India BFSI Conference - 18-19 November 2010 Final

8/8/2019 India BFSI Conference - 18-19 November 2010 Final

1/34


2/34

18 November 2010 India BFSI Conference, 18-19 Nov 10

Anand Rathi Research 2

India Banks & Financial Services Conference

Company Profiles

Day 1............................................................................................ 5Corporation Bank ................................................................................ 6

IDBI Bank............................................................................................ 8

Infrastructure Development Finance Corporation ............................. 10

Indian Overseas Bank....................................................................... 12

South Indian Bank............................................................................. 14

Union Bank of India........................................................................... 16

Day 2.......................................................................................... 19

Federal Bank..................................................................................... 20

IndusInd Bank................................................................................... 22

Karur Vysya Bank ............................................................................. 24

Mahindra & Mahindra Financial Services.......................................... 26

Shriram Transport Finance ............................................................... 28

Vijaya Bank....................................................................................... 30

Yes Bank .......................................................................................... 32


3/34



India Banks & Financial Services Conference SnapshotYear Ending Mar '10, ( m) FY12e

Company Bloomberg M.Cap (US$m) Price* ( ) NII PPP PAT EPS ( ) RoE (%) RoA(%)

Corporation Bank^ CRPBK IN Equity 2,408 759 22,103 21,367 11,703 81.6 19.6 1.2

IDBI Bank IDBI IN Equity 3,099 193 54,670 45,580 22,100 22.4 14.3 0.8

IDFC IDFC IN Equity 6,331 196 18,857 22,571 15,612 10.7 13.9 2.9

Indian Overseas Bank IOB IN Equity 1,977 164 31,679 18,446 7,070 13.0 11.5 0.5

South Indian Bank SIB IN Equity 678 27.2 9,792 6,545 3,448 3.1 18.8 1.0

Union Bank of India UNBK IN Equity 4,296 384 71,855 53,994 30,480 47.0 22.2 1.2

Federal Bank FB IN Equity 1,748 465 22,767 18,822 8,325 48.7 14.9 1.5

IndusInd Bank IIB IN Equity 3,013 293 16,678 14,617 7,887 17.1 19.2 1.5

Karur Vysya Bank KVB IN Equity 870 521 9,336 7,508 4,750 62.3 22.5 1.5

M&M Financial Services MMFS IN Equity 4,174 837 15,993 11,275 5,664 59.0 24.5 4.5

Shriram Transport Finance SHTF IN Equity 1,803 841 35,784 29,127 15,347 68.0 27.9 4.3

Vijaya Bank VJYBK IN Equity 1,044 109 24,193 16,066 7,690 17.7 21.1 0.8

Yes Bank YES IN Equity 2,729 357 19,974 17,566 10,693 30.9 25.4 1.5

Source: Bloomberg, Company, Anand Rathi Research * as of 15 Nov 10 ^FY10


4/34




5/34



Day 1


6/34

Anand Rathi Financial Services, its affiliates and subsidiaries, do and seek to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in makingtheir investment decision. Disclosures and analyst certifications are located in Appendix 1.

Anand Rathi Research Ind

India I Equities

Parag Jariwala+9122 6626 6707

[email protected]

Clyton Fernandes+9122 6626 6744

[email protected]

Banks & Financial Services

Conference

Key financialsYear end 31 Mar FY06 FY07 FY08 FY09 FY10

Net interest income (`m) 11,289 13,081 14,433 16,910 22,103Net profit (`m) 4,445 5,361 7,350 8,928 11,703

EPS (`) 31.0 37.4 51.2 62.2 81.6

Growth (%) (13.5) 10.5 20.6 37.1 21.5

PE (x) 27.1 24.5 20.3 14.8 12.2

PABV (x) 3.7 3.3 3.0 2.6 2.3

RoE (%) 13.8 13.8 15.0 18.4 19.6

RoA (%) 1.3 1.2 1.2 1.2 1.2

Dividend yield (%) 0.9 0.9 1.2 1.4 1.6

Net NPA (%) 1.1 0.6 0.5 0.3 0.3

Source: Company, Anand Rathi Research (Prices as of Nov 15, 2010)

18 November 2010

Corporation Bank

Key discussion points

Profile. Corporation Bank is more than 100 years old, with+1,100 branches (of which more than 50% are in South India).

The bank plans to achieve business of`5trn and a branch networkof ~2,000 by FY15. After government of India (GoI), LIC is thelargest shareholder in the bank with 26% stake. Ramnath Pradeep

has taken over as the new CMD (earlier, Executive Director atCentral Bank of India) of the bank, effective Sep 10.

Loan growth targeted at +22%. Corporation Bank is targetingloan growth of +22% for FY11e. The bank is looking to increasethe proportion of high-yielding SME and retail loans.

Focus on NIM protection. Cost of deposits for the bank is oneof the best among peers, at 5.4% as of 2QFY11. The newmanagement has set aggressive internal targets to improve CASAshare (from 24-25% to 30% in next 1.5 years). The bank plans toopen ~200 branches in FY11 in semi-urban and rural areas inorder to mobilise low-cost deposits. Also, focus on high-yielding

loans is likely to ensure stable/improving margins going forward. Robust asset quality. Corporation Bank has maintained healthy

asset quality compared with peers. Net NPAs as of Sep 10 stoodbelow 0.5%, with provision coverage ratio of +80%. The bank hasfully provided for airline exposure. Commercial real estateexposure is less than 1% of the loan book. Slippage ratio isexpected to remain below 1% over the next two years.

Key data CRPBK IN / CRBK.BO

52-week high/low `815/`405

Sensex/Nifty 20310/6122

3-m average volume US$2.1m

Market cap `109bn/US$2.5bn

Shares outstanding 143.4m

Free float 42.8%

Promoters 57.2%

Foreign Institutions 4.3%

Domestic Institutions 33.1%

Public 5.4%

Relative price performance

Corporation

Sensex80

100120140160180200220240

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg

Not Rated

Share Price: `759


7/34

18 November 2010 Corporation Bank


Quick Glance Financials and Valuations

Fig. 1 Income statement ( m)

Year end 31st March FY06 FY07 FY08 FY09 FY10

Net interest income 11,289 13,081 14,433 16,910 22,103

NII growth (%) (0.0) 15.9 10.3 17.2 30.7

Non-interest inc 5,715 6,355 6,998 11,072 11,864

Total income 17,004 19,436 21,431 27,982 33,967

Total income growth % 4.1 14.3 10.3 30.6 21.4

Op. expenses 7,468 8,036 8,920 10,016 12,600

Operating profit 9,536 11,400 12,511 17,966 21,367

Operating profit growth % (1.3) 19.5 9.7 43.6 18.9

Provisions 2,791 3,235 1,857 4,104 4,744

PBT 6,745 8,166 10,654 13,862 16,623

Tax 2,300 2,804 3,304 4,935 4,921

PAT 4,445 5,361 7,350 8,928 11,703

PAT growth (%) 10.5 20.6 37.1 21.5 31.1

FDEPS (` /share) 31.0 37.4 51.2 62.2 81.6

DPS (` /share) 7.0 9.0 10.5 12.5 16.5 Source: Company, Anand Rathi Research

Fig. 2 Balance sheet ( m)Year end 31st March FY06 FY07 FY08 FY09 FY10

Share capital 1,434 1,434 1,434 1,434 1,434

Reserves & surplus 32,315 36,220 40,851 47,531 56,314

Deposits 328,765 423,569 554,244 739,839 927,337

Borrowings 16,601 30,210 21,376 20,724 90,775

Minority interests

Total Liabilities 405,064 527,206 665,977 869,058 1,116,673

Advances 239,624 299,497 391,856 485,122 632,026

Investments 106,518 144,175 173,251 249,378 345,226

Cash & Bank Bal 40,887 67,189 81,032 105,397 107,919

Fixed & Other Assets 18,035 16,346 19,839 29,162 31,502

Total Assets 405,064 527,206 665,977 869,058 1,116,673

No. of shares (m) 143 143 143 143 143

Deposits growth (%) 20.7 28.8 30.9 33.5 25.3

Advances growth (%) 29.2 25.0 30.8 23.8 30.3Source: Company, Anand Rathi Research

