PSU

Asset quality to determine valuations

Pressure on margin and fee

PSBs: Stress levels continue to rise

Sohail Halai (Sohail.Halai@

(Sohail.Halai@MotilalOswal.com) / Umang Shah (Umang.Shah@MotilalOswal.com)

Alpesh Mehta (Alpesh.Me

(Alpesh.Mehta@MotilalOswal.com); + 9122 3982 5415

Pvt

Private banks continue to shine

2QFY13 Review

India Banking

Update | November 2012

Valuations..32

Key operating parameters..20-31

Business growth.14-19

Asset quality..8-13

Earnings revision ............................................................................................................................7

Actual performance v/s estimates............................................................................................................................. 6

Summary: Stress levels continue to rise, impact valuations ....3-5

Contents

53.6
HDFCB
ICICIBC*
AXSB
KMB
IIB
YES
FB
VYSB
J&KBK
SIB
Private Aggregate
SBIN (cons )*
BOB
PNB
CBK
BOI
IDBI
UNBK
OBC
INBK
IOB
CRPBK
ANDB
DBNK
Public Aggregate
HDFC*
IDFC
POWF
RECL
SHTF
LICHF
MMFS
DEWH
NBFC Aggregate

765
155
176
216
623
245
990
195

2,156
729
745
426
273
101
219
314
169
74
392
103
107

648
1,023
1,214
623
374
414
456
468
1,357
23

CMP (INR)

Financials: Valuation Matrix

Mcap
(USDb)
28.4
22.0
9.4
8.6
3.3
2.7
1.5
1.3
1.2
0.2
78.5
27.0
5.6
4.7
3.5
2.9
2.4
2.2
1.7
1.4
1.1
1.1
1.1
0.7
55.4
21.1
4.4
4.3
4.0
2.6
2.3
1.9
0.4
41.0

P/E (x)
FY13 FY14
22.7
18.2
11.9
10.0
10.6
9.3
22.3
18.7
17.0
13.9
11.6
9.6
9.7
8.2
12.3
11.0
6.5
5.9
6.7
5.7
16.0
13.6
7.3
6.3
6.2
5.5
5.1
4.4
6.4
5.2
6.5
5.2
7.0
6.1
5.5
4.6
6.5
5.5
3.9
3.6
5.1
4.5
3.5
3.3
4.4
3.8
4.4
4.0
7.0
6.1
17.6
13.9
13.2
11.3
5.6
5.0
5.9
5.1
10.2
8.7
12.3
9.3
12.3
10.2
5.2
3.8
12.2
10.3

P/BV (x)
FY13 FY14
4.4
3.7
1.8
1.6
1.9
1.6
3.1
2.7
3.2
2.7
2.6
2.1
1.2
1.1
1.6
1.4
1.4
1.2
1.1
0.9
2.7
2.4
1.2
1.0
1.0
0.9
0.8
0.7
0.8
0.7
0.8
0.7
0.7
0.6
0.8
0.7
0.8
0.7
0.7
0.6
0.5
0.5
0.6
0.5
0.7
0.6
0.7
0.6
1.0
0.9
5.3
4.2
1.6
1.4
1.0
0.9
1.2
1.1
2.0
1.6
1.9
1.6
2.9
2.4
1.1
0.9
2.2
2.0

Key highlights for private banks: (1) Margins largely

stable/improving QoQ, (2) asset quality remains strong, with
GNPAs (%) stable/declining QoQ despite one-offs, (3) healthy
loan growth led by continued traction in retail loans and (4) fall
in CA float led to pressure on CASA ratio; SA traction remains
healthy. New private banks gain market share.
Key highlights for public sector banks (PSBs): (1) Margins fell
QoQ led by continued increase in funding cost and higher
slippages, (2) no relief on asset quality, with net slippages at a
high level, (3) higher restructuring (ex SEB and AI) QoQ, (4)
moderation in business growth led by risk aversion and (5) CASA
ratio improves marginally for few banks.
Positive surprises: (1) On margins: ICICIBC, VYSB, YES and FB, (2)
On asset quality: all private banks, (3) On core profitability,
ICICIBC, VYSB, HDFCB and YES and (4) Overall performance: all
private banks performance was either in-line or better than
estimates; within PSBs, OBC and UNBKs performance was
better than its peers.
Negative surprises: (1) On margins: most PSBs surprised
negatively led by higher stress on asset quality, fall in lending
rates and pressure on cost of funds and (2) On asset quality:
PSBs reported sharp deterioration in asset quality. High stress
witnessed for SBIN, PNB, BOI, BOB and ANDB. INBK asset quality
was impacted by a large steel account.

Sluggish performance by PSBs; private banks shine

Asset quality no relief in sight

Stress levels continue to rise, impact valuations

-23

-20

SBIN

-18

-10 -10

-1

ICICIBC

-2

UNBK

10

YES

AXSB

IIB

OBC

BoB

HDFCB

PNB

INBK

Net slippages ratio (%) continues to be high

ANDB

13

16

16

15

BoI

CBK

QoQ change in NIMs (BPS)

VYSB

and net slippages ratio; private banks shine

Net slippages for PSBs (ex-SBIN) increased sharply
(+65% QoQ). Quarterly slippages declined for SBIN
though it remains high. PSBs (ex-SBIN) annualized net
slippage ratio increased to 3.2% v/s 2% a quarter ago.
Private banks asset quality remained healthy, with
GNPAs (+3% QoQ) and NNPAs (+11% QoQ on a lower
base) being contained. AXSBs gross stress addition was
better than expectation.
Excluding Air India and SEB, restructuring increased
QoQ led by higher additions for SBIN, PNB, BOB and
ANDB.

Divergent trends in NIMs

Despite the lower base (due to funded interest term
m
loan provisions, higher slippages) of previous quarter
and CRR reduction, PSBs continue to disappoint with
dismal margin performance on a sequential basis. Lag
impact of higher bulk deposits taken during tight
liquidity conditions in 4QFY12, continued asset quality
deterioration, reduction in lending rates etc impacted
PSBs NIM performance.
Benign asset quality continued strong growth in high
yielding products helped private banks report in-line
margin performance. Post the sharp (+30bp QoQ)
improvement in NIMs in 4QFY12, flat NIMs over the
last two quarters for ICICIBC was a positive surprise.

Stress levels continue to rise, impact valuations

FB

50

70

90

110

130

Pvt Banks

PSU Banks

Sensex

Apr-12

Sep-11

Aug-11

Apr-11

Feb-11

Jan-11

Nov-10

Private banks continue to outperform

Jun-12

*C.BANKS: MOSL Coverage

Mar-12

Loan growth of private banks remains strong (%)

Oct-12

Sep-12

Jul-12

Feb-12

Dec-11

Nov-11

Jul-11

May-11

Asset quality trends will remain key to valuation

Rising stress and lower margins are significantly
impacting the valuations for PSBs. The only relief for
the banks now could be monetary easing or policy
actions from government leading to optimism in CY13.
Retail focused private bank continue to show better
than expected performance and we expect trend to
continue. Private banks with higher corporate
exposures have tied through tough times so far,
however situation remains challenges.
Top picks: Private banks ICICIBC, AXSB; PSBs SBIN.
In mid-cap space, we like YES and OBC.

PSBs risk aversion continue; private banks growth healthy

althy
Retail focused banks continued to witness strong
growth across products. Further one-off short term
corporate lending opportunities boosted the loan
growth for private banks.
Large corporate segment (+17% QoQ and 38% YoY)
remains a key driver of growth for ICICIBC. YES
reported strong loan/customer asset growth of ~10%
QoQ and 23%/33% YoY.
Sequential decline or moderate growth for PSBs is due
to seasonal factors, pressure on liability side to cut
bulk deposits (Ministry of Finance directive of 15% by
end-March 2013) and risk aversion led by higher asset
quality related issues.

Stress levels continue to rise, impact valuations

Nov-12

Actual
2QFY13

379,980
270,242
113,384
23,269
5,059
37,317
33,712
5,097
3,688
5,242
266,596
156,858
8,938
28,623
21,960
19,568
11,203
11,571
36,494
109,738
18,502

(INR Million)

Coverage Banks
Coverage Banks (ex SBIN)
Private Banks
AXSB
FB
HDFCB
ICICIBC
IIB
VYSB
YES
PSBs
PSBs (Ex-SBIN)
ANDB
BoB
BoI
CBK
INBK
OBC
PNB
SBIN
UNBK

YoY (%)

Net Interest Income

2.2
11.3
3.7
14.2
6.5
25.4
6.7
15.9
2.9
6.6
7.1
26.7
5.6
34.5
5.3
21.6
7.4
21.5
11.0
35.9
0.5
6.2
1.7
7.3
-4.8
-6.0
2.3
11.5
7.5
15.3
6.1
-0.2
-2.8
-1.3
2.8
16.9
-1.2
5.7
-1.3
4.7
1.6
11.4

QoQ (%)
-1.7
-0.5
2.8
2.3
-2.5
3.5
3.5
-2.6
4.6
5.4
-3.5
-2.8
-8.2
1.8
-7.9
3.0
-6.6
-1.9
-2.6
-4.4
-5.0

Var (%)
285,704
212,167
94,247
21,783
3,496
25,713
31,933
4,198
2,276
4,847
191,457
117,920
6,381
23,826
18,541
12,821
9,084
9,212
25,329
73,536
12,727

Actual
2QFY13
YoY (%)

Operating Profit
-1.3
8.3
2.1
12.2
5.6
25.2
10.9
22.7
0.9
-3.2
-0.4
21.0
8.3
35.7
3.9
26.1
4.7
20.2
5.5
25.6
-4.4
1.6
-0.5
3.6
-9.3
-7.1
6.3
12.0
10.8
19.5
-8.0
-19.9
8.1
-1.4
2.8
21.5
-10.8
0.2
-10.1
-1.6
0.4
5.6

QoQ (%)
-4.8
-1.5
0.7
7.2
-8.8
-6.8
4.9
-2.4
1.0
-0.9
-7.3
-3.2
-8.7
6.1
-0.9
-8.2
2.0
4.2
-10.4
-13.1
-7.0

Var (%)
142,407
105,826
55,613
11,235
2,151
15,600
19,561
2,503
1,502
3,061
86,794
50,213
3,256
13,138
3,019
6,610
4,967
3,022
10,656
36,581
5,546

Actual
2QFY13

YoY (%)
Profit After Tax
-3.5
16.8
-3.9
12.9
6.3
27.6
-2.6
22.1
13.0
12.5
10.1
30.1
7.8
30.1
5.9
29.6
15.4
30.2
5.5
30.2
-8.9
10.9
-13.0
0.0
-10.0
3.0
15.4
12.7
-66.0
-38.5
-14.7
-22.4
7.6
6.0
-22.8
80.2
-14.5
-11.6
-2.5
30.2
8.4
57.3

QoQ (%)

-1.6
-2.5
3.0
-0.1
7.2
-0.1
7.3
0.9
13.7
-0.2
-4.3
-7.9
1.5
21.3
-57.5
-9.9
5.5
-9.0
-12.5
1.1
-5.0

Var (%)

For our coverage universe, NII and PAT were in line with expectation, though performance varied across banks. PSBs
SBs
disappointed while private banks reported healthy margin performance. Significant negative surprise on NII camee
from SBIN, BOI, UNBK, ANDB and INBK. Muted fee income growth was witnessed across the board, exerting
additional pressure on core operating profits.
While operating profits was lower-than-expectation (led by PSBs, private in-line), compromise on PCR and MTM
write-back and higher base of 2QFY12 led to lower growth in provisioning expense and in-line PAT. UNBK and OBC
performed well in asset quality among PSBs. Lower tax rate also came as a respite in some cases.

