IDBI, 1Q FY 2014

7/27/2019 IDBI, 1Q FY 2014

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

Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)

NII 1,475 1,440 2.4 1271 16.1

Pre-prov. profit 1,317 1,594 (17.4) 1132 16.3

PAT 307 554 (44.6) 427 (28.2)

Source: Company, Angel Research

IDBI Bank delivered a weak set of numbers for 1QFY2014, dragged by assetquality challenges. While the NII grew by 16.1% yoy, non-interest income grew by 37.9% yoy, leading to operating income and pre-provisioning profit growth of22.4% and 16.3% yoy, respectively. The bank witnessed sequential asset quality deterioration, as its absolute Gross NPA levels increased by 23.4% sequentially,

on an already large base. The bank increased provisioning by 62.7% yoy, whichresulted in 28.2% yoy earnings de-growth.

NIM declines qoq; Slippages spike to 3.4%: During the quarter, the bank’s loanbook grew at a subdued pace of 7.1% yoy (declined by 8.8% qoq). Goingforward, the Management has guided for advances growth of ~10-12% forFY2014, with primary focus on increasing PSL share in the overall loan book.Savings deposits grew by 25.8% yoy, while current deposits declined by 8.6% yoy.CASA deposits grew by 8.9% yoy, which considering a decline of 4.4% yoy inoverall deposits (due to shedding of bulk deposits), aided a 251bp yoy improvement in CASA ratio to 20.6% (454bp lower sequentially on back of 53.2%qoq de-growth in volatile current deposits). NIMs declined by 7bp qoq to 2.12%,as 37bp qoq decline in cost of funds was more than offset by 63bp sequential fall

in yield on assets. Aided by strong growth in income from the forex/derivativessegment (which more than trebled on a yoy basis), the non-interest income(excluding treasury) grew by 21.1% yoy. The bank faced asset quality pressures,as slippages ballooned to ` 1,685cr, as compared to ` 907cr in 4QFY2013. Ofthe slippages during the quarter, ` 663cr came from 4-5 chunky accounts. Annualized slippage ratio spiked to 3.4%, as against 2.0% in 4QFY2013.Recoveries/upgrades during the quarter came in lower sequentially at ` 174crcompared to ` 486cr in 4QFY2013. PCR (incl. technical write-offs) came off by 286bp qoq to 68.0%. During the quarter, the bank restructured advances worth~ ` 650cr. Going forward, the Management guided that a textile exposure couldslip into NPA category in the next few quarters, while the restructuring pipeline forthe bank stands at ~ ` 500cr.

Outlook and valuation: At the CMP, the bank is trading at a valuation of 0.4x

FY2015E P/ABV, (0.5x adjusting for the SASF). Considering the recent macro-economic developments, the pace of asset quality improvement is likely to bemuch slower than earlier anticipated. Hence, we recommend a Neutral rating onthe stock.

Key financials (standalone)

Y/E March (` cr) FY2012 FY2013 FY2014E FY2015E

NII 4,545 5,373 6,321 7,158

% chg 6.5 18.2 17.6 13.2

Net Profit 2,032 1,882 2,065 2,945

% chg 23.1 -7.4 9.7 42.6

NIM (%) 1.7 1.8 1.9 2.0

EPS (`) 15.9 14.1 15.5 22.1

P/E (x) 4.4 4.9 4.5 3.2

P/ABV (x) # 0.5 0.5 0.5 0.4

RoA (%) 0.7 0.6 0.6 0.8

RoE (%) 13.4 10.2 10.2 13.3

Source: Company, Angel Research; Note: # without adjusting for SASF

NEUTRALCMP ` 70

Target Price -

Investment Period -

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 71.7

MF / Banks / Indian Fls 13.6

FII / NRIs / OCBs 3.8

Indian Public / Others 10.8

Abs. (%) 3m 1yr 3yr

Sensex 6.0 16.6 12.4

IDBI Bank (19.0) (25.5) (43.1)

Banking

Market Cap ( ` cr) 9,309

Beta 1.2

52 Week High / Low 118/66

Avg. Daily Volume 237,831

Face Value ( ` ) 10

BSE Sensex 20,150

Nifty 6,029

Reuters Code IDBI.BO

IDBI@IN

Vaibhav Agrawal

022 – 3935 7800 Ext: 6808

[email protected]