Fig. 3 Key RatiosYear end 31st March FY06 FY07 FY08 FY09 FY10

Interest spread (%) 2.7 2.4 2.6 2.4 2.5

NIM (%) 3.2 2.9 2.7 2.5 2.5 Other inc / Total inc (%) 33.6 32.7 32.7 39.6 34.9

Cost-Income (%) 43.9 41.3 41.6 35.8 37.1

Provision coverage (%) 73.6 75.7 77.1 74.2 69.7

Dividend Payout (%) 22.6 24.1 20.5 20.1 20.2

Credit-Deposit (%) 72.9 70.7 70.7 65.6 68.2

Investment-Deposit (%) 32.4 34.0 31.3 33.7 37.2

Gross NPA (%) 3.5 2.6 2.1 1.5 1.1

Net NPA (%) 1.1 0.6 0.5 0.3 0.3

BV (`) 235.3 262.5 294.8 341.4 402.6

Adj BV (`) 228.3 256.1 289.0 335.1 393.7

CAR (%) 13.9 12.8 12.1 13.6 16.0

- Tier 1 (%) 12.4 11.3 9.6 8.9 10.0

Dividend Yield (%) 0.9 1.2 1.4 1.6 2.1Source: Company, Anand Rathi Research

Fig. 4 PE Band

CRPBK

3x

4.5x

6x

7.5x

60

160

260

360

460

560

660

760

860

Oct-04

Apr-05

Oct-05

Apr-06

Oct-06

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10

Source: Bloomberg, Anand Rathi Research

Fig. 5 Price-to-Book Band

CRPBK

0.5x

0.8x

1.1x

1.4x

60

160

260

360

460

560

660

760

860

Oct-04

Apr-05

Oct-05

Apr-06

Oct-06

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10


Fig. 6 Corporation Bank vs. Bankex

Corporation

Bankex

80

100

120

140

160

180

200

220

240

Aug-0

9

Sep-0

9

Oc

t-09

Nov-0

9

Dec-0

9

Jan-1

0

Fe

b-1

0

Mar-

10

Apr-

10

May-1

0

Jun-1

0

Ju

l-10

Aug-1

0

Sep-1

0

Oc

t-10

Nov-1

0

Source: Bloomberg


8/34



India I Equities


[email protected]

Kaitav Shah+9122 6626 6545

[email protected]


Conference

Key financialsYear end 31 Mar FY09 FY10 FY11e FY12e FY13e


EPS (`) 11.7 14.2 17.4 22.4 29.4

Growth (%) 16.2 21.7 22.0 29.3 31.0

PE (x) 16.5 13.6 11.1 8.6 6.6

PABV (x) 2.2 2.1 1.7 1.5 1.3

RoE (%) 9.4 10.5 13.8 14.3 16.6

RoA (%) 0.6 0.5 0.7 0.8 0.8

Dividend yield (%) 1.3 1.6 1.9 2.4 3.2

Net NPA (%) 0.9 1.0 1.0 0.7 0.6

Source: Company, Anand Rathi Research (Prices as of 15 Nov, 2010)

18 November 2010

IDBI Bank


Profile. One of the top-ten lenders in India, IDBI Bank has 759branches in metros & urban areas and 1,295 ATMs across thecountry. RM Bhalla is currently the chairman and managingdirector.

Infrastructure and SME to drive loans.The banks erstwhilerole as a DFI makes it the preferred partner for largeinfrastructure projects. Also, it is concentrating on farm and SMEloans to meet its priority-sector requirements. On the retail assetsfront, home loans are likely to drive growth.

Sharper CASA focus. In an effort to boost its CASA share, IDBIBank waived off all service charges on its current and savingsaccounts. CASA share in total deposits is 15.3%. Its renewedCASA focus is likely to aid NIMs of 1.8%/2% in FY11e/ FY12e,thereby driving RoA of 0.7%/0.8% in FY11e/FY12e.

Likely equity dilution in FY12. Government equity infusion(`31.2bn in 2QFY11) has given the bank headroom for anotherround of capital-raising. At present, its tier-1 capital is 8.9%, withcapital adequacy of 14.2%.

Valuation and risks.We value the (standalone) bank at `199,based on 1.2x FY12e BV. Further, we price the investments (aftera 20% holding-company discount) at `23, arriving at our target

price of`222/share. Risk: Sharp rise in wholesale borrowingcosts, leading to NIMs being lower than estimated.

Rating: Buy

Target Price: `222

Share Price: `193

Key data IDBI IN / IDBI.BO






Free float 34.9%

Promoters 65.1%



Public 14.7%


IDBI

Sensex

80

100

120

140

160

180

200

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


9/34

18 November 2010 IDBI Bank



Fig. 1 Income statement ( m)Year end 31st March FY09 FY10 FY11e FY12e FY13e


NII growth (%) 96.0 70.4 94.0 24.7 27.6

Non-interest inc 13,899 22,989 20,245 25,154 30,373

Total income 27,158 45,584 64,075 79,824 100,154


Op. expenses 13,379 18,314 26,527 34,245 43,066


Operating profit growth % 6.0 97.9 37.7 21.4 25.2

Provisions 3,995 16,822 13,135 11,580 12,548

PBT 9,784 10,447 24,413 33,999 44,540

Tax 1,199 136 7,324 11,900 15,589

PAT 8,585 10,311 17,089 22,100 28,951

PAT growth (%) 17.7 20.1 65.7 29.3 31.0

FDEPS (` /share) 11.7 14.2 17.4 22.4 29.4

DPS (` /share) 2.5 3.0 3.6 4.7 6.2Source: Company, Anand Rathi Research

Fig. 2 Balance sheet ( m)Year end 31st March FY09 FY10 FY11e FY12e FY13e

Share capital 7,248 7,249 9,844 9,844 9,844


Deposits 1,124,010 1,676,671 1,898,194 2,417,073 3,048,745

Borrowings 505,792 557,417 555,449 554,284 549,003

Minority interests - - - - -

Total Liabilities 1,724,023 2,335,720 2,599,859 3,134,360 3,782,743

Advances 1,034,283 1,382,019 1,575,501 1,945,744 2,393,265

Investments 500,476 733,455 711,823 797,634 884,136

Cash & Bank Bal 112,193 145,828 229,339 290,683 384,294


Total Assets 1,724,023 2,335,720 2,599,859 3,134,360 3,782,743

No. of shares (m) 725 725 984 984 984

Deposits growth (%) 54.0 49.2 13.2 27.3 26.1


Fig. 3 Key RatiosYear end 31st March FY09 FY10 FY11e FY12e FY13e

In terest spread (%) 0.7 0.9 1.5 1.6 1.7

NIM (%) 0.9 1.2 1.8 2.0 2.1

Other inc / Total inc (%) 51.2 50.4 31.6 31.5 30.3

Cost-Income (%) 49.3 40.2 41.4 42.9 43.0


Dividend Payout (%) 21.4 21.1 21.0 21.0 21.0

Credit-Deposit (%) 92.0 82.4 83.0 80.5 78.5


Gross NPA (%) 1.4 1.5 1.7 1.3 1.2

Net NPA (%) 0.9 1.0 1.0 0.7 0.6

BV (`) 130.0 140.2 148.5 165.6 187.9

Adj BV (`) 89.6 93.5 112.6 132.3 152.4

CAR (%) 11.2 11.3 12.5 10.7 9.4

- Tier 1 (%) 6.6 6.2 8.0 7.2 6.7

Dividend Y ield (%) 1.4 1.7 2.0 2.6 3.4

Source: Company, Anand Rathi Research

Fig. 4 PE Band

IDBI

3x

6x

9x

12x

0

50

100

150

200

250

Apr-06

S

ep-06

F

eb-07

Jul-07

D

ec-07

M

ay-08

Oct-08

M

ar-09

A

ug-09

J

an-10

J

un-10

N

ov-10



IDBI

0.3x

0.7x

1.1x

1.5x

20

70

120

170

220

270

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10


Fig. 6 IDBI Bank vs. Bankex

IDBI

Bankex

80

100

120

140

160

180

200

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


10/34

Anand Rathi Financial Services Limited does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firmmay have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investmentdecision. Disclosures and analyst certifications are located in Appendix 1

Anand Rathi Research

India Equities

India I Equities


[email protected]


[email protected]

Key financials

Year end 31 Mar FY09 FY10 FY11e FY12e FY13e

Net interest income (`m) 8,260 10,214 14,608 18,857 23,622

Net profit (`m) 7,577 10,621 12,626 15,612 18,882

EPS (`) 5.8 8.2 8.7 10.7 12.9

Growth (%) 1.0 41.1 5.9 23.7 21.0

PE (x) 35.9 25.4 24.0 19.4 16.0

PABV (x) 4.3 3.8 2.8 2.6 2.3

RoE (%) 12.7 16.1 14.3 13.9 15.0

RoA (%) 2.5 3.2 3.0 2.9 2.8

Dividend yield (%) 0.6 0.7 0.8 1.0 1.2

Net NPA (%) 0.22 0.17 0.15 0.13 0.12


Banks and Financial Services

Conference

18 November 2010

IDFC


Profile. Infrastructure Development Finance Company (IDFC)was established in 1997 as a specialised finance company thatwould focus on the infrastructure sector. IDFCs loan book stoodat `344bn and asset base at `464bn, as of Sep 10.

