aug-05




                                                                                                                                                                                                                                                                        Aug-10
         Mar-05



                            Mar-06



                                              Mar-07



                                                                Mar-08



                                                                                  Mar-09



                                                                                                    Mar-10



                                                                                                                       Mar-11




                                                                                                                                                  Mar-05




                                                                                                                                                                                                Apr-07




                                                                                                                                                                                                                                                               Mar-10
                                                                                                                                                                                                                                                      Oct-09
                                                                                                                                                                                       Nov-06




                                                                                                                                                                                                                  Feb-08




                                                                                                                                                                                                                                                                                                   Nov-11
                   Sep-05



                                     Sep-06



                                                       Sep-07



                                                                         Sep-08



                                                                                           Sep-09



                                                                                                              Sep-10



                                                                                                                                Sep-11




                                                                                                                                                                                                         Sep-07



                                                                                                                                                                                                                           Jul-08



                                                                                                                                                                                                                                             May-09




Source: Company, Angel Research; Note: Small pvt. banks under our coverage                                                               Source: Company, Angel Research, Note*:Mid and small PSU banks




February 22, 2012                                                                                                                                                                                                                                                                                     14
                                                                                                                                                                                                                                                                    3QFY2012 Results Review | Banking



                                                                                                                                                     Economy watch

Exhibit 40: Quarterly GDP trends                                                                                                                                                                   Exhibit 41: IIP trends
  (%)                                                                                                                                                                                                 (%)
  10.0                                                                                                                                                                                                12.0
                                                                                                   9.4
                                                                                                                                                                                                                                                         9.4                                                              9.5
                                                                                                                     8.8                                                                              10.0
      9.0                                                            8.6                                                           8.4           8.3                                                                7.5
                                                                                                                                                                                                       8.0                          6.7
                                                                                                                                                                  7.8        7.7                                                                                                             6.2                                                                                                           5.9
      8.0        7.5                                                                                                                                                                                                                                                 5.3
                                                                                   7.3                                                                                                                 6.0
                                                                                                                                                                                         6.9                                                                                                                                                3.7
      7.0                                                                                                                                                                                                                                                                                                                                                   3.4
                                                          6.3                                                                                                                                          4.0                                                                                                                                                                     2.5
                                  6.1                                                                                                                                                                                                                                                                                                                                                                                             1.8
                                               5.8
      6.0                                                                                                                                                                                              2.0

                                                                                                                                                                                                           -
      5.0




                                                                                                                                                                                                                                    Feb-11




                                                                                                                                                                                                                                                                                                                                            Jul-11




                                                                                                                                                                                                                                                                                                                                                                               Sep-11
                                                                                                                                                                                                                                                                                             May-11




                                                                                                                                                                                                                                                                                                                                                                                                                                  Dec-11
                                                                                                                                                                                                                                                                                                                          Jun-11
                                                                                                                                                                                                                        Jan-11




                                                                                                                                                                                                                                                                                                                                                             Aug-11
                                                                                                                                                                                                                                                         Mar-11

                                                                                                                                                                                                                                                                      Apr-11




                                                                                                                                                                                                                                                                                                                                                                                            Oct-11

                                                                                                                                                                                                                                                                                                                                                                                                           Nov-11
                     2QFY09

                                   3QFY09

                                               4QFY09

                                                          1QFY10

                                                                     2QFY10

                                                                                    3QFY10

                                                                                                   4QFY10

                                                                                                                     1QFY11

                                                                                                                                   2QFY11

                                                                                                                                                 3QFY11

                                                                                                                                                                  4QFY11

                                                                                                                                                                              1QFY12

                                                                                                                                                                                          2QFY12
                                                                                                                                                                                                      (2.0)

                                                                                                                                                                                                      (4.0)

                                                                                                                                                                                                      (6.0)                                                                                                                                                                               (4.7)

Source: CSO, Angel Research                                                                                                                                                                        Source: MOSPI, Angel Research