Sourabh Taparia

022 – 3935 7800 Ext: 6872

[email protected]

Harshal Patkar

022 – 3935 7800 Ext: 6847

[email protected]

IDBI Bank

Performance Highlights

1QFY2014 Result Update | Banking

July 19, 2013

7/27/2019 IDBI, 1Q FY 2014


IDBI Bank | 1QFY2014 Result Update

July 19, 2013 2

Exhibit 1: 1QFY2014 performance (standalone)

Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy) FY2013 FY2012 % chg (yoy)

Interest earned 6,728 6,397 5.2 6,270 7.3 25,064 23,370 7.3

- on Advances / Bills 5,097 4,940 3.2 4,926 3.5 19,549 17,969 8.8- on investments 1,585 1,377 15.1 1,327 19.5 5,335 5,291 0.8

- on balance with RBI & others 39 63 (39.2) 15 153.4 156 46 237.5

- on others 8 16 (53.2) 1 443.0 24 64 (62.7)

Interest Expended 5,253 4,957 6.0 4,999 5.1 19,691 18,825 4.6

Net Interest Income 1,475 1,440 2.4 1,271 16.1 5,373 4,545 18.2

Other income 717 1,147 (37.5) 520 37.9 3,220 2,110 52.6

Other income excl. treasury 574 1,004 (42.8) 473 21.4 2,789 1,953 42.8

- Fee income 381 805 (52.7) 368 3.5 2,237 1,509 48.2

- Treasury income 143 143 - 47 204.3 431 157 174.5

- Recoveries from w-off acc. 11 116 (90.5) 34 (67.6) 237 141 68.1

- Others 182 83 119.6 71 156.3 315 303 3.7

Operating income 2,192 2,587 (15.3) 1,791 22.4 8,593 6,655 29.1

Operating expenses 875 993 (11.8) 659 32.9 3,134 2,607 20.2

- Employee expenses 490 534 (8.2) 316 54.9 1,569 1,187 32.2

- Other Opex 385 459 (16.1) 342 12.6 1,565 1,420 10.2

Pre-provision Profit 1,317 1,594 (17.4) 1,132 16.3 5,458 4,048 34.9

Provisions & Contingencies 830 869 (4.5) 510 62.7 2,836 1,418 100.0

- Provisions for NPAs 740 669 10.6 382 93.8 2,127 965 120.5

- Provisions for Investments 10 86 (88.0) 38 (73.0) 145 196 (26.2)

- Other Provisions 79 114 (30.8) 90 (12.0) 565 257 119.5

PBT 487 725 (32.8) 622 (21.7) 2,622 2,630 (0.3)

Provision for Tax 180 171 5.5 195 (7.6) 740 598 23.7

PAT 307 554 (44.6) 427 (28.2) 1,882 2,032 (7.4)

Effective Tax Rate (%) 37.0 23.5 1344bp 31.3 564bp 28.2 22.7 547bp


Exhibit 2: Actual vs. Angel estimates

Particulars (` cr) Actual Estimates Variation (%)

NII 1,475 1,481 (0.4)

Non-Interest Income 717 639 12.2

Operating Income 2,192 2,120 3.4

Operating Expenses 875 807 8.5

Pre-Prov. Profit 1,317 1,313 0.3

Provisions & Cont. 830 506 63.8

PBT 487 806 (39.6)

Prov. for Taxes 180 258 (30.3)

PAT 307 548 (44.0)


7/27/2019 IDBI, 1Q FY 2014



July 19, 2013 3

Exhibit 3: 1QFY2014 performance (standalone)


Balance sheet

Advances ( ` cr) 178,945 196,306 (8.8) 167,138 7.1Deposits ( ` cr) 183,277 227,116 (19.3) 191,747 (4.4)

Credit-to-Deposit Ratio (%) 97.6 86.4 1120bp 87.2 1047bp

Current deposits ( ` cr) 15,565 33,289 (53.2) 17,037 (8.6)