Accelerating growth, IFC status. IDFC is set for a huge step-upin growth, with management aiming to grow its balance sheet 3xover FY10-13, led by the existing infrastructure lendingopportunity. Its classification as an infrastructure finance company(IFC) has resulted in broad-based funding avenues, allowing fasterbalance-sheet expansion. As an IFC, IDFC will also enjoyenhanced single/group borrower limits and higher exposure limitsfor bank-borrowings. Lower risk weights for its funding, easieraccess to ECBs, ability to issue tax-free bonds and its recent equityissue are likely to be positive for spreads.

Traction in other businesses. IDFCs asset management andcapital market businesses contribute significantly to its non-interest income. Its private equity manages three funds totallingUS$1.3bn. It has project equity fund of US$850m and mutualfund with AUM of US$4.5bn.

Valuation and risks. Our SOTP-basedvaluation gives us fairvalue of`219; we value the lending business at `185/share (2.3x

FY12e BV) and other businesses and investments at `34/share.Risks: Substantial slowdown in infrastructure spending andinabilit to mobilise resources for the AMC business.

Rating: Buy

Target Price: `219

Share Price: `196

Key data IDFC IN /IDFC.BO52-week high/low `218/`141




Shares outstanding 1460m

Free float 100.0%

Promoters 0.0%

Foreign Institutions 51.3%Domestic Institutions 36.3%

Public 12.4%


IDFC

Sensex90

100

110

120

130

140

150

160

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Anand Rathi Research


11/34

18 November 2010 IDFC



Fig 1 Income statement ( m)



NII growth (%) 14.1 23.7 43.0 29.1 25.3

Non-interest inc 7,296 10,853 10,289 11,391 13,008

Total income 15,556 21,067 24,897 30,249 36,629

Op. expenses 3,665 5,482 6,458 7,677 9,194


Provisions 1,532 1,298 1,233 1,302 1,710

PBT 10,359 14,287 17,206 21,269 25,725

Tax 2,782 3,666 4,580 5,658 6,843

PAT 7,577 10,621 12,626 15,612 18,882

+(AssociatesMinorities) (79) 1 - - -

Consolidated PAT 7,498 10,623 12,626 15,612 18,882

PAT growth (%) 1.0 41.7 18.2 23.3 21.9

FDEPS (` /share) 5.8 8.2 8.7 10.7 12.9

DPS (` /share) 1.2 1.5 1.7 2.1 2.6


Fig 2 Balance sheet ( m)Year end 31 Mar FY09 FY10 FY11e FY12e FY13e

Share capital 12,953 13,006 14,594 14,594 14,594


Borrowings 229,546 258,939 350,285 453,912 599,726

Subordinated Debt 6,500 6,500 6,500 6,500 6,500

Other Liabili ties 13,735 17,259 17,625 20,197 22,757

Total Liabilities 311,540 352,801 480,914 599,072 761,909

Advances 209,637 255,012 338,946 446,599 594,101

Investments 65,000 46,417 82,061 87,478 96,996

Cash & Bank Balances 8,255 2,715 3,375 3,764 4,216


Total Assets 311,540 352,801 480,914 599,072 761,909

No. of shares (m) 1,295 1,301 1,459 1,459 1,459

Borrowings growth (%) n/a n/a n/a n/a n/a

Advances growth (%) 4.2 21.6 32.9 31.8 33.0 Source: Company, Anand Rathi Research

Fig 3 RatiosYear end 31 Mar FY09 FY10 FY11e FY12e FY13e

Interest spread (%) 2.3 2.8 3.3 3.2 3.1

NIM (%) 2.9 3.2 3.7 3.6 3.6Other inc / Total inc (%) 46.9 51.5 41.3 37.7 35.5

Cost-Income (%) 23.6 26.0 25.9 25.4 25.1

Dividend Payout (%) 20.7 18.4 20.0 20.0 20.0

Debt / Equity (x) 3.7 3.7 3.3 3.8 4.5

Credit-Deposit (%) n/a n/a n/a n/a n/a

Investment-Deposit (%) n/a n/a n/a n/a n/a

Gross NPA (%) 0.4 0.4 0.4 0.4 0.4

Net NPA (%) 0.2 0.2 0.2 0.1 0.1

BV (`) 47.9 53.9 73.0 81.2 91.1

Adj BV (`) 47.9 53.9 73.0 81.2 91.1

CAR (%) 24.8 20.5 21.8 19.4 17.0

- Tier 1 (%) 22.2 17.4 19.4 17.3 15.3


Fig 4 PE Band

10x

15x

25xIDFC

35x

0

50

100

150

200

250

300

350

400

A

pr-06

S

ep-06

F

eb-07

Jul-07

D

ec-07

M

ay-08

O

ct-08

M

ar-09

A

ug-09

J

an-10

J

un-10

N

ov-10


Fig 5 Price-to-Book Band

IDFC

1x

2x

3x

4x

0

50

100

150

200

250

300

350

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10


Fig 6 Bankex vs. IDFC

IDFC

Bankex

90

100

110

120

130

140

150

160

170

180

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


12/34



India I Equities


[email protected]


[email protected]


Conference

Key financialsYear end 31 Mar FY06 FY07 FY08 FY09 FY10


EPS (`) 14.4 18.5 22.0 24.3 13.0

Growth (%) 20.3 28.7 18.7 10.7 (40.5)

PE (x) 11.4 8.9 7.5 6.7 11.3

PABV (x) 3.1 2.4 2.0 1.7 1.8

RoE (%) 28.5 29.1 27.8 24.8 11.5

RoA (%) 1.4 1.4 1.3 1.2 0.5

Dividend yield (%) 1.6 1.8 2.0 2.7 2.1

Net NPA (%) 0.7 0.5 0.6 1.3 2.5


18 November 2010

Indian Overseas Bank


Profile. Incorporated in 1937, South-India focused IndianOverseas Bank (IOB) has a wide distribution network with +2,000branches and 15 overseas offices. M Narendra has taken over asthe new CMD (earlier Executive Director, Bank of India) of thebank, effective Sep 10.

Loan growth target of 20% with stable NIM at 3%. Newmanagement targets loan growth of 20% (in line with industrygrowth) in FY11 with focus on retail and SME credit. The bankregistered 10% loan growth in 1HFY11. Re-pricing of bulk

deposit worth `70-80bn, higher CASA at ~33% and higher yielddue to base rate system s likely to protect margins at 3% levels.

Asset quality concerns. Restructured loans stood at `73bn as ofSep 10 (8.5% of loan book). Total slippages from the restructured

loan book touched `15bn at end-Sep 10 (21% of restructuredloans). Gross and net NPA ratios stood at an alarming 3.8% and2% respectively in 2QFY11. NPA coverage, including technical

write-off, stood at 60%. Credit cost would remain high for acouple of quarters due to further slippages from the restructuredloan pool, transition to 70% NPA coverage by Mar 11 and CBSplatform for recognizing NPAs.

Improvement from FY12.A large part of the slippages in2HFY11 are likely to be technical in nature due to transformationto CBS. Upgradation and recoveries are expected to be strong inFY12. Credit cost is expected to fall once the bank achieves 70%mandator NPA covera e b Mar 11.