Varied performance; private banks continue to shine

Financials: Private Banks

AXSB
FB
HDFCB
ICICBC
IIB
VYSB
YES
Financials: PSU Banks
ANDB
BoB
BoI
CBK
INBK
OBC
PNB
SBIN (standalone)
SBIN (consol)
UNBK
Financials: NBFC
DHFL
HDFC
IDFC
LICHF
MMFSL
POWF
RECL
SHTF

Company

125.6
55.7
35.8
78.7
27.5
40.3
43.0
28.0
129.0
63.7
85.5
45.7
56.6
185.1
260.7
330.3
48.1
51.3
38.6
13.3
31.7
93.7
32.7
41.7
70.4

109.5
47.0
28.7
68.3
22.0
35.4
35.4

25.0
110.6
53.9
73.7
42.8
50.8
155.5
226.2
284.5
42.0

37.7
32.1
10.9
21.8
79.4
29.5
34.9
59.8

EPS - Pre-2QFY13 (INR)

FY13E
FY14E

37.9
32.0
11.8
19.8
80.5
31.4
36.6
61.2

23.5
116.8
42.1
66.1
43.7
48.2
144.8
221.6
281.5
39.9

114.0
46.8
28.5
69.6
22.0
38.1
35.8

51.1
38.0
13.7
28.7
96.9
35.4
42.0
71.6

26.9
132.7
52.5
81.2
46.6
57.3
170.7
254.2
323.8
47.9

131.2
55.6
35.6
80.2
26.9
42.6
43.0

EPS - Post-2QFY13 (INR)

FY13E
FY14E

0.5
-0.5
8.0
-9.0
1.4
6.4
5.0
2.3

-6.1
5.7
-21.9
-10.3
2.2
-5.1
-6.9
-2.0
-1.1
-4.9

4.2
-0.5
-0.5
1.9
-0.1
7.7
0.9

-0.4
-1.6
3.4
-9.3
3.4
8.3
0.7
1.7

-3.7
2.9
-17.5
-4.9
2.1
1.3
-7.8
-2.5
-2.0
-0.4

4.4
-0.2
-0.4
1.9
-1.9
5.6
0.0

% Revision
FY13E
FY14E

48.3
14.6
14.4
9.6
33.3
31.4
28.3
10.1

-2.3
-3.8
-9.7
-10.8
7.5
23.2
0.6
27.0
23.1
23.7

11.1
3.0
29.6
24.1
28.1
25.3
29.2

34.8
18.8
16.6
44.7
20.4
12.9
14.6
17.0

14.7
13.6
24.8
23.0
6.6
18.9
17.8
14.7
15.1
20.0

15.0
18.9
24.8
15.2
22.6
11.8
20.2

EPS Growth (%)

FY13E
FY14E
14E

PSBs see earnings downgrade led by higher asset quality issues

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
PSBs (Ex-SBIN)
PSBs
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB
FB
Private Banks
Coverage Banks

INRb
492
140
56
59
89
65
35
20
30
463
955
101
21
22
1
4
6
14
174
1,129

Gross NPA
QoQ %
YoY %
4
45
40
172
25
48
11
73
32
36
-1
26
3
11
27
89
28
52
22
64
12
54
1
-1
2
13
5
26
-6
49
12
23
-1
14
2
15
3
8
11
44
3.1
0.9
1.1
0.2
1.0
1.9
3.8

GNPA %
5.2
4.7
2.6
2.0
3.4
3.7
2.9
2.1
3.5

INRb
226
79
46
24
52
36
24
13
18
286
512
21
4
7
0.2
1
0
2
38
551

Net slippages for PSBs (ex-SBIN) increased sharply

(+65% QoQ). On a higher base, SBIN reported a QoQ
decline in net slippages (partially helped by
restructuring). PSBs (ex-SBIN) annualized net slippage
ratio increased to 3.2% v/s 2% in 1QFY13.
For PSBs (ex-SBIN), GNPAs and NNPAs increased 22%
and 24% QoQ respectively. Most of the banks
compromised on PCR to protect profitability.
Relatively better performance: UNBK, OBC and CBK
(adjusted for large media account). Negative
surprise: PNB, BOI and BOB.
Net NPA
QoQ Gr %
YoY Gr %
11
40
60
277
22
47
29
113
18
23
-5
20
4
21
31
111
42
68
24
70
18
55
10
-4
-2
9
8
19
-15
48
14
23
-29
-49
4
25
11
7
17
51

0.7
0.2
0.3
0.1
0.3
0.1
0.7

NNPA %
2.4
2.7
2.1
0.8
2.0
2.1
2.0
1.3
2.2

Calculated Prov. Cov %

2QFY12
1QFY13
2QFY13
52.5
56.9
54.0
59.4
50.8
43.8
17.8
16.5
18.6
67.1
65.3
59.4
35.2
34.6
41.2
42.4
42.7
45.0
36.4
31.7
30.9
43.1
38.0
36.3
45.3
45.2
39.3
40.2
39.2
38.2
46.9
49.0
46.4
77.9
80.4
78.7
81.3
81.0
81.9
68.5
71.1
70.1
80.2
78.3
80.4
72.0
72.6
72.1
84.8
90.4
93.1
84.3
83.2
82.9
77.8
79.5
77.9

78.7
81.9
80.0
80.4
72.1
93.1
82.9

PCR (%)
Incl W/off
62.8
54.3
63.0
75.7
61.0
61.5
64.5
71.0
53.2

Going forward, restructuring is expected to increase

led by some large-mid corporate accounts under CDR.
Private banks asset quality is expected to remain
healthy due to lower restructured loans, lesser
proportion of direct agricultural loans and better risk
management.

Private banks asset quality remained healthy, with

h
GNPAs (+3% QoQ) and NNPAs (+11% QoQ on a lower
wer
base) being largely flat QoQ. AXSB gross stress
addition was better-than-expectation and within
management guidance.

Asset quality: impressive performance by private banks

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
PSBs (Ex-SBIN)
PSBs
ICICIBC
AXSB
IIB
FB

2QFY12
82,700
9,930
12,360
5,825
28,217
18,210
15,033
3,790
11,593
93,365
176,065
7,900
4,960
1,310
2,650

Slippages (INR m)
3QFY12
81,610
16,830
8,620
9,527
8,696
5,660
6,988
2,943
3,809
59,264
140,874
8,770
5,350
680
3,300
4QFY12
43,830
28,190
11,210
13,233
8,000
6,070
13,174
10,397
4,017
90,274
134,104
6,350
5,140
840
2,700

1QFY13
108,440
27,690
14,970
13,093
17,470
16,310
7,069
2,310
8,331
98,912
207,352
8,680
4,560
1,090
2,890

2QFY13
71,060
45,440
19,220
14,158
27,334
7,920
6,522
7,330
9,150
127,924
198,984
12,200
6,280
1,130
1,470

2QFY12
4.9
1.9
2.8
1.2
6.1
5.8
6.9
2.2
7.6
2.8
3.3
1.6
1.8
2.2
3.8

Slippage Ratio (%)

3QFY12
4QFY12
4.5
2.3
3.0
4.7
1.8
2.1
1.8
2.3
1.8
1.5
1.7
1.6
3.1
5.4
1.6
5.5
2.3
2.2
1.7
2.4
2.5
2.2
1.7
1.2
1.7
1.4
1.1
1.3
4.7
3.4

1QFY13
5.6
4.6
2.8
2.3
3.3
4.5
2.9
1.1
4.4
2.6
3.4
1.6
1.4
1.5
3.6

2QFY13
3.6
7.3
3.5
2.4
5.0
2.2
2.5
3.4
4.9
3.8
3.7
2.1
1.8
1.5
1.7

PSBs reported a sharp increase in slippages led by mid-corporate and SME segment. In certain cases, slippages
increased QoQ due to AFI inspection.
Among PSBs, higher stress was seen for PNB, BOI, ANDB and INBK. SBIN quarterly slippages declined QoQ on a high
base; stable recoveries and up-gradation led to net slippages declining to 44% QoQ (net slippage ratio of 2.2%,
compared to 3.9% a quarter ago). Performance of UNBK and OBC was relatively better among PSBs. Increased stress
in large corporate segment and continued challenges in mid-corporate and SME segment would keep the asset quality
under pressure for the banking system.
Private banks, in certain cases, proactively recognized some stress and made provisions - AXSB and ICICIBC recognized
a large media account and provided 60% and 85% on the same respectively. Though YES made additional provisions
of ~33% of the exposure, it did not recognize it as NPA.

Slippages: Sharp rise QoQ for PSBs; private banks proactive

2.0

3.6

3.0

0.8

1.2

0.6

4.8

0.9

BoI

UNBK

INBK

OBC

ANDB

ICICIBC

AXSB

1.2

7.0

4.8

5.1

0.6

2.1

7.5

3.0

5.9

5.8

4.8

4.3

0.4

2.0

13.2

2.3

6.1

0.6

4.0

1.4

4.3

3.5

4.6

5.5

2.6

6.6

1.4

5.6

2.6

2.7

1.7

6.3

5.2

2.8

3.9

27.4

19.4

34.8

25.3

44.9

33.6

29.7

25.0

73.7

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
ICICIBC
AXSB

1QFY10
0.9
0.4
0.6
0.9
0.5
1.0
0.6
0.1
0.3
2.5
1.7

2QFY10
0.7
0.1
0.7
0.5
1.3
0.4
0.2
0.3
0.4
2.2
2.4

3QFY10
0.3
0.8
1.0
0.6
1.2
0.2
0.2
0.2
0.4
2.2
1.5

66.1

22.8

16.0

45.7

35.8

57.7

27.9

53.0

12.9

15.1

82.7

23.3

61.4

29.5

4Q
47.1

48.0 31.5

76.1 44.4

33.8 38.3

37.6 31.1

23.2 20.9

65.2 34.8

67.3 19.7

FY13
1Q
2Q
33.1 23.9

47.9

26.2

4QFY10
1.4
1.0
1.5
0.6
1.6
1.1
1.7
2.2
1.3
2.2
0.8

15.9 22.1

2QFY11
1.3
0.7
0.5
0.3
0.6
2.0
1.0
0.6
0.6
1.4
1.2

148.3 15.8 31.3

22.7

1QFY11
1.1
1.1
0.3
0.6
0.7
0.3
0.7
2.5
0.1
1.7
1.1

32.6

27.2

93.8 184.3 161.6 30.8 66.7

47.4

48.6

24.8

30.7

21.9

55.2

58.8

FY12
2Q
3Q
25.5 23.2

As a % of Opening GNPA (ann.)