Saving deposits ( ` cr) 22,145 23,760 (6.8) 17,606 25.8

CASA deposits ( ` cr) 37,710 57,049 (33.9) 34,643 8.9

CASA ratio (%) 20.6 25.1 (454)bp 18.1 251bp

CAR (%) 13.4 13.1 22bp 14.4 (101)bp

Tier 1 CAR (%) 7.8 7.7 15bp 8.2 (41)bps

Profitability Ratios (%)

Cost of funds 8.0 8.4 (37)bp 8.4 (43)bp

Yield on assets 10.0 10.6 (63)bp 10.0 (6)bp

Return on Earning Assets 10.2 10.9 (65)bp 10.3 (6)bp

Cost of Liabilities 7.0 7.0 6bp 7.4 (36)bp

Reported NIM 2.1 2.2 (7)bp 2.1 3bp

Cost-to-income ratio 39.9 38.4 156bp 36.8 316bp

Asset quality

Gross NPAs ( ` cr) 7,959 6,450 23.4 5,496 44.8

Gross NPAs (%) 4.3 3.2 112bp 3.2 110bp

Net NPAs ( ` cr) 3,872 3,100 24.9 3,478 11.3

Net NPAs (%) 2.2 1.6 58bp 2.1 9bp

Provision Coverage Ratio (%) 68.0 70.8 (286)bp 65.5 247bp

Slippage ratio (%) 3.4 2.0 143bp 2.3 113bp

Loan loss prov. to avg. assets (%) 1.0 0.9 7bp 0.5 43bp


Balance Sheet growth remains moderate during the quarter

The bank’s Balance Sheet grew at a moderate pace during the quarter. Its loan

book grew at a subdued pace of 7.1% yoy (declined sequentially by 8.8%);

deposits witnessed a decline of 4.4% yoy and 19.3% qoq. Going forward, the

Management has guided for an advances growth of ~10-12% for FY2014, with

primary focus on increasing the share of PSL in the overall loan book (PSL

achievement at the end of 1QFY2014 stands at around 20%).

During the quarter, the bank witnessed strong traction in savings deposits, with a

growth of 25.8% yoy (down by 6.8% qoq), while volatile current deposits declined

by 8.6% yoy (the decline was much sharper sequentially with de-growth of 53.2%).

CASA deposits grew by 8.9% yoy, which considering a decline of 4.4% yoy in

overall deposits (due to shedding of bulk deposits), aided a 251bp yoy

improvement in CASA ratio to 20.6% (which came sequentially lower by 454bp on

back of 53.2% qoq de-growth in volatile current deposits). About two years back

(September 2010), the bank had waived off all transaction and service-related

charges on all current and saving bank accounts to attain higher growth in CASA

deposits. As a result, the bank has increased the number of saving accounts by a

robust ~15% (to ~72.5lakh) over the past one year.

7/27/2019 IDBI, 1Q FY 2014



July 19, 2013 4

Exhibit 4: Balance sheet growth remains moderate


Exhibit 5: CASA deposit improve sequentially


NIM declines sequentially

During 1QFY2013, margins for the bank declined by 7bp qoq to 2.12%, as the

37bp qoq decline in cost of funds was more than offset by 63bp sequential fall in

yield on assets. The Cost of Funds for the bank declined by 37bp sequentially to

8.0%, primarily driven by re-pricing of bulk deposits at a lower rate, decline in

proportion of bulk deposits (more than 300bp fall on a yoy basis to 47% as of

1QFY2014) and capital raising done in 4QFY2013. Yield on assets for the bank

also declined by 63bp sequentially to 9.97%, dragged primarily by asset quality

challenges.

Exhibit 6: Yield on Assets declines 63bp sequentially...


Exhibit 7: ...hence NIM declines 7bp qoq


Healthy growth in non-interest income (excl. treasury) aided by

strong performance in Forex and Derivatives income

During 1QFY2014, the bank reported a healthy performance on the non-interest

(excluding treasury) front, with a growth of 21.1% yoy to ` 573cr. Although, the

income from the commission, exchange and brokerage (CEB) stream grew at a

muted pace of 3.5% yoy, a strong growth in income in the Forex/derivatives

segment which more than trebled on a yoy basis, aided the overall growth in non-

interest income (excluding treasury performance). Recoveries from written-off

accounts came in at ` 11cr as compared to ` 34cr in 1QFY2013. Income from

treasury almost trebled at ` 143cr during the quarter as against ` 47cr in

1QFY2013. Overall, the bank reported a 37.7% yoy growth in its other income.