Exhibit 42: Monthly WPI inflation trends                                                                                                                                                           Exhibit 43: Manufacturing and services PMI
   (%)                                                                                                                                                                                                                                                                              Mfg. PMI                                                          Services PMI
  12.0                                                                                                                                                                                              62.0
              9.5             9.7              9.7        9.6                                          9.8              10.0 9.9
                                                                      9.5             9.4                                                                 9.5                                       60.0
  10.0
                                                                                                                                                                           7.5                      58.0
   8.0                                                                                                                                                                                 6.6
                                                                                                                                                                                                    56.0
   6.0
                                                                                                                                                                                                    54.0
   4.0
                                                                                                                                                                                                    52.0
   2.0                                                                                                                                                                                              50.0
   0.0                                                                                                                                                                                              48.0
                                                                                                                                                                           Dec-11
                                                                        Jun-11




                                                                                                                                                                                        Jan-12
                                                                                                       Aug-11
                                  Mar-11

                                               Apr-11




                                                                                                                                            Oct-11

                                                                                                                                                              Nov-11
                Feb-11




                                                                                                                          Sep-11
                                                                                          Jul-11
                                                           May-11




                                                                                                                                                                                                                                                           Dec-10




                                                                                                                                                                                                                                                                                                                                                                                                           Dec-11
                                                                                                                                                                                                                                                                                                                                              Jun-11
                                                                                                                                                                                                                                                                    Jan-11




                                                                                                                                                                                                                                                                                                                                                                                                                         Jan-12
                                                                                                                                                                                                               Aug-10




                                                                                                                                                                                                                                                                                                                                                                      Aug-11
                                                                                                                                                                                                                                                                                               Mar-11
                                                                                                                                                                                                                                                                                                                 Apr-11
                                                                                                                                                                                                                                   Oct-10
                                                                                                                                                                                                                                             Nov-10




                                                                                                                                                                                                                                                                                                                                                                                         Oct-11
                                                                                                                                                                                                                                                                                                                                                                                                  Nov-11
                                                                                                                                                                                                                          Sep-10




                                                                                                                                                                                                                                                                                    Feb-11




                                                                                                                                                                                                                                                                                                                                                                                Sep-11
                                                                                                                                                                                                                                                                                                                                                          Jul-11
                                                                                                                                                                                                                                                                                                                                   May-11




Source: MOSPI, Angel Research                                                                                                                                                                      Source: Markit, Angel Research



Exhibit 44: Exports and imports growth trends                                                                                                                                                      Exhibit 45: Eight core industry growth rates for Dec 2011
                                                                                                                                                                                                    15.0                                                                                                                                                                                   13.3
  (%)                                                   Exports growth                                               Imports growth
                                                                                                                                                                                                    10.0                                                                                                                                                                                                            8.0
  90                                                                                                                                                                                                                    5.6
                                                                                                                                                                                                      5.0                                                                                                                                                             2.2
  75                                                                                                                                                                                                                                                                                                  0.8
                                                                                                                                                                                                       -
  60
                                                                                                                                                                                                     (5.0)                                                                                                                              (2.5)
  45                                                                                                                                                                                                                                        (5.6)
                                                                                                                                                                                                    (10.0)
  30                                                                                                                                                                                                                                                                (10.8)
                                                                                                                                                                                                    (15.0)
                                                                                                                                                                                                                                                                                                                                                                                            Cement
                                                                                                                                                                                                                                                                                                                                                                       Steel
                                                                                                                                                                                                                        Coal



                                                                                                                                                                                                                                             Crude Oil




                                                                                                                                                                                                                                                                                                                                            Fertilizers
                                                                                                                                                                                                                                                                      Natural Gas




                                                                                                                                                                                                                                                                                                                                                                                                                    Electricity
                                                                                                                                                                                                                                                                                                      Refinary Products




  15

  -
                                                          Feb-11




                                                                                                                         Jul-11



                                                                                                                                                     Sep-11
                                                                                              May-11
                                      Dec-10




                                                                                                                                                                                       Dec-11
                                                                                                            Jun-11
                                                Jan-11




                                                                                                                                      Aug-11
                                                                    Mar-11

                                                                                 Apr-11
            Oct-10

                         Nov-10




                                                                                                                                                                  Oct-11

                                                                                                                                                                            Nov-11




Source: Bloomberg, Angel Research                                                                                                                                                                  Source: Bloomberg, Angel Research




February 22, 2012                                                                                                                                                                                                                                                                                                                                                                                                                     15
                                                                                                3QFY2012 Results Review | Banking




  Research Team Tel: 022 - 39357800                   E-mail: research@angelbroking.com                    Website: www.angelbroking.com

  DISCLAIMER

  This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
  decision. 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 reliable
  sources 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 this
  document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
  responsible 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. While
  Angel 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 the
  latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have
  investment positions in the stocks recommended in this report.