Credit cost (annualized) remains high (%)

1.6

6.7

1.9

2.4

1.0

2.3

4.4

1.9

5.5

59.6

BoB

5.0

4.9

5.7

14.7

CBK

4.8

PNB

3.6

6.5

SBIN

7.2

FY12
FY13
1Q 2Q 3Q 4Q 1Q
2Q
1Q
30.8 17.7 19.7 47.2 32.8 28.2 48.6

Recoveries & Upgradation (INR b)

Recoveries and upgradation: Performance not very strong

SBIN

3QFY11
0.9
1.0
0.3
0.4
0.3
1.1
0.8
0.2
1.0
0.9
0.8

AXSB

ICICIBC

ANDB

OBC

UNBK
INBK

BoI

BoB

CBK

PNB

1Q

2Q

4.2

5.5

0.2

3.2

3Q

1.6

1.1

0.3

0.4

4QFY11
1.8
0.9
1.1
0.8
0.7
0.3
1.7
0.9
1.2
0.7
0.3

2.3

3.2

0.0

1.4

0.2

3.4

2.9

2.4

4.8

0.0

0.6

0.9

1QFY12
0.6
0.9
0.5
0.2
0.7
1.0
0.6
0.6
0.6
0.8
0.4

1.6

0.8

1.6

1.9

0.4

2.0

1.5 16.0 2.6

1.1

2.9

0.1

6.0

FY12

1.1

1.2

1.3

4.8

1.8

0.8

3.1

2.0

3.8

0.3

0.8

1Q

1Q

48.9

61.3

1.5

4.6

2Q

18.3

11.5

2.4

0.5

3Q

FY12

68.6

12.7

0.8

29.7

9.4

37.5

21.1

22.5

4.1

12.9

13.3

54.1

50.8

1Q

5.8

20.8

17.5

37.3

1.6

0.8

65.5

18.7

0.5

8.2

1QFY13
1.3
1.2
0.8
1.1
0.9
1.0
1.5
0.4
0.7
0.7
0.6

7.5

12.2

2.4

67.0

2Q

90.1

20.0

0.8

35.3

34.7

14.4

0.6

43.5

14.6

0.6

16.7

10

2QFY13
0.8
1.5
0.8
1.0
2.3
0.8
1.0
1.1
0.6
0.7
0.9

27.5

4.8

28.1

53.6

35.0 114.6 38.0

4QFY12
1.3
1.4
0.7
1.4
0.8
0.5
1.8
2.1
0.5
0.8
0.3

47.6

3.2

79.3

36.5

19.6

4Q
0.8

FY13

As a % to Op GNPA (ann.)

12.5 110.2 16.1

14.6

37.2

1.0

9.5

3QFY12
1.5
0.9
0.3
0.8
0.6
1.1
0.4
0.5
0.2
0.6
0.9

3.9

5.1

0.0

3.0

1.3

2.4

0.1

5.8

1.6

0.2

19.7

2Q

FY13

2QFY12
1.2
0.5
0.9
0.5
1.5
1.3
1.3
0.5
1.2
0.6
0.7

0.3

3.1

0.1

5.4

3.4

1.7

2.1

5.3

5.1

0.7

0.8

4Q

Write-offs (INR b)

Some banks resort to writeoffs to keep GNPAs (%) lower

wer

Recoveries and upgradations moderate, net slippages rise

12.6

2.8

9.7

OBC

INBK

ANDB

1.2

3.3

AXSB

78.9

ICICIBC

PSBs (Ex-SBIN)

143.9

15.9

UNBK

PSBs

4.0

23.8

7.4

CBK

BoI

2.7

PNB

BoB

65.0

SBIN

2QFY12

4.1

1.8

30.9

92.8

-1.0

2.3

1.8

3.6

1.2

6.5

3.2

13.2

61.9

3QFY12

-0.8

0.6

56.5

53.1

-0.8

10.0

8.9

4.1

-5.2

11.0

5.1

23.4

-3.4

4QFY12

Net Slippages (INR b)

3.9

4.7

64.0

139.6

6.9

-1.2

2.8

11.7

11.9

10.5

8.4

13.0

75.6

1QFY13

4.9

6.6

107.0

149.9

6.6

5.6

3.9

1.7

22.1

11.4

15.3

40.5

42.9

2QFY13

1.2

0.2

2.8

3.2

6.4

1.6

5.8

5.0

5.2

0.8

1.7

0.5

3.8

2QFY12

1.3

0.4

1.1

2.0

-0.6

1.3

0.8

1.1

0.3

1.3

0.7

2.4

3.4

3QFY12

-0.2

0.1

1.7

1.0

-0.4

5.3

3.7

1.1

-1.0

1.9

1.0

3.9

-0.2

4QFY12

Net Slippage Ratio (%)

1.2

0.8

2.0

2.7

3.6

-0.6

1.1

3.2

2.2

1.8

1.6

2.1

3.9

1QFY13

11

1.4

1.1

3.2

2.8

3.5

2.6

1.5

0.4

4.1

1.9

2.8

6.5

2.2

2QFY13

A large media, pharma and steel account slipped in 1HFY13 and kept net slippages high for the banks.
Excluding a media account of INR5b for ICICIBC and INR3.5b for AXSB, net slippages improved sharply QoQ.
UNBK surprised positively with a sharp fall in net slippages. In case of INBK a large steel accounted impacted asset
quality performance, excluding for the same net slippages remained under control.
Sequential decline in SBIN net slippages is driven by INR13.9b of restructuring during the quarter. Adjusted for that as
well, net slippages declined from a high level of 1QFY13.
For PNB and BOI net slippages almost doubled QoQ.

Net slippages rose QoQ led by sharp increase in slippages

0.1

% of Loa n

32,470

Net Addition to OSRL in 2QFY13

18,460

9,850

5.6

166,450

70,000

22,500

3.1

92,500

8.8

258,950

PNB

8,189

54,476

3.1

67,949

55,000

14,800

3.2

69,800

6.4

137,749

CBK

15,985

8,367

5.2

151,786

20,000

24,000

1.5

44,000

6.7

195,786

BoB

2,021

40,866

4.6

119,871

28,800

29,000

2.2

57,800

6.8

177,671

BoI

OSRL is Outstanding Standard Restructured Loans

CBK and UNBK report restructured loans facility-wise and rest of the banks report borrower-wise

-16,090

3.4

315,270

Net Addition to OSRL in 1QFY13

% of Loa n

OSRL (ex-AI and SEB)

SEB

Ai r Indi a

12,690

12,690

AI and SEB

Of which

3.5

327,960

% of Loa n

OSRL

SBIN

-990

9,550

3.0

53,210

30,000

1.7

30,000

4.7

83,210

UNBK

5,292

14,438

4.8

56,500

41,550

16,780

4.9

58,330

9.7

114,830

OBC

4,307

10,160

7.7

73,287

22,300

7,900

3.2

30,200

10.8

103,487

INBK

Restructured loan portfolio continues to rise (INR m)

5,151

8,915

6.4

62,666

13,000

13,000

2.6

26,000

9.0

88,666

CRPBK

PSBs

282,450

133,970

1.7

416,420

6.0

4,311

11,792

8.1

12

90,045

143,409

4.4

69,666 1,073,988

14,800

6,300

2.4

21,100

10.5

90,766 1,490,408

ANDB

0.8

20.9 92.9 331.1 143.4 90.0

23.6 11.8

4.3

0.6

0.2

3.3

9.8

2.8

10.7
2.5

17.2

-1.9

16.0 17.4

20.0

9.9

11.8

-0.5

1.8

-2.5

10.1

8.4

-24.8 -0.5

18.2 10.8

7.9

20.9 66.4 62.9 22.3

0.8

-2.9

4.6

-0.8

-3.2

6.0

-0.9

23.2

89.5

4.3

4.3

4.7

-1.0

2.0

16.0

8.2

18.5

FY12
FY13
2Q
3Q
4Q
1Q
2Q
-5.8 -19.5 38.2 -16.1 32.5

Net Addition to OSRL (ex-AI and SEB)

2.7

-1.0

2.3

1.8

3.6

1.2

6.5

3.2

8.4

15.3

-0.8

10.0

8.9

4.1

-5.2

6.9

-1.2

2.8

11.7

6.6

5.6

3.9

1.7

11.9 22.1

11.0 10.5 11.4

5.1

13.2 23.4 13.0 40.5

Net Stress Addition

11.1

-6
43
-33

10
10

UNBK
OBC
INBK

ANDB
PSBs

123
44

103
178
31

36
70
86

279
147

195
303
402

-43
191
120

FY12
3Q
4Q
-23
59
69 256
-4
25
-15
-6
43
-33
10
10

38
55
8

-6
45
45

50
37

136
60

55
127
108

241
29
155

2Q
-7
93

123
31

103
96
31

36
70
86

FY12
3Q
-23
2

30
28

96
-16
189

-107
38
13

4Q
44
1

136
9

-14
16
-6

-2
29
38

50
36

-6
40
45

38
55
8

FY13
1Q
2Q
-18
35
33
63

Net Addition to OSRL (ex-AI and SEB)

FY13
1Q
2Q
-18
35
33
63

Net Addition to OSRL

62.9 23.5

10.5

-0.1
8.8

5.1

8.9

9.9

9.2

0.7

22.8 18.7 10.9

46.7

17.2 21.5 43.1 17.2

15.0 19.6 39.5 21.3

20.6 21.2 25.1 52.8 24.1

130
69

108
119
33

34
17
110

2Q
82
11

-13
44

23
17
27

14
25
5

-9
24

23
79
110

22
38
-21

4Q
-4
80

80
58

67
24
-13

37
37
45

76
61

9
32
59

71
39
85

FY13
1Q
2Q
82
46
44 137

Net Slippages

FY12
3Q
73
50

141
79

102
163
-1

30
42
95

111
87

126
194
58

50
95
91

270
170

218
382
512

-21
229
100

216
118

122
151
95

279
66
200

126
98

4
77
104

109
94
93

FY13
1Q
2Q
65
81
78 200

Net Stress Addition

FY12
2Q
3Q
4Q
75
50
55
104 119 336

OSRL is Outstanding Standard Restructured Loans

For both charts, ANDB and UNBK facility-wise reported nos. adjusted to borrower-wise for like-to-like comparison

-4
25
-15

2Q
-7
93

CBK
BoB
BoI

SBIN
PNB

As a %
of loans
(in bps)

-5.0

10.0 24.6 65.8 18.9 27.4

6.4

25.9 31.3 98.6 22.9 59.0

FY12
FY13
2Q
3Q
4Q
1Q
2Q
59.2 42.4 47.5 59.5 75.4
11.1 -19.8

7.9

23.5
-1.9

10.5

-0.1

8.8

5.1

17.2 12.5

1.7

27.2

7.0

15.0 19.6 21.5

20.6 21.2

9.9

8.6

0.7

18.7 10.9

-1.8

4.6

9.3

22.0 24.1

10.0 24.6 21.8 18.9 27.4

6.4

25.9 13.8 23.6 22.9 59.0

FY12
FY13
2Q
3Q
4Q
1Q
2Q
59.2 42.4 34.8 59.5 75.4

Net Stress Addition (Ex-AI and SEB)

141
79

102
163
-1

30
42
95

2Q
75
104

111
75

126
113
58

50
95
91

FY12
3Q
50
53

21
51

119
62
298

-85
76
-8

4Q
40
80

216
67

53
40
-19

35
66
83

13

126
97

4
72
104

109
94
93

FY13
1Q
2Q
65
81
78 200

Net Stress Addition (Ex-AI and SEB)

143.9 92.8 53.1 139.6 149.9 164.8 185.7 384.2 283.1 239.9 164.8 159.2 116.0 161.9 239.3

9.7

2.8

12.6

15.9

23.8

4.0

7.4

FY13
1Q
2Q
75.6 42.9

Net Slippages

FY12
2Q
3Q
4Q
65.0 61.9 -3.4

Net stress additions (ex- AI and SEBs) nears one percentage point during the quarter

9.8

4.3

PSBs

36.7 10.2

5.3

-1.0

ANDB

2.8

19.7 34.2 14.4

9.6

4.6

16.0 35.4

2.0

16.0

-2.9

UNBK

8.4

20.0 30.3 40.9

18.2 54.8

INBK

-0.8

BoI

8.2

18.5

OBC

6.0

-3.2

BoB

-10.0 54.5

9.9

-0.9

CBK

7.9

23.2 18.1 75.2

PNB

SBIN

FY12
FY13
2Q
3Q
4Q
1Q
2Q
-5.8 -19.5 50.9 -16.1 32.5

(INR b)

Net Addition to OSRL

Net stress addition (incl. AI and SEBs) declines QoQ on a higher base; excl AI and SEBs up 48% QoQ and ex-SBIN up 60%
% QoQ