7 . 8

6 . 7

9 . 4

8 . 4

7 . 1

8 . 8

3 . 2

5 . 4

7 . 9

( 4 . 4

)

87.2

92.4 91.686.4

97.6

70.0

75.0

80.0

85.0

90.0

95.0100.0

105.0

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

Adv. yoy chg (%) Dep. yoy chg (%) CDR (%, RHS)

1 8 . 1

2 1 . 9

2 2 . 3

2 5 . 1

2 0 . 6

13.7

18.019.3

12.5

8.9

-

15.0

30.0

-

5.0

10.0

15.0

20.0

25.0

30.0


CASA ratio (%) CASA yoy growth (%, RHS)

10.0310.37

10.8210.60

9.97

6.5

7.5

8.5

9.5

10.5

11.5


(%)

2.092.05

2.30

2.192.12

1.50

1.75

2.00

2.25

2.50


(%)

7/27/2019 IDBI, 1Q FY 2014



July 19, 2013 5

Exhibit 8: Healthy core other inc. gr. aided by strong forex income


CEB 381 805 (52.7) 368 3.5

Treasury 143 143 - 47 204.3Forex 152 58 162.1 45 237.8

Recoveries 11 116 (90.5) 34 (67.6)

Others 29 26 11.5 26 11.5

Other income 716 1,148 (37.6) 520 37.7

Other inc excl. treasury 573 1,005 (43.0) 473 21.1


Asset quality faces pressure; Slippages spiked to 3.4% in

1QFY2014

On the asset quality front, the bank faced pressure as slippages for the quarterballooned to ` 1,685cr, as compared to ` 907cr in 4QFY2013 and ` 1,043cr

witnessed in 1QFY2013. Of the slippages during the quarter, ` 663cr came from

4-5 chunky accounts, the highest of which was ` 300cr coming from a textile sector

account. The Annualized slippage ratio spiked to 3.4%, as compared to 2.0% in

4QFY2013 and 2.3% in 1QFY2013. Recoveries/upgrades during the quarter

came in lower at ` 174cr compared to ` 486cr in 4QFY2013 and ` 93cr in

1QFY2013. On an absolute basis, Gross and Net NPA levels increased by

23.4% and 24.9% qoq, respectively. The PCR (including technical write-offs)

for the bank came off by 286bp qoq to 68.0%.

During the quarter, the bank restructured advances worth ~ ` 650cr. As of1QFY2014, the restructured book of the bank stood at ` 14,251cr, out of

which ` 11,987cr are standard restructured advances. Going forward, the

Management guided that a textile exposure could slip into NPA category in the

next few quarters, while the restructuring pipeline for the bank stands at

around ` 500cr.

Exhibit 9: NPA ratios increase sharply qoq...


Exhibit 10: ...as slippages spiked to 3.4% in 1QFY2014


3 . 2

3 . 5

3 . 7

3 . 2

4 . 3

2 . 1

2 . 0

1 . 9

1 . 6

2 . 2

65.5 65.8 69.2

70.8

68.0

40.0

50.0

60.0

70.0

80.0

-

0.5

1.0

1.5

2.0

2.5

3.0

3.54.0

4.5

5.0


Gross NPAs (%) Net NPAs (%) PCR (%, RHS)

2.3 1.4 1.6 2.0 3.4

0.5

0.4

1.2

0.9 1.0

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


Slippages (%) Credit cost (%, RHS)

7/27/2019 IDBI, 1Q FY 2014



July 19, 2013 6

Exhibit 11: Steady network expansion continues


Exhibit 12: Cost ratios trends


Merger with Stock Holding Corporation of India (SHCIL) on hold IDBI Bank had sought approval from the finance ministry to merge SHCIL (one of

the largest custodians of securities and a leading depository participant) with itself.

SHCIL’s current major shareholding includes IDBI (19% holding), IFCI (34%), GIC

(17%) and LIC (15%). As per media reports, the finance ministry is of the view that

IDBI Bank does not have enough capital/retained earnings to effect the merger on

its own and the ministry isn’t comfortable with the share swap arrangement (that

the bank had proposed) as that would effectively result in a dilution of Government

shareholding. Meanwhile, IFCI (which has the largest shareholding in SHCIL) is

also learnt to have opposed the merger.