Key data IOB IN / IOBK.BO




Market cap `90bn/US$2bn


Free float 39.2%

Promoters 60.8%



Public 16.1%


IOB

Sensex

80

100

120

140

160

180

200

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg

Not Rated

Share Price: `164


13/34

18 November 2010 Indian Overseas Bank



Fig. 1 Income statement ( m)Year end 31st March FY06 FY07 FY08 FY09 FY10


NII growth (%) 11.4 23.9 (4.3) 17.1 10.4

Non-interest inc 5,411 3,870 10,371 15,958 11,433

Total income 26,083 29,478 34,871 44,654 43,111

Total income growth % 4.5 13.0 18.3 28.1 (3.5)

Op. expenses 12,616 13,878 14,853 19,417 24,665



Provisions 3,611 1,866 3,521 5,694 8,656

PBT 9,856 13,734 16,497 19,543 9,790

Tax 2,023 3,650 4,524 6,285 2,720

PAT 7,834 10,084 11,973 13,258 7,070

PAT growth (%) 20.3 28.7 18.7 10.7 (46.7)

FDEPS (` /share) 14.4 18.5 22.0 24.3 13.0

DPS (` /share) 2.6 3.0 3.2 4.5 3.5 Source: Company, Anand Rathi Research

Fig. 2 Balance sheet ( m)Year end 31st March FY06 FY07 FY08 FY09 FY10

Share capital 5,448 5,448 5,448 5,448 5,448


Deposits 505,293 687,404 843,256 1,001,159 1,107,947

Borrowings 7,366 28,962 63,536 65,483 89,822

Minority interest

Total Liabilities 593,578 822,568 1,018,377 1,210,734 1,310,964

Advances 347,562 470,603 604,018 748,853 790,039

Investments 189,523 239,745 284,747 312,154 376,506

Cash & Bank Bal 37,072 89,793 103,413 109,219 98,246


Total Assets 593,578 822,568 1,018,377 1,210,734 1,310,964

No. of shares (m) 545 545 545 545 545

Deposits growth (%) 14.2 36.0 22.7 18.7 10.7


Fig. 3 Key RatiosYear end 31st March FY06 FY07 FY08 FY09 FY10

Interest spread (%) 3.4 3.2 2.8 2.7 2.7


Cost-Income (%) 48.4 47.1 42.6 43.5 57.2


Dividend Payout (%) 18.1 16.2 14.6 18.5 27.0

Credit-Deposit (%) 68.8 68.5 71.6 74.8 71.3


Gross NPA (%) 3.4 2.3 1.6 2.5 4.5

Net NPA (%) 0.7 0.5 0.6 1.3 2.5

BV (`) 56.1 71.1 87.2 109.1 115.9

Adj BV (`) 53.4 68.0 82.9 97.1 92.1

CAR (%) 13.0 13.3 11.1 13.2 14.8

- Tier 1 (%) 8.5 8.2 7.3 7.9 8.7


Fig. 4 PE Band

IOB

3x

4.5x

6x

7.5x

20

60

100

140

180

O

ct-04

Apr-05

O

ct-05

Apr-06

O

ct-06

Apr-07

O

ct-07

Apr-08

O

ct-08

Apr-09

O

ct-09

Apr-10

O

ct-10



IOB

0.4x

0.7x

1x

1.3x

20

60

100

140

180

Oc

t-04

Apr-

05

Oc

t-05

Apr-

06

Oc

t-06

Apr-

07

Oc

t-07

Apr-

08

Oc

t-08

Apr-

09

Oc

t-09

Apr-

10

Oc

t-10


Fig. 6 Indian Overseas Bank vs. Bankex

IOB

Bankex

80

100

120

140

160

180

200

Aug-0

9

Sep-0

9

Oc

t-09

Nov-0

9

Dec-0

9

Jan-1

0

Fe

b-1

0

Mar-

10

Apr-

10

May-1

0

Jun-1

0

Ju

l-10

Aug-1

0

Sep-1

0

Oc

t-10

Nov-1

0

Source: Bloomberg


14/34



India I Equities


[email protected]

Kaitav Shah+9122 6626 6545

[email protected]


Conference



EPS (`) 1.7 2.1 2.5 3.1 3.9

Growth (%) 28.4 20.0 18.8 24.1 27.4

PE (x) 15.7 13.1 11.0 8.9 7.0

PABV (x) 2.6 2.2 1.9 1.6 1.4

RoE (%) 15.8 16.8 17.4 18.8 20.5

RoA (%) 1.0 1.0 1.0 1.0 1.0

Dividend yield (%) 1.1 1.5 1.7 2.1 2.7

Net NPA (%) 0.5 0.4 0.3 0.3 0.3


18 November 2010

South Indian Bank


Profile. Based in Thrissur, Kerala, South Indian Bank (SIB) is oneof the oldest private-sector banks in South India. Its 610 branchesand 401 ATMs are largely concentrated in the four southernstates. At present, Dr VA Joseph is Managing Director & CEO.

Vision 2013. Over FY05-10, SIBs loan book CAGR was 24.1%,in line with industry growth. By FY13, management aims for

`750bn in business, a 7,500 headcount, 750 branches and 750ATMs. This implies 24.5% CAGR in business over FY10-13e.Management intends the growth to be diversified across segmentsand geographical areas. The bank intends to preserve its identityand grow organically, without any merger or acquisition.

Robust liability franchise. Low-cost (current and savingsaccounts) and non-residential external (NRE) deposits constitute38.6% of the banks deposits base, enabling it to hold downdeposit costs, thereby protecting margins. We expect NIM of2.7% in FY11e and 2.8% in FY12e.

Comfortable capital position.At present, the banks tier-1capital is 13.1%, with capital adequacy of 15.9%, which is enoughto support its business growth targets. Hence, equity dilution inthe near term is unlikely.

Valuation and risks.At our target price of`28.5, the stockwould trade at PABV of 1.7x FY12e and 1.4x FY13e. Risks: Sloweconomic growth leading to credit growth being lower thanestimated, and higher NPAs.

Rating: Buy

Target Price: `28.5

Share Price: `27.2

Key data SIB IN / SIBK.BO

52-week high/low `29.7/`12.5



Market cap `31bn/US$686m

Shares outstanding 1130m

Free float 100%

Promoters 0%



Public 49.2%


SouthIndian

Sensex80100120140160180200220240260

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


15/34

18 November 2010 South Indian Bank





NII growth (%) 32.7 8.7 32.7 29.9 28.4

Non-interest inc 1,644 2,085 2,215 2,441 2,638

Total income 6,872 7,768 9,754 12,233 15,214


Op. expenses 3,285 3,662 4,565 5,688 7,075



Provisions 574 433 915 1,240 1,380

PBT 3,014 3,673 4,274 5,305 6,760

Tax 1,066 1,336 1,496 1,857 2,366

PAT 1,948 2,338 2,778 3,448 4,394

PAT growth (%) 28.4 20.0 18.8 24.1 27.4

FDEPS (` /share) 1.7 2.1 2.5 3.1 3.9



Share capital 1,130 1,130 1,130 1,130 1,130


Deposits 180,923 230,115 289,333 359,102 441,695

Borrowings 9,831 10,372 11,410 12,551 13,806



Advances 118,479 158,229 202,533 253,167 311,395

Investments 60,752 71,556 86,800 98,753 114,841

Cash & Bank Bal 20,359 19,877 20,476 29,638 41,360


Total Assets 203,794 255,340 317,753 391,342 478,603

No. of shares (m) 1,130 1,130 1,130 1,130 1,130

Deposits growth (%) 19.4 27.2 25.7 24.1 23.0



Interest spread (%) 2.7 2.3 2.3 2.4 2.5

NIM (%) 3.0 2.6 2.7 2.8 3.0


Cost-Income (%) 47.8 47.1 46.8 46.5 46.5


Dividend Payout (%) 17.4 19.3 19.1 19.0 19.0

Credit-Deposit (%) 65.5 68.8 70.0 70.5 70.5


Gross NPA (%) 2.5 1.3 1.3 1.3 1.3

Net NPA (%) 0.5 0.4 0.3 0.3 0.3

BV (`) 11.5 13.1 15.1 17.4 20.4

Adj BV (`) 10.4 12.6 14.5 16.8 19.7

CAR (%) 14.8 15.4 14.7 13.7 13.0

- Tier 1 (%) 13.2 12.4 11.9 11.2 10.8

Dividend Yield (%) 1.4 1.9 2.2 2.7 3.4

Source: Company, Anand Rathi Research; *Basel-II FY10 onwards

Fig. 4 PE Band

South

Indian

2x

5x

8x

11x

0

5

10

15

20

25

30

35

Apr-06

S

ep-06

F

eb-07

Jul-07

D

ec-07

M

ay-08

Oct-08

M

ar-09

A

ug-09

J

an-10

J

un-10

N

ov-10



0.5x

1.0x

1.5x

2.0x

-

5

10

15

20

25

30

35

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10

South Indian


Fig. 6 South Indian Bank vs. Bankex

South Indian

Bankex

80

100

120

140

160

180

200

220

240

260

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


16/34



India I Equities


[email protected]