Net stress addition on the rise

 Retail focused banks continued to witnessed strong

growth across products. While HDFCB retail loan
growth was healthy at 10% QoQ and 33% YoY,
continued short term lending opportunities led to
strong growth (22% YTD, 7% QoQ) in corporate
segment as well. HDFCB reported robust growth
(~45%) in CV loans. Credit card and PL grew 30%+ YoY.
AXSB retail loan growth was also strong at 9% QoQ and
50% YoY (17% YTD) led by secured products.
Sequential decline or moderate growth for PSBs is due
to seasonal factors, pressure on liability side to cut
bulk deposits (MOF directive of 15% by end-March
2013) and risk aversion led by higher asset quality
related issues.
Large corporate segment (+17% QoQ and 38% YoY)
remains a key driver of domestic loan growth for
ICICIBC. Retail loans have also started seeing some
traction with 2% QoQ and 14% YoY growth.
YES reported strong loan/customer asset growth of
9%/10% QoQ and 23%/33% YoY. Strong loan growth
during the quarter is attributed to short term lending
opportunities. Management clarified that risk aversion
remains and loan growth is likely to moderate over
next two quarters. The robust growth in vehicle
finance portfolio (8% QoQ, ~40% YoY) led to strong
loan growth for IIB. FB moderated growth to protect
margins in the quarter.
1,721
420
394
300
363
8,266
32,943
48,094

AXSB
YES
IIB
VYSB
FB
Private Banks
Coverage Banks
Industry

865

ANDB

2,316

957

INBK

HDFCB

1,188

OBC

2,751

1,767

UNBK

ICICIBC

2,604

BoI

24,677

2,922

BoB

PSBs

2,158

CBK

15,408

2,947

PNB

PSBs (Ex-SBIN)

9,269

2QFY13
(INR b)

SBIN

Loans

1.0

1.3

3.8

-4.6

2.6

5.9

9.0

0.6

8.6

2.5

0.5

0.2

-0.1

2.0

4.3

1.6

-1.4

2.2

-4.4

0.1

1.1

15.9

17.1

20.6

8.0

20.8

30.8

22.9

22.9

22.9

17.6

16.0

15.3

16.1

10.8

12.5

20.0

20.0

22.2

-1.0

18.4

17.2

7.8

2.8

5.0

0.8

1.9

6.2

1.4

0.8

9.2

5.8

2.2

0.2

2.3

3.0

0.7

-3.9

5.0

-0.5

-3.0

0.2

5.7

19.5

19.4

23.3

19.0

22.9

31.2

16.4

29.8

21.5

21.6

18.1

17.7

14.4

13.8

16.0

19.5

22.9

23.0

4.9

21.2

18.9

YoY

QoQ

QoQ

YoY

1QFY13 (Gr %)

2QFY13 (Gr %)

Private banks continue to outpace PSBs

PSBs grapple with asset quality issues

3.7

3.3

6.2

5.1

4.4

6.2

3.3

6.2

7.4

6.0

2.4

2.3

-1.6

4.7

7.5

1.2

0.9

2.9

1.4

2.5

2.6

QoQ

14

20.1

19.6

21.6

21.6

22.8

28.5

12.7

26.7

20.0

20.5

19.0

20.7

22.1

23.4

20.7

16.5

17.7

23.9

23.8

19.3

16.1

YoY

2QFY12 (Gr %)

Loans: healthy growth in retail; corporate growth slows down

 Managements of PNB, CBK, OBC and ANDB

commented that moderate balance sheet growth is
likely to continue for some more quarters.

Within private banks, strong deposits growth was

witnessed for ICICIBC, HDFCB and IIB. Moderation in
balance sheet for future profitable growth led to just
5% YoY and 2% QoQ decline in deposits for FB.

Large PSBs like PNB, BOB and CBK has shed at least
200bp of bulk deposits. CBK and OBC continued the
strategy to moderate balance sheet growth to improve
its balance sheet profile.

Domestic deposit growth remained moderate for PSBs

(ex BOB), which in our view, to an extent was triggered
by GOI directive to reduce the bulk deposits
proportion to less than 15% by end-March 2013 and
banks risk aversion to grow loans.

Banks under our coverage grew faster than the

industry. Private banks continue to outpace industry
deposit growth on a QoQ basis, led by strong loan
growth.

In a stressed liquidity and muted deposits growth

environment, borrowings remained a key source of
funding. In TTM, banks actively used RBIs refinance
window refinancing some priority sector loans etc.

1,312
1,086
21,084
32,421
2,814
2,741
2,356
523
478
362

INBK
ANDB
PSBs (Ex-SBIN)
PSBs
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB

64,110

1,642

OBC

Industry

2,261

UNBK

42,190

3,327

BoI

Coverage Banks

4,081

BoB

9,769

3,368

CBK

Private Banks

4,007

PNB

495

11,336

SBIN

FB

2QFY13
(INR b)

Deposits

2.9

3.2

5.1

-2.1

0.8

6.0

4.1

5.8

6.4

5.1

2.6

2.5

0.9

3.3

3.8

1.8

-1.9

6.6

0.6

4.0

2.8

14.0

15.8

17.6

4.8

17.8

24.5

18.6

21.2

18.8

14.8

15.3

14.7

15.0

12.9

9.8

15.6

11.2

24.0

7.7

17.3

16.5

1.9

3.3

3.5

3.3

1.9

6.4

2.1

1.1

4.4

4.8

3.3

2.1

1.7

5.1

1.4

-0.3

6.5

-0.6

2.3

1.5

5.7

13.5

16.7

19.4

17.8

14.6

27.8

15.2

21.3

22.0

16.1

15.9

15.8

18.5

15.0

9.4

11.5

15.7

22.3

11.5

18.9

16.1

YoY

QoQ

QoQ

YoY

1QFY13 (Gr %)

2QFY13 (Gr %)

2.5

3.9

6.7

10.1

-1.9

8.8

1.1

5.9

9.2

6.2

3.2

3.6

3.9

5.2

3.5

-1.8

2.0

5.2

4.1

5.5

2.4

QoQ

15

19.5

18.3

17.2

30.9

17.8

22.6

10.2

23.9

18.1

9.9

18.7

21.5

20.2

18.6

18.9

10.0

24.1

22.1

25.4

25.0

13.8

YoY

2QFY12 (Gr %)

Borrowings remain one of the key source of funding

ing
Private banks continue to outpace PSBs

Deposits: Bulk deposit cap by MOF leading to growth moderation

23.4
23.7
25.2
21.6
16.7
14.1
21.3
32.5
22.3
20.7
19.7
20.0
21.4
26.1
31.4
25.5
17.8
21.0
20.7
20.1

PNB

CBK

BOB*

BOI*

UNBK

OBC

INBK

ANDB

PSBs (Ex- SBIN)

PSBs

ICICIBC*

HDFCB

AXSB

YES

IIB

VYSB

FB

Private Banks

Coverage Banks

Industry

* Domestic CD ratio

18.0

SBIN*

1QFY12

21.2

19.6

21.6

21.6

22.8

28.5

12.7

26.7

20.0

20.5

19.0

20.7

22.1

23.4

20.7

16.5

17.7

23.9

23.8

19.3

16.1

2QFY12

16.0

19.1

20.5

17.6

22.6

29.7

15.3

20.4

22.1

19.1

18.6

20.0

20.7

19.1

21.9

16.8

20.9

25.8

15.5

18.7

16.5

3QFY12

19.5

17.6

19.5

18.2

21.8

34.0

10.5

19.2

22.2

17.3

17.1

18.5

17.4

20.4

16.7

18.3

16.3

25.7

10.0

21.3

14.7

4QFY12

YoY Loan Growth (%)

16.5

19.4

23.3

19.0

22.9

31.2

16.4

29.8

21.5

21.6

18.1

17.7

14.4

13.8

16.0

19.5

22.9

23.0

4.9

21.2

18.9

1QFY13

15.9

17.1

20.6

8.0

20.8

30.8

22.9

22.9

22.9

17.6

16.0

15.3

16.1

10.8

12.5

20.0

20.0

22.2

-1.0

18.4

17.2

2QFY13

74.5

77.7

82.9

74.5

76.1

80.5

76.0

71.8

83.1

75.5

76.2

73.6

83.3

74.7

67.9

73.1

65.6

74.2

71.6

74.9

76.7

1QFY12

73.8

77.2

82.5

71.1

80.9

78.5

77.6

72.0

81.7

72.3

75.7

72.7

78.9

74.3

70.6

75.3

64.6

72.6

69.7

72.9

75.8

2QFY12

75.3

78.7

82.6

71.0

83.1

79.9

76.4

71.3

83.6

71.1

77.6

73.9

80.2

74.0

70.9

76.1

67.2

74.6

69.5

73.7

78.6

3QFY12

77.0

79.9

84.5

77.2

81.6

82.8

77.3

77.1

79.2

76.1

78.5

76.2

80.0

75.5

72.5

81.2

71.5

74.7

71.1

77.4

78.5

4QFY12

CD Ratio (%)

CD ratio: Comes off on a high base, also impacts margins

76.4

79.5

85.6

75.2

81.6

82.6

76.7

76.9

82.8

76.6

77.7

74.8

80.4

73.9

72.0

78.3

68.5

74.7

67.4

76.4

77.8

1QFY13

16

75.0

78.1

84.6

73.3

83.1

82.5

80.4

73.1

84.5

77.1

76.1

73.1

79.6

73.0

72.4

78.1

69.1

71.6

64.1

73.5

76.6

2QFY13

72.9
76.4
73.5

1QFY13

CBK

69.7
67.4
64.1
74.7

BOI*

2QFY13

BOB*

72.6
71.6
64.6
68.5
69.1
78.3
78.1

OBC

70.6
72.0
72.4

INBK

74.3
73.9
73.0

ANDB

78.9
80.4
79.6

PSBs
(ExSBIN)

72.7
74.8
73.1

76.1
72.3
76.6
77.1
81.7
82.8
84.5

AXSB

72.0
76.9
73.1

YES

77.6
76.7
80.4

IIB

78.5
82.6
82.5

VYSB

80.9
81.6
83.1

FB

71.1
75.2
73.3

17

PVT. C. Banks Industry

Banks

82.5
85.6
84.6
77.2
79.5
78.1
73.8
76.4
75.0

-1.0

FB

8.0

INBK
OBC

10.8
12.5

PSBs (Ex-SBIN)

15.3

Industry

15.9

PSBs

16.0

ANDB

16.1

C. Banks

17.1

SBIN

17.2

ICICIBC

17.6

PNB

18.4

UNBK

20.0

BoI

20.0

PVT. Banks

20.6

VYSB

20.8

BoB

22.2

AXSB

22.9

YES

22.9

HDFCB

22.9

FB
CBK
OBC
BoI
INBK

Deposit growth remains healthy (%)

PSBs ICICIBC* HDFCB

75.7
77.7

Though CD ratio has moderated, it remains at an elevated level (%)

UNBK

75.3

CBK

4.8
7.7
9.8
11.2
12.9

Industry

14.0

PSBs (Ex-SBIN)

14.7

ICICIBC

14.8

ANDB

15.0

PSBs

15.3

UNBK

15.6

C. Banks

15.8

SBIN

16.5

PNB

17.3

PVT. Banks

17.6

VYSB

17.8

YES

18.6

HDFCB

18.8

AXSB

21.2

BoB

24.0

IIB

24.5

Loan growth moderates; few PSBs consolidate balance sheet

76.6

Strong growth for private banks; PSBs lag (%)