February 22, 2012                                                                                                                          16
                                                                                            3QFY2012 Results Review | Banking




  Disclosure of Interest Statement
                       Analyst ownership    Angel and its Group companies   Angel and its Group companies'        Broking relationship
                         of the stock           ownership of the stock      Directors ownership of the stock     with company covered
  AxisBk                      No                        Yes                               Yes                             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

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




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

February 22, 2012                                                                                                                    17
                                                                                                                                                                                                   3QFY2012 Results Review | Banking


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

Research Team
Fundamental:
Sarabjit Kour Nangra                                                                 VP-Research, Pharmaceutical                                                                              sarabjit@angelbroking.com
Vaibhav Agrawal                                                                      VP-Research, Banking                                                                                     vaibhav.agrawal@angelbroking.com
Shailesh Kanani                                                                      Infrastructure                                                                                           shailesh.kanani@angelbroking.com
Bhavesh Chauhan                                                                      Metals & Mining                                                                                          bhaveshu.chauhan@angelbroking.com
Sharan Lillaney                                                                      Mid-cap                                                                                                  sharanb.lillaney@angelbroking.com
V Srinivasan                                                                         Research Associate (Cement, Power)                                                                       v.srinivasan@angelbroking.com
Yaresh Kothari                                                                       Research Associate (Automobile)                                                                          yareshb.kothari@angelbroking.com
Hemang Thaker                                                                        Research Associate (Capital Goods)                                                                       hemang.thaker@angelbroking.com
Nitin Arora                                                                          Research Associate (Infra, Real Estate)                                                                  nitin.arora@angelbroking.com
Ankita Somani                                                                        Research Associate (IT, Telecom)                                                                         ankita.somani@angelbroking.com
Varun Varma                                                                          Research Associate (Banking)                                                                             varun.varma@angelbroking.com
Sourabh Taparia                                                                      Research Associate (Cement, Power)                                                                       Sourabh.taparia@angelbroking.com

Technicals:
Shardul Kulkarni                                                                     Sr. Technical Analyst                                                                                    shardul.kulkarni@angelbroking.com
Sameet Chavan                                                                        Technical Analyst                                                                                        sameet.chavan@angelbroking.com
Sacchitanand Uttekar                                                                 Technical Analyst                                                                                        sacchitanand.uttekar@angelbroking.com

Derivatives:
Siddarth Bhamre                                                                      Head - Derivatives                                                                                       siddarth.bhamre@angelbroking.com

Institutional Sales Team:
Mayuresh Joshi                                                                       VP - Institutional Sales                                                                                 mayuresh.joshi@angelbroking.com
Hiten Sampat                                                                         Sr. A.V.P- Institution sales                                                                             Hiten.Sampat@angelbroking.com
Meenakshi Chavan                                                                     Dealer                                                                                                   meenakshis.chavan@angelbroking.com
Gaurang Tisani                                                                       Dealer                                                                                                   gaurangp.tisani@angelbroking.com
Akshay Shah                                                                          Sr. Executive                                                                                            akshayr.shah@angelbroking.com

Production Team:
Simran Kaur                                                                          Research Editor                                                                                          simran.kaur@angelbroking.com
Dilip Patel                                                                          Production                                                                                               dilipm.patel@angelbroking.com




CSO & Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai - 400 093.Tel.: (022) 3083 7700. Angel Broking Ltd: BSE Sebi Regn No: INB010996539 / PMS Regd Code: PM/INP000001546 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / NSE Sebi Regn Nos: Cash: INB231279838 /
NSE F&O: INF231279838/Currency: INE231279838 / MCX Currency Sebi Regn No: INE261279838 / Member ID: 10500 / Angel Commodities Broking Pvt. Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302



 February 22, 2012                                                                                                                                                                                                                                                                       18