Kaitav Shah+9122 6626 6545

[email protected]


Conference

Key financialsYear end 31 Mar FY08 FY09 FY10 FY11e FY12e


EPS (`) 27.5 34.2 41.1 47.0 60.3

Growth (%) 64.1 24.5 20.2 14.4 28.4

PE (x) 14.0 11.2 9.4 8.2 6.4

PABV (x) 2.7 2.3 2.1 1.7 1.4

RoE (%) 21.9 21.5 21.7 20.8 22.2

RoA (%) 1.2 1.2 1.2 1.1 1.2

Dividend yield (%) 1.0 1.3 1.4 1.6 2.1

Net NPA (%) 0.2 0.3 0.8 0.7 0.6


18 November 2010

Union Bank of India


Profile. Flagged off in 1919 by Mahatma Gandhi, Union Bank ofIndia is headquartered at Mumbai and was nationalized in 1969. Ithas 2,869 branches concentrated in urban and semi-urban areasand 2,420 ATMs across the country. MV Nair is Chairman andManaging Director.

Navnirman-II. Implemented in FY11, Navnirman-II is aninitiative toimprove the banks business strategy, by transformingitself into a Customer-centric Marketing Organisation. The sixpillars of the initiative are customer service excellence, HRtransformation, rapid branch expansion, financial inclusion, riskmanagement and wealth management

Business growth strategy. Management aims to create capacityto grow at least 5% more than the industry, albeit profitably, whilemaintaining asset quality. For FY11, it aims at yoy growth of 20%in deposits and 25% in advances.

Likely equity dilution by end-FY11.The bank has requestedthegovernment for equity infusion of`15bn, which would increasegovernment stake, from 55.4% to ~60%. At present, the bankstier-1 capital is 7.9%, with capital adequacy of 12.5%.

Valuation and risks.At our target price of`391, Union Bankwould trade at 1.7x FY11e and 1.4x FY12e ABV. Risks: Sloweraccretion to low-cost deposits leading to NIMs being lower thanestimated; higher NPAs leading to provisions being higher thanestimated.

Rating: Buy

Target Price: `391

Share Price: `384

Key data UNBK IN / UNBK.BO






Free float 44.6%

Promoters 55.4%



Public 14.1%


Union

Sensex

80

100

120

140

160

180

200

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


17/34

18 November 2010 Union Bank of India



Fig. 1 Income statement ( m)Year end 31st March FY08 FY09 FY10 FY11e FY12e


NII growth (%) 10.6 23.6 9.9 32.0 29.8

Non-interest inc 10,870 14,825 19,747 19,933 22,539

Total income 41,733 52,961 61,672 75,285 94,394


Op. expenses 15,930 22,141 25,078 31,544 40,401



Provisions 7,199 7,255 8,264 11,456 12,547

PBT 18,604 23,565 28,329 32,284 41,447

Tax 4,872 6,300 7,580 8,542 10,967

PAT 13,732 17,265 20,749 23,742 30,480

PAT growth (%) 64.1 24.5 20.2 14.4 28.4

FDEPS (` /share) 27.5 34.2 41.1 47.0 60.3


Fig. 2 Balance sheet ( m)Year end 31st March FY08 FY09 FY10 FY11e FY12e

Share capital 5,051 5,051 5,051 5,051 5,051


Deposits 1,038,586 1,387,028 1,700,397 2,060,598 2,496,044

Borrowings 128,669 135,323 146,983 163,244 179,569


Total Liabilities 1,240,733 1,609,755 1,951,618 2,348,159 2,825,680

Advances 743,483 965,342 1,193,153 1,479,510 1,834,592

Investments 338,226 429,970 544,035 576,968 648,971

Cash & Bank Bal 100,978 159,849 157,767 209,496 243,218


Total Assets 1,240,733 1,609,755 1,951,618 2,348,159 2,825,680

No. of shares (m) 505 505 505 505 505

Deposits growth (%) 21.9 33.5 22.6 21.2 21.1


Fig. 3 Key RatiosYear end 31st March FY08 FY09 FY10 FY11e FY12e

Interest spread (%) 2.8 2.5 2.2 2.4 2.7

NIM (%) 2.8 2.9 2.5 2.7 2.9Other inc / Total inc (%) 26.0 28.0 32.0 26.5 23.9

Cost-Income (%) 38.2 41.8 40.7 41.9 42.8


Dividend Payout (%) 14.6 14.6 13.4 13.2 13.3

Credit-Deposit (%) 71.6 69.6 70.2 71.8 73.5


Gross NPA (%) 2.2 2.0 2.2 2.1 1.8

Net NPA (%) 0.2 0.3 0.8 0.7 0.6

BV (`) 145.5 173.0 206.4 246.1 297.1

Adj BV (`) 143.0 166.6 187.3 224.7 274.8

CAR (%) 12.5 13.3 12.5 12.8 12.6

- Tier 1 (%) 7.5 8.2 7.9 7.6 7.6


Fig. 4 PE Band

Union

3x

5x

7x

9x

50

100

150

200

250

300

350

400

450

500

Apr-06

S

ep-06

F

eb-07

Jul-07

D

ec-07

M

ay-08

Oct-08

M

ar-09

A

ug-09

J

an-10

J

un-10

N

ov-10



Union0.7x

1.0x

1.3x

1.6x

50

100

150

200

250

300

350

400

450

500

550

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10


Fig. 6 Union Bank vs. Bankex

Union

Bankex

80

100

120

140

160

180

200

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


18/34

18 November 2010 Union Bank of India



19/34



Day 2


20/34



India Equities

India I Equities

Kaitav Shah+9122 6626 6545

[email protected]


[email protected]



Net profit (`m) 5,066 4,646 5,954 8,325 9,886

EPS (`) 29.3 27.2 34.8 48.7 57.8

Growth (%) 36.0 (7.2) 28.2 39.8 18.8

PE (x) 15.9 17.1 13.4 9.6 8.0

PABV (x) 1.9 1.7 1.6 1.4 1.2

RoE (%) 12.1 10.3 12.0 14.9 15.6

RoA (%) 1.4 1.1 1.3 1.5 1.4

Dividend yield (%) 1.1 1.1 1.2 1.4 1.7

Net NPA (%) 0.3 0.5 0.8 0.7 0.6



Conference

18 November 2010

Federal Bank


Profile. Based in Aluva, Kerala, Federal Bank is one of the largestold-private-sector banks in the country. At end-2QFY11, it had anetwork of 719 branches, of which +60% are in Kerala, and 761

ATMs. Its advances book is skewed towards the SME and retailsegments and it has a substantial NRI customer base.

New MD and CEO. In Sep 10, Shyam Srinivasan joined as MD& CEO. His long-term vision and strategy (with emphasis onstronger systems and streamlining of processes) are likely to drivegrowth. For this fiscal, the bank has indicated credit growth in line

with the systems (~20%), focusing on the SME and retailsegments. We expect the bank to scale up its growth in FY12e to25% as broad-based credit returns to the system.

Focus on strengthening risk management system andimproving asset quality.The new management aims to improvethe banks asset quality by strengthening its risk managementsystem and developing higher underwriting standards. Betterassets would aid the bank in limiting its high credit costs and leadto better RoE.

Valuation and risks. At our target price of`564, the stock wouldtrade at 1.7x FY12e and 1.5x FY13e ABV. Key risks: Higher creditcosts due to higher-than-expected slippages; lower credit growthon account of adverse macro-economic conditions.