2QFY12

PNB

*C.BANKS: MOSL Coverage

SBIN*

*Domestic CD ratio

75.8
77.8

ANDB

*Average daily CASA ratio

3,428

26

FB

1,434

63

VYSB

Coverage Banks

81

IIB

Private Banks

52

481

394

HDFCB

AXSB*

YES

338

ICICIBC*

1,197

64

59

INBK

1,994

99

PSBs (Ex-SBIN)

157

UNBK

OBC

PSBs

274

132

BoB

131

CBK

BoI

280

PNB

4.0

11.8

3.3

-3.7

8.6

-0.2

15.2

15.4

9.9

-1.0

1.5

-5.3

2.5

0.5

-13.9

-17.2

13.3

14.6

9.0

-4.6

QoQ

797

(INR b)

SBIN

Growth (%)

CA Dep
YoY

7.0

13.0

12.9

32.3

9.8

29.6

11.3

19.7

2.4

3.1

8.1

11.2

-5.4

15.3

4.9

0.4

26.8

-21.9

19.2

-3.6

11,104

2,424

118

55

53

39

562

792

806

8,680

4,714

222

315

297

533

710

778

705

1,154

3,965

(INR b)

SA Dep

3.6

4.1

-1.8

2.9

3.4

29.2

6.5

3.2

3.5

3.4

5.0

-1.2

2.0

5.6

5.4

5.5

3.0

6.0

7.4

1.6

QoQ

Growth (%)
YoY

13.8

18.0

15.5

5.8

61.3

351.4

20.1

14.7

14.9

12.7

12.8

14.8

10.0

16.1

11.5

11.8

13.5

10.1

14.8

12.5

14,532

3,858

144

119

134

90

955

1,273

1,144

10,674

5,911

282

380

396

690

842

1,053

836

1,434

4,762

(INR b)

CASA Dep

3.7

6.8

-0.9

-0.7

6.4

10.6

9.9

7.5

5.3

2.6

4.3

-2.1

2.1

4.3

0.3

1.1

5.5

7.3

7.7

0.5

QoQ

Growth (%)

12.2

16.1

15.0

18.5

25.8

86.7

16.3

16.5

10.9

10.8

12.0

14.0

9.8

15.9

9.9

9.8

16.7

3.4

15.6

9.5

YoY

26.4

32.6

27.7

11.0

38.3

47.3

38.3

26.1

29.8

22.9

32.1

31.6

34.0

25.8

36.3

47.4

2QFY12

28.7

32.6

26.5

12.6

37.0

47.7

39.0

26.6

30.2

22.3

32.5

32.4

34.1

23.9

35.3

47.5

3QFY12

27.5

34.2

27.3

15.0

38.0

48.4

39.0

26.4

30.5

24.1

31.3

34.3

33.2

24.3

35.3

46.6

4QFY12

CASA ratio (%)

28.7

33.3

27.9

16.3

36.0

46.0

39.1

26.7

29.3

24.0

30.9

32.0

32.2

23.3

34.6

46.1

1QFY13

18

29.0

32.8

28.0

17.3

36.2

45.9

37.5

25.9

29.0

24.1

30.5

32.8

31.8

24.8

35.8

45.0

2QFY13

Better cash management by corporates, advance technology and increased competition in CA deposits segment are
leading to structural decline in CA share in overall deposits across banks. Large private banks continue to show
healthy performance on the SA front. However, decline in CA share is leading to overall moderation in CASA ratio .
PNB and CBK arrested the continued decline in CASA ratio led by healthy growth in SA deposits. Aggressive new
private banks are gaining market share at the cost of PSBs. SBIN reported more than 100bp decline in CASA ratio.
YES, IIB and KMB witnessed strong traction in SA deposits. Post deregulation of the saving deposit rate (since
1HFY12), share of SA in overall deposits increased by 250-600bp for these banks.

CASA: decline in CA; mid size private banks outpace in SA

9.5

INBK

9.8

BoI

9.8

UNBK

9.9

PSBs

10.8

ICICIBC

10.9

PSBs (Ex-SBIN)

12.0

ANDB

14.0

FB

15.0

PNB

15.6

OBC

15.9

PVT. Banks

16.1

AXSB

16.3

HDFCB

16.5

BoB

16.7

VYSB

18.5

IIB

11.0
17.3

OBC

24.0

CBK

23.3

22.9
24.1

25.8
24.8

26.7

IIB

27.9

INBK

29.3

FB

BoB

BoI

27.7
28.0

29.8
29.0

26.4

28.7

29.0

32.1

30.9

30.5

34.0

32.2

31.8

33.3

32.8

31.6

32.0

32.8

PNB

34.6

AXSB

36.0

ICICIBC

32.6
2QFY13

VYSB

25.9

1QFY13

UNBK

26.1

2QFY12

ANDB

39.1

19

SBIN

46.1

HDFCB

46.0

CBK

10.1

UNBK

11.5

BoI

11.8

SBIN

12.5

PSBs

12.7

PSBs (Ex-SBIN)

12.8

BoB

13.5

HDFCB

14.7

ANDB

14.8

PNB

14.8

ICICIBC

14.9

FB

15.5

OBC

16.1

PVT. Banks

18.0

AXSB

20.1

36.3
35.8

38.3
36.2

38.3
37.5

47.4

CBK

61.3
351.4

-21.9

INBK

-5.4

SBIN

-3.6

BoI

0.4

ICICIBC

2.4

PSBs

3.1

UNBK

4.9

PSBs (Ex-SBIN)
IIB

8.1
9.8

ANDB

11.2

AXSB

11.3

FB

12.9

PVT. Banks

13.0

OBC

15.3

PNB

19.2

HDFCB

19.7

45.0

47.3
45.9

BoB

26.8

and also on current account deposits

16.3

10.0

YES

86.7

CASA ratio strong growth for mid-size private banks (%)

YES

INBK

IIB

25.8

YES

5.8

CASA: growth moderated for system led by CA float decline

SBIN

VYSB

PSBs lag in savings deposit growth...

3.4

leading to moderation in CASA growth (% YoY)

CBK

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
Private Banks
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB
FB

Net Interest Margins (%)

3.4
4.1
3.3
3.0
2.8
3.4
3.3
3.8
3.9
2.6
4.2
3.7
3.0
3.4
3.3
4.4

2.5
4.3
3.7
3.1
3.3
3.3
4.2

2QFY11

3.2
3.9
3.0
2.9
2.9
3.0
3.3
3.7
3.7

1QFY11

2.6
4.2
3.8
2.8
3.6
3.1
4.3

3.6
4.1
3.3
3.2
3.1
3.4
3.1
3.8
3.9

3QFY11

2.7
4.2
3.4
2.8
3.5
3.3
4.0

3.1
3.9
3.2
3.1
2.9
3.4
3.0
3.9
3.7

4QFY11

Despite the lower base (due to FITL, higher slippages)

of previous quarter and CRR reduction, PSBs continue
to disappoint with dismal margin performance on a
sequential basis.
Lag impact of higher bulk deposits taken during tight
liquidity conditions in 4QFY12, continued asset quality
deterioration, cut in lending rates etc too marred PSBs
NIM performance.
Continued higher stress and pressure on lending yields
led to further 25bp QoQ (YTD 60bp) decline in margins
for SBIN. Strong margin was a key strength for SBIN to
counter higher credit cost. INBK and ANDB also
disappointed.

2.6
4.2
3.3
2.8
3.4
3.0
3.9

3.6
3.8
2.4
2.9
2.2
3.1
2.9
3.4
3.8

1QFY12

2.6
4.1
3.8
2.9
3.4
3.4
3.8

3.8
4.0
2.6
3.1
2.4
3.2
2.6
3.8
3.8

2QFY12

2.7
4.1
3.8
2.8
3.3
3.5
3.9

4.1
3.9
2.6
3.0
2.6
3.3
2.9
3.6
3.8

3QFY12

3.0
4.2
3.6
2.8
3.3
3.3
3.6

3.9
3.5
2.6
3.0
2.9
3.3
2.7
3.2
3.3

4QFY12

3.0
4.3
3.4
2.8
3.2
3.3
3.4

3.6
3.6
2.4
2.7
2.3
3.0
2.8
3.3
3.3

1QFY13

3.0
4.2
3.5
2.9
3.3
3.5
3.6

3.3
3.5
2.5
2.7
2.4
3.0
2.8
3.1
3.1

2QFY13

-1
-10
9
10
3
16
16

20

39
10
-32
0
-10
10
-19

Change in (bp)
QoQ
YoY
-23
-45
-10
-45
13
-11
-2
-36
15
-1
1
-19
0
15
-18
-64
-20
-69

Benign asset quality, continued strong growth in high

igh
yielding products and containment of cost of fundss
helped private banks to report in-line margins.
After the sharp (+30bp QoQ) improvement in NIMs in
4QFY12, flat NIMs QoQ over the last two quarters for
ICICIBC was a positive surprise.
AXSB, HDFCB and YES performance was on the
expected lines. VYSB and FB surprised positively with
+15bp QoQ improvement in margins.
As PSBs are not expected to be aggressive, private
banks having higher reliance on bulk deposits could be
key beneficiaries in a falling interest rate scenario.

NIMs: PSBs disappoint; private banks fare well

*Calculated

(%)
SBIN
PNB
CBK*
BoB
BoI
UNBK*
OBC
INBK
ANDB
Private Banks
ICICIBC*
HDFCB*
AXSB*
YES
IIB
VYSB
FB

2QFY11
9.7
10.6
9.9
8.4
8.5
9.0
10.3
10.2
11.0
8.3
9.7
8.9
9.5
12.1
9.8
11.2

8.3
9.7
8.7
9.6
12.2
9.6
10.8

8.3
10.0
8.9
10.0
12.3
10.1
11.1

3QFY11
9.7
10.6
9.8
8.6
8.8
9.6
10.3
10.4
11.1
8.6
10.4
9.2
10.7
12.9
10.7
11.2

4QFY11
9.5
10.8
9.9
8.7
8.8
9.8
10.8
10.6
11.6
9.0
10.8
10.1
11.6
13.5
11.1
12.0

1QFY12
10.4
11.4
10.5
9.1
8.9
10.2
11.6
11.1
12.2
9.5
11.0
10.8
12.2
13.8
11.4
12.7

2QFY12
11.1
11.9
10.9
9.6
9.4
10.7
11.7
11.5
12.5
9.5
11.3
11.0
12.4
13.8
11.7
12.9

3QFY12
11.2
12.0
11.1
9.5
9.5
10.8
12.2
11.7
12.8

9.8
11.5
10.7
12.5
13.9
11.8
12.5

4QFY12
11.4
11.4
11.2
9.3
9.7
10.6
12.3
10.9
12.3

9.9
11.9
10.9
12.4
14.0
12.0
12.5

1QFY13
10.9
11.5
11.1
9.1
8.9
10.8
12.4
11.3
12.1

10.1
11.6
11.0
12.4
13.9
11.9
12.8

2QFY13
10.9
11.1
11.3
9.1
9.2
10.7
12.4
11.1
12.0

19
-27
19
0
-1
-12
23

Chg. QoQ
2
-43
16
-1
34
-19
-3
-16
-8

21

61
62
19
20
13
51
1

Chg. YoY
-25
-83
34
-57
-22
-4
70
-37
-45

Base rate largely stable in 2QFY13 but product specific reduction continues (%)
%)

1QFY11
9.3
10.2
9.4
8.2
8.4
9.0
10.0
10.1
10.9

On a QoQ basis, private banks

showed stable/improving yield
on loans (YoL) due to higher
retail loan growth.
PSBs YoL fell QoQ due to
continued deterioration in
asset quality and reduction in
lending rates.
Sharp deterioration of ~40bp
in YoL for PNB was a negative
surprise.