If at all the merger gets through, it is likely to be a share swap deal, which would

be based on valuation of both. SHCIL is an unlisted company, but in the past one

year there was a stake sale in the company (by ICICI Bank to IFCI), which was

priced at ` 818 per share, thereby valuing the company at 3.8x FY2012 BV. IDBI

bank currently trades at 0.4x FY2015 ABV. If the swap ratio is priced using the last

reported/traded valuations mentioned above, it would significantly dilute the book

and earnings for the existing shareholders.

The merger will augment the branch network of the bank by 23% with an addition

of 227 branches (assuming RBI sanctions conversion of SHCIL branches into

bank’s branches). The retail client base would increase by 10%, with an addition of~8lakh customers, to whom the bank can cross sell. However, the extent of benefit

that the bank can reap out of higher branches/customers cannot be ascertained

(considering lack of clarity regarding the profile of these branches/customers).

Investment Arguments

Strong branch expansion and relatively healthy fee income

IDBI Bank enjoys the advantage of a modern, 100% CBS branch network, which is

growing organically at a much faster rate than other PSU banks (17–18% CAGR

post the FY2007 UWB acquisition). While the present 1,111 branches are

predominantly urban-concentrated (~66%), the bank intends to increase its

presence in semi-urban areas going forward. Steady branch expansion plans of

9 8 2

9 9 8

1 , 0

1 9

1 , 0

7 7

1 , 1

1 1

1,581 1,591 1,597

1,702

1,799

1,400

1,500

1,600

1,700

1,800

1,900

900

950

1,000

1,050

1,100

1,150


Branches ATMs (RHS)

0.9 1.1 1.1 1.3 1.1

36.8

38.9

32.038.4

39.9

10.0

20.0

30.0

40.0

-

0.3

0.6

0.9

1.2

1.5


Opex to average assets (%, RHS) CIR (% , RHS)(%)

7/27/2019 IDBI, 1Q FY 2014



July 19, 2013 7

the Management, in our view, should continue to increase the contribution of retail

deposits in the bank’s funding mix and drive strong CASA market share gains. The

bank’s CASA deposits posted a 31.5% CAGR over FY2007–13, and we have

factored in a 15.7% CAGR over FY2013-15E.Relative to other PSU banks, on account of the bank’s strong corporate

relationships and government mandates, the bank’s fee income at 0.9% is also

reasonably healthy (though going forward, in light of the bank’s move to waive off

charges for retail depositors to attract CASA deposits as well as slower balance

sheet growth and consistent with Management’s guidance, we expect the bank’s

fee income as a proportion of average assets to moderate to 0.8%).

RoA enjoying structural tailwinds, but cyclical headwinds

Historically, IDBI Bank has witnessed the lowest NIM in the industry, majorly on

account of high cost of funding due to the liability mix heavily skewed towards bulkdeposits. Also, since the bank relied heavily on corporate lending to increase its

loan book, yields on assets on an average have been lower than peers. In wake of

lower NIMs, the bank has indicated a strategy of lower advances growth (~10-

12% for FY2014) than the system to concentrate on the increasing percentage of

low-cost CASA deposits and to consciously shift focus from large corporate lending

to retail and MSME lending to bring in higher-yielding loans.

SASF – A burden on the bank’s books

Due to the erstwhile DFI structure being challenged by a number of asset-quality

issues, IDBI Bank at the time of the merger had to set up a stressed assetstabilization fund (SASF) to quarantine defaulted assets. The transfer value of the

SASF was ~ ` 9,000cr, through which the bank has witnessed only ~ ` 3,800cr

worth of cash recoveries (as of FY2012). The possibility of an entire recovery seems

implausible and would lead to full provisioning expenses towards the amount that

remains unrecoverable. The SASF with an outstanding value of ~ ` 5,200cr also

remains a burden on the bank’s investment books due to its special nature of zero

interest securities. Accordingly, we have adjusted 75% of the value of the SASF

against the bank’s net worth to arrive at ABV estimates for valuing the bank.