Rating: Buy

Target Price: `564

Share Price: `465

Key data FB IN/FED.BO52-week high/low `501/`223





Free float 100%

Promoters 0%


Public 39.7%


Federal

Sensex

7090

110130150170190210230

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10



21/34

18 November 2010 Federal Bank



Fig 1 Income statement ( m)Year end 31st March FY09 FY10 FY11e FY12e FY13e


NII growth (%) 51.5 7.2 28.2 25.9 20.6

Non-interest inc 5,158 5,309 5,283 6,415 8,072

Total income 18,312 19,417 23,370 29,182 35,525


Op. expenses 5,715 6,769 8,296 10,359 12,789

Operating profi t 12,598 12,649 15,074 18,822 22,736


Provisions 4,668 4,053 6,012 6,263 7,754

PBT 7,930 8,596 9,062 12,559 14,982

Tax 2,925 3,950 3,108 4,234 5,096

PAT 5,005 4,646 5,954 8,325 9,886

PAT growth (%) 36.0 (7.2) 28.2 39.8 18.8

FDEPS (` /share) 29.3 27.2 34.8 48.7 57.8

DPS (` /share) 5.0 5.0 5.5 6.5 8.0


Fig 2 Balance sheet ( m)Year end 31st March FY09 FY10 FY11e FY12e FY13e

Share capital 1,710 1,710 1,710 1,710 1,710


Deposits 321,982 360,580 425,529 537,569 682,859

Borrowings 23,268 29,272 32,199 35,419 38,961



Advances 223,919 269,502 323,402 404,252 505,315

Investments 121,190 130,546 148,935 182,774 225,343

Cash & Bank Bal 34,371 27,234 26,481 31,071 41,021


Total Assets 388,509 436,756 510,039 632,325 789,442

No. of shares (m) 171 171 171 171 171

Deposits growth (%) 24.3 12.0 18.0 26.3 27.0


Fig 3 RatiosYear end 31st March FY09 FY10 FY11e FY12e FY13e

Interest spread (%) 3.1 2.9 3.2 3.4 3.3

NIM (%) 3.9 3.6 3.9 4.1 4.0


Cost-Income (%) 31.2 34.9 35.5 35.5 36.0


Dividend Payout (%) 17.1 18.4 15.8 13.4 13.8

Credit-Deposit (%) 69.5 74.7 76.0 75.2 74.0


Gross NPA (%) 2.6 3.0 3.4 2.8 2.6

Net NPA (%) 0.3 0.5 0.8 0.7 0.6

BV (`) 252.9 274.2 305.9 346.9 395.4

Adj BV (`) 248.9 266.7 291.4 331.4 378.5

CAR (%) 20.2 18.5 16.5 14.8 13.4 - Tier 1 (%) 18.4 17.1 15.3 13.8 12.6 Dividend Yield (%) 1.1 1.1 1.2 1.4 1.7 Source: Company, Anand Rathi Research

Fig 4 PE Band

Federal

4x

8x

12x

16x

50

150

250

350

450

550

650

750

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10



Federal

0.5x

1.0x

1.5x

2.0x

50

150

250

350

450

550

650

750

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10


Fig 6 Federal Bank vs. Bankex

Federal

Bankex

70

90

110

130

150

170

190

210

230

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


22/34



India I Equities


[email protected]

Kaitav Shah+9122 6626 6545

[email protected]


Conference



EPS (`) 4.2 8.5 12.0 17.1 23.4

Growth (%) 100.8 104.3 40.2 43.2 36.5

PE (x) 70.2 34.4 24.5 17.1 12.5

PABV (x) 8.3 5.8 3.9 3.3 2.8

RoE (%) 9.8 17.3 17.7 19.2 22.4

RoA (%) 0.6 1.1 1.4 1.5 1.6

Dividend yield (%) 0.4 0.6 0.9 1.2 1.7

Net NPA (%) 1.1 0.5 0.3 0.2 0.2


18 November 2010

IndusInd Bank


Profile. IndusInd Bank is one of Indias fastest growing privatesector banks with a network of 238 branches and 544 ATMs. In

Jun 04, Ashok Leyland Finance was merged with the bank. Atbeginning 08, a new management team took charge of IndusIndBank which is largely responsible for the banks enviable growth

and wider presence. Planning Cycle II (11-14). Management has successfully

demonstrated its execution prowess by easily achieving its goals inCycle I, in terms of profitability, productivity and efficiency. Ithave now embarked on phase-2 to achieve scale, higher marginsand profitability. Management expects large corporate loans andnew retail products to drive loan growth.

Impressive margins, rising CASA. Strong growth momentumin CASA has helped NIM rise to an impressive 3.41%. CASAshare improved to +25% in Sep 10 compared with less than 20%in FY09, despite strong deposits growth.

Capital infusion.The banks tier-1 capital improved to 12.2%,with capital adequacy of 16.2% due to capital infusion ofUS$253m in Sep 10, which is sufficient for supporting itsbusiness growth targets in the near term.

Valuation and risks.At our target price of`255, the stock wouldtrade at PABV of 3.4x FY11e and 2.9x FY12e. Risks: Sloweconomic growth leading to credit growth being lower thanestimated and higher NPAs.

Rating: Buy

Target Price: `255

Share Price: `293

Key data IIB IN / INBK.BO






Free float 80.3%

Promoters 19.7%



Public 22.5%


IndusInd

Sensex

90

140

190

240

290

340

390

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


23/34

18 November 2010 IndusInd Bank





NII growth (%) 52.6 93.1 38.3 36.0 36.8

Non-interest inc 4,562 5,535 8,373 10,440 13,541

Total income 9,153 14,399 20,633 27,118 36,360


Op. expenses 5,470 7,360 9,945 12,501 16,762



Provisions 1,437 1,708 2,301 2,612 3,212

PBT 2,245 5,331 8,387 12,005 16,386

Tax 762 1,827 2,877 4,118 5,620

PAT 1,483 3,503 5,510 7,887 10,765

PAT growth (%) 97.7 136.2 57.3 43.1 36.5

FDEPS (` /share) 4.2 8.5 12.0 17.1 23.4



Share capital 3,552 4,106 4,606 4,606 4,606


Deposits 221,103 267,102 349,627 461,508 609,190

Borrowings 38,412 62,621 71,351 81,323 92,718



Advances 157,706 205,506 269,213 355,361 469,076

Investments 80,834 104,018 122,369 147,682 194,941

Cash & Bank Bal 19,237 26,032 44,572 54,517 52,376


Total Assets 276,147 353,695 459,110 586,905 754,098

No. of shares (m) 355 411 461 461 461

Deposits growth (%) 16.1 20.8 30.9 32.0 32.0



Interest spread (%) 2.0 2.9 2.8 2.9 3.2

NIM (%) 2.0 3.1 3.2 3.4 3.6


Cost-Income (%) 59.8 51.1 48.2 46.1 46.1


Dividend Payout (%) 30.1 21.1 20.9 21.0 21.0

Credit-Deposit (%) 71.3 76.9 77.0 77.0 77.0


Gross NPA (%) 1.6 1.2 1.4 1.3 1.3

Net NPA (%) 1.1 0.5 0.3 0.2 0.2

BV (`) 40.2 52.7 77.8 90.7 108.3

Adj BV (`) 35.1 50.3 76.1 88.8 106.1

CAR (%) 12.3 13.4 15.2 13.3 11.9

- Tier 1 (%) 7.5 8.4 10.7 9.4 8.5

Dividend Yield (%) 0.4 0.6 0.9 1.3 1.7


Fig. 4 PE Band

IndusInd

3x

8x

13x

18x

0

50

100

150

200

250

300

350

M

ay-06

A

ug-06

N

ov-06

F

eb-07

M

ay-07

A

ug-07

N

ov-07

F

eb-08

M

ay-08

A

ug-08

N

ov-08

F

eb-09

M

ay-09

A

ug-09

N

ov-09

F

eb-10

M

ay-10

A

ug-10

N

ov-10



IndusInd1.0x

2.0x

3.0x

4.0x

20

70

120

170

220

270

320

370

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10


Fig. 6 IndusInd Bank vs. Bankex

IndusInd

Bankex

90

140

190

240

290

340

390

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


24/34



India Equities

India I Equities

Kaitav Shah+9122 6626 6545

[email protected]


[email protected]



EPS (`) 31.3 44.1 51.3 62.3 77.1

Growth (%) 13.3 41.1 16.4 21.4 23.7

PE (x) 16.7 11.8 10.1 8.4 6.8

PABV (x) 3.0 2.5 2.1 1.8 1.5

RoE (%) 18.6 22.6 22.1 22.5 23.3

RoA (%) 1.5 1.7 1.6 1.5 1.5

Dividend yield (%) 1.6 1.6 1.9 2.3 2.7

Net NPA (%) 0.3 0.2 0.3 0.2 0.2



Conference

18 November 2010

Karur Vysya Bank


Profile. One of the old-private-sector banks, based in Karur,Tamil Nadu, Karur Vysya Bank is nearly 94 years old. In the pastfive years it has consistently delivered over 1.5% RoA. At end-FY10, its distribution network comprised 335 branches (53% in

Tamil Nadu) and 376 ATMs.