Lending yields: Product specific rate reduced

5.3
5.0
5.7
4.4
4.8
5.2
5.6
5.3
5.5
5.2
4.3
4.6
6.3
6.0
4.7
5.8

CBK*
BoB

BoI
UNBK**
OBC

INBK
ANDB
Private Banks

ICICIBC**
HDFCB**
AXSB

YES
IIB
VYSB

FB
* Cuml a ti ve ** Ca l cul a ted CoF

1QFY11

SBIN
PNB

(%)

5.9

6.7
6.0
4.9

5.3
4.5
4.8

5.4
5.7

5.0
5.2
5.9

5.7
4.5

5.2
5.0

2QFY11

6.0

7.1
6.2
5.4

5.5
4.7
4.8

5.4
5.8

5.0
5.3
6.1

5.6
4.5

5.1
5.2

3QFY11

6.2

7.8
7.0
6.0

5.7
4.9
5.6

5.6
6.5

5.3
5.6
6.5

6.2
4.8

5.4
5.6

4QFY11

7.0

8.5
7.7
6.8

6.1
5.5
6.1

6.4
7.0

6.0
6.2
7.2

7.1
5.4

5.7
6.3

1QFY12

7.4

8.6
8.2
6.9

6.4
6.2
6.2

6.6
7.5

6.1
6.5
7.6

7.2
5.6

6.0
6.5

2QFY12

7.6

8.9
8.2
6.9

6.3
6.4
6.3

6.9
7.6

6.0
6.6
7.9

7.6
5.7

6.0
6.7

3QFY12

7.6

9.0
8.3
7.3

6.2
6.1
6.5

6.8
7.9

6.0
6.7
8.0

7.6
5.8

6.1
6.8

4QFY12

7.6

9.0
8.9
7.5

6.4
6.5
6.7

7.0
7.7

5.9
7.0
8.0

7.9
5.9

6.2
7.0

1QFY13

7.6

8.7
8.7
7.3

6.5
6.5
6.5

7.1
8.0

6.1
7.0
7.9

7.8
5.9

6.4
6.9

2QFY13

-30
-18
-25

13
-2
-16

7
29

16
-8
-5

-12
-4

22

17

10
52
40

12
30
35

48
57

1
47
30

56
24

Change in (bp)
QoQ
YoY
12
36
-7
39

Higher intake of bulk deposits in a stressed liquidity situation in 4QFY12 and moderation in low cost deposits growth
wth
led to pressure on cost of deposits in 1HFY13.
Among large PSBs (except for BOB and BOI who have large international operations), SBIN enjoys the lowest cost of
funds due to its strong CASA base.
Healthy growth in SA deposits for private banks partially negated the impact of higher cost of term deposits. YES
reported a sharp fall in cost of funds QoQ led by fall in bulk liability rates. IIB and VYSB also reported a decline in cost
of deposits, thus helping margins.
Improving liquidity situation, moderation in credit growth, lowering of SLR limit, GOI directive (for PSBs) of capping
bulk proportion etc would lead to lowering of cost of deposits in the coming quarters.

Cost of deposits: stabilizing now expected to fall from 3QFY13

3

-10
-10

BoB

-2

ICICIBC

-1

OBC

UNBK

IIB

AXSB

YES

10

CBK

13
15
16

FB

16

-16 -12
-8 -3 -1 -1
0 2
23
16 19 19

34

29

-6.0
-1.3
-0.2
4.7
5.7
6.2
6.6
7.3
11.3
11.4
11.5
15.3
15.9
16.9
21.5
21.6
25.4
26.7
34.5
35.9

BoI
CBK
BoB
OBC
YES
ICICIBC
UNBK
INBK
ANDB
IIB
SBIN
VYSB
AXSB
PNB
FB
HDFCB

Margins surprise negatively for PSBs

(%)

12
13
16

Initial signs of cooling cost of deposits

6
7

ANDB
INBK
CBK
SBIN
PNB
PSBs
FB
PSBs (Ex-SBIN)
C. Banks
UNBK
BoB
BoI
AXSB
OBC
VYSB
IIB
PVT Banks
HDFCB
ICICIBC
YES

YoY Gr. (%)

-19

23

YES -30
VYSB -25
IIB
-18
AXSB
-16
CBK*
-12
PNB
-7
OBC
-5
BoB
-4
HDFCB**
-2
FB
INBK
SBIN
ICICIBC**
BoI
ANDB

YoL impacted due to higher slippages

-27

Change in bp

-43

PNB
HDFCB*
UNBK*
INBK
VYSB
ANDB
OBC
BoB
IIB
YES
SBIN
CBK*
AXSB*
ICICIBC*
FB
BoI

QoQ change bp for NIMs, YoL and COD

BoI
VYSB

0.5
1.6
1.7
2.2
2.3
2.8
2.9
5.3
5.6
6.1
6.5
6.7
7.1
7.4
7.5
11.0

2.4
2.5
2.7
2.8
2.9
3.0
3.0
3.1
3.1
3.3
3.3
3.5
3.5
3.5
3.6
4.2

Margins surprised negatively for PSBs

PNB
HDFCB

-4.8
-2.8
-1.3
-1.2

NII: PSBs - muted business & decline in NIMs; Pvt: healthy growth & NIMs performance

-18

ANDB
INBK
SBIN
PNB
PSBs
UNBK
PSBs (Ex-SBIN)
C. Banks
BoB
OBC
FB
IIB
ICICIBC
CBK
PVT. Banks
AXSB
HDFCB
VYSB
BoI
YES

QoQ Gr. (%)

INBK

*C.BANKS: MOSL Coverage

ANDB -20

Pressure on NIMs continues

Change in bp

SBIN -23

3.2

37,317
23,269
5,242
5,097
3,688
5,059

HDFCB

AXSB

YES

IIB

VYSB
113,384
379,980
270,242

Private Banks

Coverage Banks

Coverage Banks (Ex-SBIN)

FB

15.9

33,712

ICICIBC

7.7

7.5

7.6

7.0

7.5

8.9

16.4

3.4

4.0

7.9

156,858

4.5

266,596

8,938

ANDB

10.2

PSBs (Ex-SBIN)

11,203

INBK

-2.8

4.5

3.4

11.7

10.9

10.8

8.1

2QFY12

PSBs

18,502
11,571

21,960

BoI

UNBK

28,623

BoB

OBC

36,494
19,568

PNB

109,738

SBIN

CBK

2QFY13
(INR M)

NII

5.4

6.7

7.0

11.3

6.6

2.7

10.9

6.6

5.8

8.2

6.6

4.3

3.4

3.1

15.2

7.2

8.6

3.5

-2.2

2.4

9.9

4.1

3.0

7.1

-7.0

-1.4

7.8

4.8

0.3

8.7

14.5

1.5

2.2

-7.1

-7.5

-6.3

5.4

21.0

5.3

6.3

-6.4

0.6

QoQ Growth (%)

3QFY12
4QFY12

0.4

-0.9

2.8

0.1

7.5

4.2

5.3

1.6

2.8

2.8

-2.4

-1.1

2.7

6.5

5.4

-2.9

-18.3

0.0

-9.6

11.6

-4.1

1QFY13

3.7

2.2

6.5

2.9

7.4

5.3

11.0

6.7

7.1

5.6

0.5

1.7

-4.8

-2.8

2.8

1.6

7.5

2.3

6.1

-1.2

-1.3

2QFY13

13.6

18.0

17.7

8.2

19.4

27.1

23.1

24.3

16.6

13.7

18.1

11.3

21.4

15.5

-8.1

8.2

7.2

25.9

-0.5

16.0

29.2

2QFY12

11.8

16.3

18.0

18.1

31.6

18.6

32.3

23.5

12.2

17.3

15.7

8.2

17.1

12.8

10.7

10.2

4.1

15.8

-8.2

10.4

27.3

12.4

20.5

21.9

9.7

18.9

19.7

28.6

26.2

19.3

23.7

20.0

6.8

6.1

-2.6

5.4

9.3

8.4

7.0

5.0

9.3

43.8

18.4

17.2

26.0

6.9

31.0

24.1

33.3

26.4

22.3

32.4

14.0

13.6

3.1

12.0

10.6

14.6

11.0

21.8

4.2

18.6

14.6

YoY Growth (%)

3QFY12
4QFY12
1QFY13

24

14.2

11.3

25.4

6.6

21.5

21.6

35.9

15.9

26.7

34.5

6.2

7.3

-6.0

-1.3

16.9

11.4

15.3

11.5

-0.2

5.7

4.7

2QFY13

Private banks continue to perform better on growth and margins fronts, leading to healthy NII growth. For FB, while
NIMs were better-than-expected, moderation in business growth led to pressure on NII growth.

Higher deposit cost, elevated net slippages and moderate growth led to pressure on NII growth of SBIN, PNB, CBK,
K,
INBK and ANDB. OBCs performance was relatively better than peers.

NII: pressure on margins leads to moderate growth

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
PSBs (Ex- SBIN)
PSBs
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB
FB
Private Banks
Coverage Banks
Coverage Banks (Ex-SBI)

FEE Income

2QFY13
(INR m)
24,492
6,424
3,781
4,676
4,403
3,508
1,937
1,813
1,479
28,020
52,512
17,090
12,151
13,430
2,297
2,987
1,165
810
49,930
102,442
77,950
2QFY12
-1.2
-18.3
-8.2
14.3
21.3
18.2
17.4
29.5
7.8
4.3
1.6
7.7
6.8
6.4
23.1
14.8
15.3
10.7
8.3
4.5
6.7

3QFY12
1.6
13.6
4.9
-0.6
4.4
8.5
-6.8
-32.8
23.7
2.9
2.3
0.1
14.2
8.6
-5.7
16.5
16.2
-4.9
6.4
4.1
5.0

2QFY13
-5.9
-12.1
-9.4
12.9
7.3
18.8
4.7
9.0
4.6
1.5
-2.1
3.8
5.8
16.0
18.6
11.0
0.9
21.5
8.6
2.8
5.9

2QFY12
-11.7
2.2
9.9
13.2
10.9
3.9
15.5
8.4
5.0
8.2
-2.4
6.9
15.6
32.4
48.0
31.7
9.9
1.6
17.0
5.4
13.5

3QFY12
6.6
23.9
31.2
18.1
19.0
16.4
20.1
-18.4
12.2
17.8
12.2
4.7
20.7
26.3
35.2
45.7
22.9
-2.9
16.7
14.2
17.1

YoY Growth (%)

4QFY12
1QFY13
13.0
-1.1
11.5
9.2
-17.1
-11.3
2.0
4.0
13.1
10.3
21.7
17.2
29.5
12.0
6.4
-10.8
-0.6
5.0
6.3
4.2
10.0
1.6
-3.5
4.4
23.6
23.3
7.7
9.7
21.4
37.7
60.1
43.8
7.6
19.9
16.5
4.8
9.3
13.5
9.7
6.7
8.1
9.8

25

2QFY13
-5.8
17.5
-12.4
2.8
-2.5
17.8
-0.1
-24.9
1.8
1.4
-2.1
0.6
22.1
19.5
32.7
39.1
5.0
15.1
13.8
5.1
9.0

Lower loan processing fees, reduction in account

maintenance charges and lower transaction banking
ing
fees further impacted SBINs fee income growth.
Muted loan growth, macro-economic uncertainty,
changes in the charges for government business and
higher focus on asset quality (rather than revenues)
shall lead to moderation in fee income growth in FY13.