At the same time, the bank has material stakes in several financial institutions,

including NSE, CARE, NSDL and ARCIL, apart from subsidiaries such as IDBIFederal Life, and the market value of all these investments is estimated to be about

` 2,000cr more than the bank’s investment cost (about ` 15/share, post 25%

holding company discount). Monetization of these investments could partially help

in compensating the decline in the bank’s net worth on account of legacy NPAs,

providing an upside to our estimates.

Outlook and valuation

The bank has been among the fastest-growing banks in terms of CASA deposits

over the past few years (CAGR of ~32% over FY2007-13) even when compared to

private banks and now has a market share of 2.5% (as of FY2013).

At the CMP, the bank is trading at a valuation of 0.4x FY2015E P/ABV, (0.5x

adjusting for the SASF). Considering the recent macro-economic developments, the

7/27/2019 IDBI, 1Q FY 2014



July 19, 2013 8

pace of asset quality improvement is likely to be much slower than earlier

anticipated. Hence, we recommend a Neutral rating on the stock.

Exhibit 13: Key assumptions

Particulars (%)Earlier estimates Revised estimates

FY2014 FY2015 FY2014 FY2015

Credit growth 10.0 12.0 10.0 12.0

Deposit growth 10.0 12.0 8.0 12.0

CASA Ratio 26.3 27.3 25.6 26.6

NIMs 1.9 2.0 1.9 2.0

Other Income growth (5.5) 2.0 (0.7) 3.5

Growth in Staff Expenses 17.0 17.0 20.0 17.0

Growth in Other Expenses 17.0 17.0 15.0 17.0

Slippages 1.7 1.7 2.5 1.8

Coverage Ratio 73.0 75.0 70.0 75.0

Source: Angel Research

Exhibit 14: Change in estimates

Particulars (`cr)

FY2014 FY2015

Earlierestimates

Revisedestimates

Var. (%)Earlier

estimatesRevised

estimatesVar. (%)

NII 6,374 6,321 (0.8) 7,289 7,158 (1.8)

Non-interest income 3,043 3,197 5.1 3,103 3,310 6.7

Operating income 9,416 9,518 1.1 10,392 10,468 0.7

Operating expenses 3,667 3,683 0.4 4,291 4,309 0.4

Pre-prov. profit 5,749 5,835 1.5 6,101 6,159 0.9

Provisions & cont. 1,876 2,799 49.2 1,497 1,697 13.4

PBT 3,873 3,036 (21.6) 4,604 4,462 (3.1)

Prov. for taxes 1,239 972 (21.6) 1,565 1,517 (3.1)

PAT 2,634 2,065 (21.6) 3,039 2,945 (3.1)

Source: Angel Research

Exhibit 15: P/ABV# band

Source: Company, Angel Research; Note: #Without adjusting the book value for SASF

0

50

100

150

200

250

300

A p r - 0 6

O c t - 0 6

A p r - 0 7

O c t - 0 7

A p r - 0 8

O c t - 0 8

A p r - 0 9

O c t - 0 9

A p r - 1 0

O c t - 1 0

A p r - 1 1

O c t - 1 1

A p r - 1 2

O c t - 1 2

A p r - 1 3

O c t - 1 3

Price (`) 0.45x 0.7x 0.95x 1.2x 1.45x

7/27/2019 IDBI, 1Q FY 2014



July 19, 2013 9

Exhibit 16: Recommendation summary

Company Reco.CMP

(`)Tgt. price

(`)Upside

(%)FY2015EP/ABV (x)

FY2015ETgt. P/ABV (x)

FY2015EP/E (x)

FY2013-15EEPS CAGR (%)

FY2015ERoA (%)

FY2015ERoE (%)

AxisBk Buy 1,191 1,441 21 1.3 1.6 7.6 19.1 1.6 18.1

FedBk Neutral 381 - - 0.8 - 6.7 7.5 1.1 13.1

HDFCBk Accumulate 681 745 9 3.2 3.5 15.1 26.3 1.9 22.8

ICICIBk* Buy 959 1,160 21 1.4 1.7 9.6 17.4 1.6 16.2

SIB Neutral 23 - - 0.9 - 5.5 5.7 0.9 16.2

YesBk Neutral 425 - - 1.8 - 8.5 17.1 1.3 22.8

AllBk Accumulate 85 95 13 0.4 0.4 2.6 18.3 0.7 13.6

AndhBk Neutral 78 - - 0.5 - 3.4 (0.3) 0.7 13.2

BOB Accumulate 570 642 13 0.6 0.7 3.9 16.8 0.9 16.0

BOI Accumulate 211 236 12 0.5 0.5 3.1 21.6 0.7 15.1

BOM Accumulate 49 54 9 0.5 0.6 3.8 10.0 0.6 15.3

CanBk Neutral 319 - - 0.5 - 3.7 15.4 0.8 14.2CentBk Neutral 63 - - 0.6 - 3.4 52.3 0.6 14.3