Ambitious business growth. By its centenary year, 2016, thebank aims to reach the ambitious business size of`1,250bn, from

the present `365bn. In line with its stated objectives, it hasstepped up its business growth, achieving over 28% yoy growth inthe past four quarters compared with less than 20% in FY09. Weexpect consistent business CAGR of 26.6% over FY10-13e in theniche SME and retail sectors.

Management succession plan.The present MD and CEO, MrKuppuswamy, who has ably charted the banks success for nearlya decade, is due for retirement by May 11.

Capital-raising in the offing.The bank has announced a rightsissue at `150 a share in the ratio of 2:5, augmenting the presentcapital base of 13.4%, of which tier-1 is 11.9%. This would helpthe bank achieve its ambitious growth plans.

Valuation and risks.At our target price of`730, the stock wouldtrade at 2.4x FY12e and 2.1x FY13e ABV. Risks: Slow economicgrowth leading to credit growth being lower than estimated, andhigher NPAs.

Rating: Buy

Target Price: `730

Share Price: `521

Key data KVB IN/KARU.BO52-week high/low `640/`249



Market cap `39bn/US$863m


Free float 96.5%

Promoters 3.5%


Public 70.8%


KarurVysya

Sensex80

130

180

230

280

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10



25/34

18 November 2010 Karur Vysya Bank






NII growth (%) 20.3 37.6 31.1 26.1 30.3

Non-interest inc 2,655 2,470 2,880 3,390 4,018

Total income 6,759 8,119 10,283 12,726 16,178


Op. expenses 2,576 3,487 4,268 5,217 6,633



Provisions 871 374 582 723 902

PBT 3,312 4,259 5,434 6,785 8,643

Tax 951 898 1,521 2,036 2,766

PAT 2,361 3,360 3,912 4,750 5,877

PAT growth (%) 13.3 42.3 16.4 21.4 23.7

FDEPS (` /share) 31.3 44.1 51.3 62.3 77.1

DPS (` /share) 8.6 8.6 10.0 12.0 14.0



Share capital 540 544 762 762 762


Deposits 151,014 192,719 241,434 306,875 384,728

Borrowings 6,092 11,017 13,618 16,480 19,628



Advances 104,099 134,975 171,418 219,415 280,852

Investments 47,160 66,022 77,259 92,062 111,571

Cash & Bank Bal 13,742 12,351 17,241 24,400 26,733


Total Assets 170,607 219,935 274,283 346,266 431,897

No. of shares (m) 76 76 76 76 76

Deposits growth (%) 20.3 27.6 25.3 27.1 25.4



Interest spread (%) 2.2 2.5 2.5 2.6 2.7


Cost-Income (%) 38.1 42.9 41.5 41.0 41.0


Dividend Payout (%) 27.4 19.4 19.5 19.3 18.1

Credit-Deposit (%) 68.9 70.0 71.0 71.5 73.0


Gross NPA (%) 2.0 1.7 1.6 1.4 1.4

Net NPA (%) 0.3 0.2 0.3 0.2 0.2

BV (`) 178.8 212.6 252.4 300.7 361.5

Adj BV (`) 175.3 208.6 246.7 294.1 353.6

CAR (%) 13.1 14.5 14.3 13.7 13.0

- Tier 1 (%) 12.6 12.9 12.1 11.2 10.5

Dividend Yield (%) 1.6 1.6 1.9 2.3 2.7 Source: Company, Anand Rathi Research

Fig 4 PE Band

Karur Vysya

Bank

3x

6x

9x

12x

50

150

250

350

450

550

650

750

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10



Karur Vysya

Bank

0.7x

1.3x

1.9x

2.5x

0

100

200

300

400

500

600

700

800

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Mar-09

Aug-09

Jan-10

Jun-10

Nov-10


Fig 6 Karur Vysya Bank vs. Bankex

Karur Vysya

Bankex

80

100

120

140

160

180

200

220

240

260

280

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Source: Bloomberg


26/34



India Equities

India I Equities


[email protected]


[email protected]



Net profit (`m) 2,145 3,444 4,593 5,664 7,042

EPS (`) 22.4 35.9 47.9 59.0 73.4

Growth (%) 20.6 60.1 33.4 23.3 24.3

PE (x) 37.5 23.4 17.6 14.3 11.5

PABV (x) 5.7 4.7 4.0 3.3 2.7

RoE (%) 15.4 21.5 24.1 24.5 25.1

RoA (%) 3.0 4.2 4.5 4.5 4.5

Dividend yield (%) 0.7 0.9 1.1 1.3 1.5

Net NPA (%) 2.9 1.0 1.5 1.8 1.9



Conference.

18 November 2010

M&M Financial Services


Profile. M&M Financial Services (MMFS) provides personalfinance for a wide range of utility vehicles, tractors and cars,focusing on the rural and semi-urban segments. It is poised to tapstrong rural demand on the back of strong association with parent(M&M; 60% stake) and a wide branch network in rural India.

Riding high on strong rural prosperity. Increased governmentspending on rural projects, a good monsoon, growing prosperityand higher disposable income of the rural population would driveloan growth for the company. The past year saw MMFS assetquality improving, on strong cash flows for rural households.Collections in 2HFY11 are likely to be buoyant due to the festivalseasons and more harvesting income for farmers. The monsoonnext year and its subsequent impact on asset quality would be keyto watch in FY11.

Huge potential for housing finance subsidiary. Rural housingfinance is likely to be the next growth driver. The home loan

portfolio is expected to touch `15bn by FY13 (vs. `2bn in 2Q).

Fund-raising plans. MMFS is likely to raise equity capital in thenext 9-12 months for funding its fast-growing rural housing-finance subsidiary and its own capital-adequacy requirement.

Valuation and risks. At our target price of`789, the stock wouldtrade at PBV of 3x FY12e and 2.5x FY13e. Risks: Economicslowdown, regulatory changes.

Rating: Buy

Target Price: `789

Share Price: `842

Key data MMFS IN /MMFS.BO52-week high/low `914/`267





Free float 39.8%

Promoters 60.2%


Public 5.4%


M&M Fin.

Sensex80

130

180

230

280

330

380

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10



27/34

18 November 2010 M&M Financial Services






NII growth (%) 14.0 20.4 24.1 25.3 24.7

+ Non-interest inc 198 380 411 470 554

Total income 8,748 10,671 13,177 16,463 20,496

- Op. expenses 2,668 3,250 4,411 5,188 6,011


- Provisions 2,824 2,215 1,807 2,694 3,816

PBT 3,256 5,206 6,959 8,582 10,669

- Tax 1,111 1,762 2,366 2,918 3,627

PAT 2,145 3,444 4,593 5,664 7,042

+(AssociatesMinorities) - - - - -


PAT growth (%) 21.2 60.5 33.4 23.3 24.3

FDEPS (`/share) 22.4 35.9 47.9 59.0 73.4

DPS (`/share) 5.5 7.5 9.0 11.0 13.0 Source: Company, Anand Rathi Research


Share capital 957 960 960 960 960


Borrowings 52,130 64,578 80,872 101,090 126,363

Current liab and prov 7,617 9,087 11,359 14,198 17,748

Deferred tax liab - - - - -


Advances 67,987 83,788 106,411 133,013 166,267 Investments 1,097 2,159 2,267 2,675 3,157