QoQ Growth (%)

4QFY12
1QFY13
59.6
-38.3
15.3
2.1
-1.7
-6.3
8.7
-15.7
13.1
-23.0
24.8
-26.8
27.8
-19.9
44.2
-28.9
0.8
-22.0
13.8
-14.7
35.9
-28.0
1.6
-4.7
9.0
-7.3
8.6
-12.7
21.1
-2.0
5.4
1.9
-0.8
-9.8
18.4
-15.9
6.3
-7.3
22.3
-19.7
9.1
-10.2

HDFCB, YES and IIB continue to surprise positively on

the fee income front while VYSB, FB and ICICIBC
disappointed. AXSB fee income improved QoQ led by
retail fees.

On a QoQ basis, fee income fell further due to lower

sanctions, decline in third party distribution related
fees, lower economic growth and rationalization of
retail fees to retain customers.

Fee income: dismal growth led by lower economic activities

20-Nov-12

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
PSBs (Ex- SBIN)
PSBs
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB
FB
Private Banks
Coverage Banks

8.1

31-Ma r-12
30-Jun-12
30-Sep-12
8.1

8.6
8.2
8.2

5 year
8.4
8.3
8.4

1QFY13
7,416
1,930
3,038
55
2,360
-110
1,185
197
104
8,759
16,176
-210
665
2,170
945
497
58
468
4,592
20,768

8.2

8.5
8.2
8.2

10 year
8.3
8.4
8.6

Net Investment Gains (INR m)

1QFY12
2QFY12
3QFY12
4QFY12
-8,791
-4,302
-2,205
-537
-860
260
-560
3,610
-865
881
-280
2,020
-645
-1,348
1,614
4,083
197
30
-473
-35
430
180
280
2,350
-619
-618
-538
624
-220
-750
-359
253
333
192
-28
-137
-2,249
-1,173
-343
12,768
-11,040
-5,475
-2,548
12,231
-250
-800
-650
1,580
-413
-13
-818
-715
332
-520
750
2,480
247
410
483
688
278
239
131
274
6
30
50
30
7
72
-76
464
207
-582
-130
4,801
-10,832
-6,057
-2,678
17,032

8.2
8.0
8.0

30-Jun-11
30-Sep-11
31-Dec-11

4QFY11
302
310
-310
863
1,188
980
-521
256
649
3,415
3,717
-1,960
86
-229
241
192
30
13
-1,627
2,090

1 year
8.1
8.3
8.5

G-sec Yield (%)

2QFY13
4,902
730
1,943
2,461
1,692
1,210
581
289
438
9,344
14,246
1,720
-1,059
2,730
471
218
44
403
4,527
18,773

4QFY11
2
1.7
-2.7
6.4
16.3
13.7
-18.4
3.3
15.9
4.7
4.1
-10.2
0.5
-1.5
7.9
7.5
2.2
0.5
-2.7
1

Net Investment Gains as a % to PBT

1QFY12
2QFY12
3QFY12
4QFY12
-28
-11
-5
-1
-5.4
1.4
-3.2
18.9
-9.3
8.4
-2.6
19.6
-4.5
-8.2
9.2
34.1
2.4
0.8
-4.6
-0.3
5.8
3.1
9.0
21.7
-12.7
-22.6
-12.1
28.4
-3.6
-10.7
-5.3
10.7
6.4
4.5
-0.6
-3.3
-3.2
-1.7
-0.5
17.3
-10.8
-5.0
-2.1
8.8
-1.4
-3.9
-2.8
6.0
-2.6
-0.1
-4.0
-3.4
2.4
-3.8
4.6
13.1
7.6
11.8
12.8
17.1
10.4
8.4
4.3
8.2
0.4
1.7
2.8
1.8
0.3
2.5
-2.5
13.0
0.4
-0.9
-0.2
6.1
-7
-4
-1
8

1QFY13
13
10.7
31.2
0.4
19.6
-1.5
21.0
2.8
2.1
11.2
11.9
-0.8
3.2
12.7
22.0
14.2
3.0
16.5
6.1
10

26

2QFY13
8.9
5.0
22.6
14.2
56.0
15.4
12.6
4.1
8.8
13.7
11.5
6.4
-4.6
16.4
10.4
5.9
2.0
12.6
5.7
9

Contribution of investment profits (incl. MTM) to PBT

remained at a high level. Trading profits to PBT was
as
significantly high for BOI; however, sharp increase in
provisions severely impacted profitability.
CBK trading gains moderated but remained high
compared to some peers, while BOB reported a sharp
increase QoQ.
Barring AXSB and FB, other private banks reported
lower contribution from trading gains.

Treasury income: contribution remains high

2.8

BoB

1.8

ANDB

1.4

PSBs (Ex- SBIN)

0.6

ICICIBC

-0.1

OBC

-2.1

PSBs

-2.5

BoI

-5.8

SBIN

-12.4

CBK

22.1
HDFCB

17.5
PNB

13.8
PVT. Banks

1QFY13

2QFY13

Net trading income to PBT remains stable/improve (%)

*C.BANKS: MOSL Coverage

17.8
UNBK

BoB

PSBs (Ex- SBIN)

FB

OBC

PSBs

YES

SBIN

ANDB

ICICIBC

IIB

PVT. Banks

PNB

INBK

VYSB

HDFCB

12.9
BoB

11.0
IIB

9.0
INBK

8.6
PVT. Banks

7.3
BoI

5.8
HDFCB

4.7
OBC

4.6
ANDB

3.8
ICICIBC

1.5
PSBs (Ex- SBIN)

0.9
VYSB

-2.1
PSBs

-5.9
SBIN

-9.4
CBK

-12.1
PNB

45
3,512

180

390

OBC
INBK

590

UNBK

ANDB

288
312

BoI

617

CBK
BoB

1,090

PNB

PSBs (Ex-SBIN)

AXSB

5,367

41

400

260

420

876

1,220

1,350

800

6,484

86

1,030

299

900

1,858

711

680

920

8,941

200

460

301

1,620

1,906

1,064

980

2,410

7,863

439

341

1,967

580

2,367

830

468

870

6,225

159

532

1,412

560

1,666

655

640

600

Recoveries (INR m)
1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13

Recoveries from written-off accounts decelerate

16.0

39.1
IIB

But on a lower base, fee income picks up QoQ (%)

27

5.0

3.2

7.5

30.6

7.1

55.2

3.8

7.4

4.1

% of
PBT

18.6
YES

Fee income growth moderates (YoY, %) for PSBs

19.5
AXSB

UNBK

3.2
-4.6
3.0
2.0
2.8
4.1
10.7
5.0
6.1
5.7
14.2
5.9
-0.8
6.4
2.1
8.8
13.0
8.9
22.0
10.4
11.9
11.5
21.0
12.6
16.5
12.6
11.2
13.7
0.4
14.2
-1.5
15.4
12.7
16.4
31.2
AXSB

18.8
.8
UNBK

Fee income moderates; non core income contribution a mixed bag

-24.9

INBK

5.0
VYSB

5.1
C. Banks

32.7
YES

22.6

CBK

56.0
19.6
BoI

2.8
C. Banks

21.5
FB

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
PSBs (Ex- SBIN)
PSBs
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB
FB
Private Banks
Coverage Banks

OPEX

PNB continues to make higher AS 15 related

provisioning leading to stable QoQ growth (on a higher
igher
base).
Among others, BOI and INBK reported a marginal
increase in opex of 3.5% YoY led by 4% YoY decline in
employee expense (BOI) and control over other
expenses (INBK).
Cost to core income for PSBs increased QoQ led by
weak core operating income, despite cost being
contained.

28

QoQ Growth (%)

YoY Growth (%)
Cost to core Income ratio (%)
2QFY13
(INR m) 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13
69,668
6.4
-0.7
16.4
-12.6
8.2
10.6
13.1
8.5
7.5
9.3
48.7
44.7
46.6
46.9
51.9
20,219
5.1
0.0
-9.1
22.5
0.1
13.7
6.1
-1.0
17.1
11.5
45.3
43.6
41.0
45.6
47.1
12,828
12.9
-5.4
17.7
-13.4
12.3
9.0
-1.9
8.9
8.8
8.3
49.5
47.3
53.1
50.5
54.9
13,080
4.9
3.0
36.8
-19.8
-1.5
10.5
8.3
10.1
18.6
11.4
38.9
38.9
50.3
41.3
39.3
12,360
8.1
-0.5
22.4
-16.7
2.1
21.7
-4.7
-24.5
9.6
3.5
50.7
46.8
47.9
49.3
46.9
11,234
5.4
13.8
-5.1
1.2
7.4
4.6
28.4
-28.6
15.1
17.4
48.9
51.8
45.3
49.4
51.0
6,427
-5.9
19.5
8.2
-3.1
0.8
4.8
24.8
39.9
17.9
26.3
43.0
46.0
50.6
48.6
47.6
5,764
11.8
-3.1
9.7
-9.6
7.6
5.5
13.7
23.5
7.5
3.5
40.4
40.5
45.0
40.6
44.3
4,751
3.4
2.1
6.9
-2.5
0.9
7.9
9.6
7.5
10.1
7.4
40.3
38.8
44.1
43.6
45.6
86,662
6.2
2.4
10.3
-5.1
3.3
10.9
7.8
-3.4
13.8
10.7
45.0
44.3
47.0
46.2
46.9
156,330
6.3
1.0
13.0
-8.5
5.4
10.8
10.1
1.7
11.0
10.0
46.6
44.5
46.8
46.5
49.0
22,209
4.0
1.3
15.9
-4.4
4.6
20.5
11.6
20.4
16.7
17.4
45.0
43.4
46.0
43.9
43.7
25,055
4.9
6.3
14.3
-1.4
3.0
20.9
17.8
23.5
25.7
23.4
51.5
50.7
53.3
52.5
50.6
17,417
10.0
3.0
12.3
-8.5
12.2
26.2
23.6
27.5
16.4
18.8
46.8
45.0
48.9
46.5
47.5
3,162
10.0
12.4
18.3
5.8
5.2
31.3
38.4
52.4
54.7
47.9
38.3
40.7
44.0
45.2
41.9
4,104
10.8
6.5
8.9
5.7
2.9
33.9
29.4
38.9
35.8
26.1
51.3
50.9
51.8
53.0
50.8
3,100
8.2
2.0
4.8
0.3
4.5
5.1
11.4
0.0
16.1
12.1
66.7
62.4
66.1
64.7
63.9
2,957
3.4
7.4
13.0
-3.5
9.7
16.5
16.5
17.1
21.1
28.5
42.2
41.6
49.0
48.3
50.4
78,004
6.3
4.1
13.7
-3.3
5.8
21.9
18.0
23.6
21.8
21.2
47.9
46.7
49.7
48.4
47.8
234,334
6.3
2.0
13.2
-6.8
5.5
14.0
12.5
7.8
14.3
13.5
47.0
45.2
47.7
47.1
48.6

Heavy investments for setting up retail business and

top level recruitment are leading to higher opex
growth for YES. Nevertheless, overall cost to income
ratio remains under control.

For AXSB, YES, KMB and ICICIBC cutting cost would be

difficult on a growing retail business, in our view.

Private banks opex growth was largely on the

expected lines. Most of the managements commented
of restricting opex growth to counter expected
moderation in top line growth.