CorpBk Accumulate 327 360 10 0.4 0.5 3.1 5.7 0.7 14.2

DenaBk Neutral 68 - - 0.4 - 2.7 3.7 0.7 14.7

IDBI# Neutral 70 - - 0.4 - 3.1 27.1 0.8 13.5

IndBk Accumulate 107 113 5 0.4 0.4 2.6 7.0 0.9 14.7

IOB Neutral 47 - - 0.3 - 2.4 78.9 0.6 13.0

J&KBk Neutral 1,250 - - 1.0 - 5.9 (1.7) 1.2 16.8

OBC Buy 174 203 17 0.4 0.4 2.8 17.0 0.8 12.9

PNB Accumulate 631 718 14 0.6 0.7 3.6 14.5 1.1 16.5

SBI* Accumulate 1,814 2,077 14 1.0 1.2 6.4 17.5 1.0 17.0

SynBk Accumulate 111 121 9 0.6 0.6 4.0 (8.5) 0.6 14.6

UcoBk Reduce 69 63 (9) 0.7 0.7 4.4 67.5 0.6 13.6

UnionBk Accumulate 157 178 14 0.5 0.6 3.3 14.7 0.7 15.2

UtdBk Neutral 46 - - 0.3 - 2.3 54.6 0.6 14.7

VijBk Accumulate 45 47 6 0.5 0.5 4.1 9.5 0.4 11.5

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

Company Background

IDBI Bank is the sixth largest PSU bank in India, with a branch network of ~1,100branches and a balance sheet size of over ` 2.8lakh cr. IDBI was incorporated in

1964 as a development financial institution; but in October 2004, it was

transformed into a banking company with the reverse merger of IDBI and its

subsidiary IDBI Bank. The bank now offers an array of wholesale and retail

banking products, apart from providing long-term finance for industrial

development.

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July 19, 2013 10

Income statement (standalone)

Y/E March (` cr) FY10 FY11 FY12 FY13 FY14E FY15E

Net Interest Income 2,256 4,269 4,545 5,373 6,321 7,158

- YoY Growth (%) 82.0 89.2 6.5 18.2 17.6 13.2

Other Income 2,181 2,143 2,119 3,220 3,197 3,310

- YoY Growth (%) 39.6 (1.7) (1.1) 52.0 (0.7) 3.5

Operating Income 4,437 6,413 6,664 8,593 9,518 10,468

- YoY Growth (%) 58.4 44.5 3.9 28.9 10.8 10.0

Operating Expenses 1,831 2,255 2,607 3,134 3,683 4,309

- YoY Growth (%) 36.9 23.1 15.6 20.2 17.5 17.0

Pre - Provision Profit 2,605 4,158 4,056 5,458 5,835 6,159

- YoY Growth (%) 78.0 59.6 (2.4) 34.6 6.9 5.5

Prov. & Cont. 1,561 1,877 1,426 2,836 2,799 1,697

- YoY Growth (%) 226.3 20.3 (24.0) 98.8 (1.3) (39.4)

Profit Before Tax 1,045 2,281 2,630 2,622 3,036 4,462

- YoY Growth (%) 6.0 118.3 15.3 (0.3) 15.8 46.9

Prov. for Taxation 14 631 598 740 972 1,517

- as a % of PBT 1.3 27.6 22.7 28.2 32.0 34.0

PAT 1,031 1,650 2,032 1,882 2,065 2,945

- YoY Growth (%) 20.1 60.0 23.1 (7.4) 9.7 42.6

Balance sheet (standalone)

Y/E March (` cr) FY10 FY11 FY12 FY13 FY14E FY15E

Share Capital 725 985 1,278 1,333 1,333 1,333Reserve & Surplus 9,440 13,583 18,150 19,903 21,506 23,758

Deposits 167,667 180,486 210,493 227,116 245,286 274,720

- Growth (%) 49.2 7.6 16.6 7.9 8.0 12.0

Borrowings 35,010 36,607 38,451 51,158 54,045 60,021

Tier 2 Capital 12,699 14,962 15,027 14,651 14,285 13,928

Other Liab. & Prov. 8,031 6,754 7,439 8,607 9,994 11,001

Total Liabilities 233,573 253,377 290,837 322,769 346,449 384,762

Cash Balances 13,903 19,559 15,090 10,544 11,038 12,362

Bank Balances 679 1,207 2,967 7,381 5,197 5,771

Investments 73,345 68,269 83,175 98,801 103,920 113,378

Advances 138,202 157,098 181,158 196,306 215,937 241,850

- Growth (%) 33.6 13.7 15.3 8.4 10.0 12.0

Fixed Assets 2,997 3,037 3,019 2,925 3,046 3,281

Other Assets 4,446 4,206 5,427 6,811 7,311 8,120

Total Assets 233,573 253,377 290,837 322,769 346,449 384,762

- Growth (%) 35.5 8.5 14.8 11.0 7.3 11.1

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July 19, 2013 11

Ratio analysis

Y/E March FY10 FY11 FY12 FY13 FY14E FY15E

Profitability ratios (%)

NIMs 1.2 1.8 1.7 1.8 1.9 2.0Cost to Income Ratio 41.3 35.2 39.1 36.5 38.7 41.2

RoA 0.5 0.7 0.7 0.6 0.6 0.8

RoE 13.2 15.8 13.4 10.2 10.2 13.3

B/S ratios (%)

CASA Ratio 14.6 20.9 24.1 25.1 25.6 26.6

Credit/Deposit Ratio 82.4 87.0 86.1 86.4 88.0 88.0

CAR 11.3 13.6 14.7 13.5 13.1 12.5

- Tier I 6.2 8.0 8.5 8.0 8.1 8.1

Asset Quality (%)

Gross NPAs 1.5 1.8 2.5 3.2 4.6 4.6

Net NPAs 1.0 1.1 1.6 1.6 2.0 1.6

Slippages 1.4 1.4 1.6 1.5 2.5 1.8

Loan Loss Prov. /Avg. Assets 0.4 0.5 0.4 0.7 0.7 0.4

Provision Coverage 74.9 74.7 68.3 70.8 70.0 75.0

Per Share Data (`)EPS 14.2 16.8 15.9 14.1 15.5 22.1

ABVPS (75% cover.) 113.4 128.5 132.6 142.1 152.2 174.4

DPS 3.0 3.5 3.0 3.5 3.0 4.5

Valuation Ratios

PER (x) 4.9 4.2 4.4 4.9 4.5 3.2

P/ABVPS (x) 0.6 0.5 0.5 0.5 0.5 0.4

Dividend Yield 4.3 5.0 4.4 5.0 4.3 6.4

DuPont Analysis

NII 1.1 1.8 1.7 1.8 1.9 2.0

(-) Prov. Exp. 0.8 0.8 0.5 0.9 0.8 0.5

Adj. NII 0.3 1.0 1.1 0.8 1.1 1.5

Treasury 0.3 0.1 0.1 0.1 0.0 0.0

Int. Sens. Inc. 0.7 1.0 1.2 1.0 1.1 1.5

Other Inc. 0.7 0.8 0.7 0.9 0.9 0.9

Op. Inc. 1.4 1.9 1.9 1.9 2.0 2.4

Opex 0.9 0.9 1.0 1.0 1.1 1.2PBT 0.5 0.9 1.0 0.9 0.9 1.2

Taxes 0.0 0.3 0.2 0.2 0.3 0.4

RoA 0.5 0.7 0.7 0.6 0.6 0.8

Leverage 25.9 23.3 18.0 16.6 16.6 16.5

RoE 13.2 15.8 13.4 10.2 10.2 13.3

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July 19 2013 12

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

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Disclosure of Interest Statement IDBI Bank

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

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

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Documents

IDBI, 1Q FY 2014