Opex: private banks focus to cut flab

2QFY13
(INR m)
64,562
22,699
10,521
20,219
14,003
10,777
7,081
7,252
5,665
98,216
162,778
28,593
24,413
19,282
4,376
3,981
1,752
2,913
85,310
248,087
2QFY12
5.8
6.1
1.6
17.3
4.8
7.3
5.0
14.2
6.0
8.0
7.1
6.7
3.5
15.1
14.8
8.9
34.5
4.6
8.5
7.5

Core operating profits = NII + Fees (ex forex) -Opex

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
PSBs (Ex- SBIN)
PSBs
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB
FB
Private Banks
Coverage Banks

CORE PPP
3QFY12
16.7
7.2
3.5
2.7
16.3
1.3
5.6
-3.4
8.8
5.5
10.1
7.9
9.7
11.2
1.6
8.4
23.5
10.5
9.3
9.9

2QFY13
-11.3
-5.7
-5.9
7.3
12.6
0.6
5.2
-7.5
-7.0
0.3
-4.6
5.3
11.0
8.0
19.9
12.4
8.1
0.8
8.4
-0.5

2QFY12
26.6
14.0
-5.4
34.1
-3.4
10.4
-11.2
20.9
27.9
10.7
16.7
4.0
11.8
27.8
29.0
23.5
50.1
1.4
13.7
15.8

3QFY12
32.1
17.5
-3.2
21.8
18.9
-2.9
2.8
4.0
21.1
11.1
19.4
12.5
11.0
25.2
29.7
25.2
74.5
14.4
17.2
18.7

YoY Growth (%)

4QFY12
1QFY13
68.9
14.8
18.5
16.8
-8.1
-6.0
2.6
19.6
85.2
12.2
107.6
14.7
-11.1
4.7
-14.9
9.1
2.9
-1.4
17.6
10.7
36.6
12.4
6.4
25.2
17.2
19.3
10.9
23.5
11.4
21.5
24.8
25.0
65.2
57.9
5.1
-4.0
12.1
22.1
28.3
15.3

29

2QFY13
-3.7
3.8
-13.0
9.4
20.6
7.6
4.9
-11.6
-13.4
2.8
0.1
23.6
27.9
15.8
26.9
29.0
27.0
-7.5
22.0
6.7

Sequentially, strong core PPP growth for BOI is on

account of lower base as it had declined 20%+ QoQ in
1QFY13 due to significant moderation in NIMs.

Healthy margins and loan growth, coupled with

containment of cost led to strong core PPP growth for
f
ICICIBC, HDFCB, YES, IIB and VYSB, despite
moderation in fee income (ex HDFCB).

QoQ Growth (%)

4QFY12
1QFY13
7.8
-13.7
1.4
1.3
-6.7
-4.2
-13.9
15.3
17.0
-21.3
22.8
-14.1
-10.0
5.0
-8.6
8.3
-14.0
-0.5
-0.9
-1.9
2.9
-7.3
4.6
4.0
3.1
1.9
-4.0
0.6
3.1
1.0
4.9
0.9
-11.1
7.0
-16.3
-0.8
0.8
2.2
2.2
-4.5

Strong margin performance and control over opex led

to healthy core PPP growth for private banks.
Pressure on asset quality, moderation in loan growth
and higher opex pressure led to moderation in core
PPP growth for PSBs.
Growth for SBIN moderated led by a sharp moderation
in margins and muted fee income growth.

Core operating profit: private banks lead the pack

2QFY13
(INR m)

36,581
10,656
6,610
13,138
3,019
5,546
3,022
4,967
3,256
86,794
50,213
19,561
15,600
11,235
3,061
2,503
1,502
2,151
55,613
142,407
105,826

PAT

SBIN
PNB
CBK
BoB
BoI
UNBK
OBC
INBK
ANDB
PSBs
PSBs (Ex-SBIN)
ICICIBC
HDFCB
AXSB
YES
IIB
VYSB
FB
Private Banks
Coverage Banks
Coverage Banks (Ex-SBIN)

77.5
9.0
17.4
12.9
-5.1
-24.1
-52.7
15.2
-18.0
19.1
0.5
12.9
10.5
-2.3
8.8
7.2
22.7
30.8
9.1
15.3
4.3

2QFY12
16.1
-4.6
2.7
10.6
45.8
-44.1
111.2
12.2
-4.1
10.8
7.8
15.0
19.2
19.8
8.1
6.7
3.6
5.6
15.7
12.5
11.5

3QFY12
24.1
23.8
-5.3
17.7
33.0
292.5
-25.2
-34.3
12.0
21.0
19.1
10.0
1.6
15.9
7.0
8.5
6.6
17.7
8.9
16.6
14.2

-7.4
-12.5
-6.5
-25.0
-6.9
-33.8
47.8
33.7
6.5
-9.3
-10.4
-4.6
-2.5
-9.7
6.7
5.8
2.1
-19.9
-4.7
-7.7
-7.8

-2.5
-14.5
-14.7
15.4
-66.0
8.4
-22.8
7.6
-10.0
-8.9
-13.0
7.8
10.1
-2.6
5.5
5.9
15.4
13.0
6.3
-3.5
-3.9

2QFY13
12.4
12.1
-15.4
14.4
-20.4
16.2
-57.8
12.7
4.3
2.5
-2.3
21.6
31.5
25.2
33.3
45.0
53.3
36.2
27.8
10.3
9.7

2QFY12

15.4
5.5
-20.8
20.7
9.7
-66.0
-13.2
7.0
-8.4
1.4
-5.5
20.3
31.4
23.7
32.9
33.9
44.0
41.1
26.4
9.4
7.6

3QFY12

N.A.
18.6
-7.8
17.3
93.0
29.4
-20.6
-21.3
8.6
87.7
15.7
31.0
30.4
25.2
33.6
30.1
39.5
38.4
30.0
62.9
21.9

136.9
12.7
6.8
10.3
71.5
10.2
10.4
13.5
-6.2
44.8
15.6
36.3
30.6
22.4
34.3
31.1
38.4
30.2
31.0
39.6
22.4

YoY Growth (%)

4QFY12
1QFY13

30

30.2
-11.6
-22.4
12.7
-38.5
57.3
80.2
6.0
3.0
10.9
0.0
30.1
30.1
22.1
30.2
29.6
30.2
12.5
27.6
16.8
12.9

2QFY13

Within PSBs large divergence was witnessed. BOI

reported significantly lower-than-expected PAT led by
lower-than-expected NIM performance and higher
NPA provisions. PNB and CBK, PAT was impacted due
to disappointment in fee income.
BOBs PAT was higher-than-expected (21%) led by
healthy NIMs, write-back on investment depreciation
of INR1.3b. Despite core operating income being weak,
PAT was in line with expectation for SBIN, led by
compromise on PCR and write-back on investment.

QoQ Growth (%)

4QFY12
1QFY13

Private banks profits were largely in line with

estimates and positive surprise came from ICICIBC, FB
and VYSB. NIMs and healthy asset quality were the
key drivers for these banks. HDFCB maintained a
consistent performance with 30%+ YoY growth in PAT.
For PSBs, lower-than-expected margins had put
pressure on operating profits. However, lower
provisions (led by compromising on PCR and MTM
write-back on investments in certain cases) helped
PAT. Lower tax rate for certain banks came as a relief.

PAT: qualitatively wide divergence in PSBs and private banks

2QFY13

UNBK

62.2
58.9
61.5

1QFY13

BoI

64.2
60.9
61.0

4QFY12

BoB

80.1
79.0
75.7

OBC

61.5
64.4
64.5

INBK

70.1
75.1
71.0

ANDB

71.1
60.4
53.2

-38.5

CBK

-22.4

PNB

-11.6

PSBs (Ex-SBIN)

0.0

SIB

2.3

ANDB

3.0

INBK

6.0

PSBs

10.9

FB

12.5

BoB

12.7

C. Banks

16.8

AXSB

22.1

PVT Banks

27.6

IIB

29.6

HDFCB

30.1

ICICIBC

30.1

SBIN

30.2

VYSB

30.2

YES

30.2

31

UNBK
OBC

Private banks profitability remains robust (YoY gr., %)

*C.BANKS: MOSL Coverage

BoI

57.3
80.2

3.5

INBK

3.5

ANDB

7.4

CBK

8.3

SBIN

9.3

PSBs

10.0

BoB

11.4

PNB

11.5

VYSB

12.1

C. Banks

13.5

ICICIBC

17.4

UNBK

17.4

AXSB

18.8

PVT Banks

21.2

HDFCB

23.4

IIB

26.1

OBC

26.3

FB

28.5

YES

47.9

ANDB

-13.4

CBK

-13.0

INBK

-11.6

FB

-7.5

SBIN

-3.7

PSBs

0.1

PSBs (Ex- SBIN)

2.8

PNB

3.8

OBC

4.9

C. Banks

6.7

UNBK

7.6

BoB
AXSB

9.4
15.8

BoI

20.6

PVT Banks

22.0

ICICIBC

23.6

YES

26.9

VYSB

27.0

HDFCB

27.9

IIB

57.9

Profitability impacted due to higher provisions

CBK

67.6
66.5
63.0

BoI

Opex for private banks increase due to expansion (YoY gr., %) Weak core operations (core operating profit YoY gr, %))

PNB

62.7
62.8
54.3

Banks compromise on PCR, which led to lower provisioning

expense (PCR, incl. tech w/off %)

SBIN

68.1
64.3
62.8

Avg(x)

Nov-09

Nov-08

0.8

P/B (x)

Avg(x)

0.6

1.1

Peak(x)

Nov-11

1.4

2.6

3.8

5.0

6.2

P/B (x)

3.4

Avg(x)

Peak(x)

HDFCB above average valuation

2.0
1.6
1.2
0.8
0.4

1.4

2.3
1.1

1.9

3.9

5.0

Min(x)

0.8

1.7

Min(x)

Nov-08

Nov-07

Nov-06

Oct-05

1.3
0.7

Peak(x)

P/B (x)

0.8

Avg(x)

4.8
3.6
2.4
1.2
0.0

P/B (x)

2.2

Avg(x)

0.4

Peak(x)

AXSB ~20 discount to LPA

1.8
1.4
1.0
0.6
0.2

OBC discounts narrows to LPA

0.5

1.0

1.5

2.0

Avg(x)

Nov-09

Min(x)

P/B (x)

PNB at 38%+ discount to LPA

Nov-10

Peak(x)

Nov-12

P/B (x)

Nov-10

UNBK at 30% discount to LPA

Oct-05

Oct-05

Oct-05

Nov-11

Peak(x)

0.8

1.8

Min(x)

0.7

1.4

Min(x)

0.9

1.8

Min(x)
4.0

P/B (x)

Avg(x)

1.0
0.5

Peak(x)

P/B (x)

Avg(x)

1.8

Peak(x)

Nov-11

0.0

1.5

3.0

4.5

6.0

P/B (x)

Avg(x)

2.5

Peak(x)

0.5

YES Bank discount narrows to LPA

0.5

1.2

1.9

2.6

3.3

ICICIBC near average valuation

2.0
1.6
1.2
0.8
0.4

CBK at 20%+ discount to LPA

Oct-05

Nov-06

Nov-06

Nov-06

Nov-06

Nov-07

Nov-07

Nov-07

Nov-07

2.6
2.1
1.6
1.1
0.6

Nov-09

Nov-09

Nov-10

SBIN trading at ~20% disc to LPA

Nov-10

Nov-10

Nov-11
Nov-11

Nov-08

Nov-08

Nov-12
Nov-12

Oct-05
Oct-05

Oct-05
Oct-05

Nov-06
Nov-06

Nov-08

0.8

1.7

Min(x)

2.3

Min(x)
4.8

0.7

1.8

Min(x)
2.9

Nov-12

PSBs trading at/significant discount to LPA P/BV

Nov-07

Nov-06
Nov-06

Nov-07

Nov-07
Nov-07

Nov-08
Nov-08

Nov-08
Nov-08

Nov-09
Nov-09

Nov-09
Nov-09

Nov-10
Nov-10

Nov-09

Nov-12

Nov-11
Nov-11

Nov-10
Nov-10

Nov-11
Nov-11

Nov-12
Nov-12

Nov-12

32

Nov-12