Cash & Bank Bal 2,763 2,420 1,746 2,116 2,683


Total Assets 74,439 90,950 113,100 140,586 174,990

No. of shares (m) 96 96 96 96 96

Borrowings growth (%) 2.9 23.9 25.2 25.0 25.0

Loan growth (%) 2.9 23.2 27.0 25.0 25.0 Source: Company, Anand Rathi Research


Interest spread (%) 8.9 9.9 10.0 10.0 10.0


Cost-Income (%) 30.5 30.5 33.5 31.5 29.3


Dividend Payout (%) 24.8 21.0 18.8 18.6 17.7

Borrowings-Loans (%) 76.7 77.1 76.0 76.0 76.0

Gross NPA (%) 9.5 6.9 7.0 7.2 7.3

Net NPA (%) 2.9 1.0 1.5 1.8 1.9

BV (`) 153.5 180.1 217.4 263.6 321.7

Adj BV (`) 146.4 177.1 211.5 254.9 310.2

CAR (%) 19.5 19.0 17.5 16.0 15.5

- Tier 1 (%) 17.4 16.6 15.1 13.8 13.1

Dividend Yield (%) 0.7 0.9 1.1 1.4 1.6 Source: Company, Anand Rathi Research

Fig 4 PE Band

MMFS

5x

9x

13x

17x

0

100

200

300

400

500

600

700

800

900

Ju

l-05

F

eb

-06

S

ep-0

6

A

pr-

07

N

ov-0

7

J

un-0

8

J

an-0

9

A

ug-0

9

M

ar-

10

O

ct-10



MMFS 1.5x

2.2x

2.9x

3.6x

0

100

200

300

400

500

600

700

800

900

Ju

l-05

Fe

b-0

6

Sep-0

6

Apr-

07

Nov-0

7

Jun-0

8

Jan-0

9

Aug-0

9

Mar-

10

Oc

t-10


Fig 6 - MMFS vs. Bankex

M&M Fin.

Bankex

80

130

180

230

280

330

380

Aug-0

9

Sep-0

9

Oc

t-09

Nov-0

9

Dec-0

9

Jan-1

0

Fe

b-1

0

Mar-

10

Apr-

10

May-1

0

Jun-1

0

Ju

l-10

Aug-1

0

Sep-1

0

Oc

t-10

Nov-1

0

Source: Bloomberg


28/34



India Equities

India I Equities


[email protected]


[email protected]



Net profit (`m) 6,124 8,731 12,238 15,347 18,916

EPS (`) 30.1 38.7 54.3 68.0 83.9

Growth (%) 56.8 28.7 40.2 25.4 23.2

PE (x) 27.9 21.7 15.5 12.3 10.0

PABV (x) 7.7 5.0 3.9 3.1 2.5

RoE (%) 30.3 28.6 28.1 27.9 27.2

RoA (%) 2.8 3.4 4.1 4.3 4.4

Dividend yield (%) 0.6 0.7 0.9 1.1 1.4

Net NPA (%) 0.8 0.7 0.6 0.6 0.6



Conference

18 November 2010

Shriram Transport Finance


Profile. Shriram Transport Finance (STFC) is strategically placedin the niche, commercial vehicle (CV) market to reap the benefitof growth in freight capacity. STFCs matchless business model, interms of experience, diversified reach and leading position in theused-CV loan market enables it to command strong pricing

power.

Focus on growth and healthy margins. Higher demand forCVs (new and old) is expected to drive disbursement growth.STFC stepped up securitisation of its loan portfolio in FY10. It

securitized loans of`25bn in 2QFY11. Higher securitization alongwith strong pricing power has lifted NIM to 8.2% in 2QFY11 vs.6.9% in 2QFY10.

New business initiatives.The subsidiary for constructionequipment finance is now fully operational. Management foresees

vast demand due to a rising number of infrastructure projects in

India. STFC is aiming for a loan book of`

60bn by end-FY12. Ithas set up touch-screen truck-trading kiosks at its branches. It hadalready acquired land at four locations to construct auto malls andplans to scale this up to 60-70 locations in one year.

Valuation and risks. We reiterate our positive stance on STFC.At our target price of`934, the stock would trade at 4.3x FY11eand 3.4x FY12e PBV. Risks: Slowdown in economic activity couldcurtail loan growth and increase NPAs.

Rating: Buy

Target Price: `934

Share Price: `839

Key data SHTF IN /SRTR.BO52-week high/low `890/`416





Free float 58.5%

Promoters 41.5%


Public 16.6%


Shriram

Sensex80

130

180

230

280

330

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10



29/34

18 November 2010 Shriram Transport Finance






NII growth (%) 45.4 28.2 34.9 23.0 22.6

+ Non-interest inc 713 968 1,245 1,545 1,775

Total income 17,535 22,528 30,336 37,329 45,656

- Op. expenses 5,271 5,176 6,685 8,202 9,819

Operating profi t 12,264 17,352 23,650 29,127 35,836

- Provisions 3,057 4,106 5,107 5,873 7,176

PBT 9,206 13,246 18,543 23,254 28,660

- Tax 3,082 4,515 6,305 7,906 9,744

PAT 6,124 8,731 12,238 15,347 18,916

+(AssociatesMinorities) - - - - -


PAT growth (%) 57.1 42.6 40.2 25.4 23.2

FDEPS (`/share) 30.1 38.7 54.3 68.0 83.9

DPS (`/share) 5.0 6.0 7.5 9.0 12.0



Share capital 2,035 2,255 2,255 2,255 2,255


Borrowings 201,213 184,599 227,373 270,089 327,209

Current liab and prov 25,615 46,741 51,416 56,557 62,676

Deferred tax liab - - - - -


Advances 179,535 179,650 223,048 272,705 333,064Investments 6,548 18,560 19,488 20,463 21,486

Cash & Bank Bal 57,849 45,373 54,321 59,396 72,650


Total Assets 249,995 269,764 327,471 388,302 467,289

No. of shares (m) 204 226 226 226 226

Borrowings growth (%) 36.2 (8.3) 23.2 18.8 21.1

Loan growth (%) 19.1 0.1 24.2 22.3 22.1Source: Company, Anand Rathi Research


Interest spread (%) 7.9 7.0 6.3 6.4 6.4

NIM (%) 6.7 6.9 7.8 7.8 7.9 Other inc / Tota l inc (%) 23.4 34.5 42.2 42.9 43.1

Cost-Income (%) 30.1 23.0 22.0 22.0 21.5


Div idend Payout (%) 19.5 17.8 16.2 15.5 16.7

Borrowings-Loans (%) 112.1 102.8 101.9 99.0 98.2

Gross NPA (%) 2.1 2.8 3.1 3.3 3.5

Net NPA (%) 0.8 0.7 0.6 0.6 0.6

BV (`) 111.6 170.0 215.5 273.0 342.9

Adj BV (`) 109.1 168.1 213.4 270.6 339.9

CAR (%) 15.0 21.4 20.9 21.0 21.5

- Tier 1 (%) 12.6 16.2 15.9 16.0 16.5

Dividend Yield (%) 0.7 0 .8 1.0 1.2 1.6 Source: Company, Anand Rathi Research

Fig 4 PE Band

STFC

3x

7x

11x

15x

0

100

200

300

400

500

600

700

800

900

1,000

Ju

l-05

F

eb

-06

S

ep-0

6

A

pr-

07

N

ov-0

7

J

un-0

8

J

an-0

9

A

ug-0

9

M

ar-

10

O

ct-10



STFC

1x

2x

3x

4x

0

100

200

300

400

500

600

700

800

900

1,000

Ju

l-05

Fe

b-0

6

Sep-0

6

Apr-

07

Nov-0

7

Jun-0

8

Jan-0

9

Aug-0

9

Mar-

10

Oc

t-10


Fig 6 STFC vs. Bankex

Shriram

Bankex

80

130

180

230

280

330

Aug-0

9

Sep-0

9

Oc

t-09

Nov-0

9

Dec-0

9

Jan-1

0

Fe

b-1

0

Mar-

10

Apr-

10

May-1

0

Jun-1

0

Ju

l-10

Aug-1

0

Sep-1

0

Oc

t-10

Nov-1

0

Source: Bloomberg


30/34



India Equities

India I Equities

Kaitav Shah+9122 6626 6545

[email protected]


[email protected]



Net profit (`m) 2,625 5,073 6,380 7,690 9,535

EPS (`) 6.1 11.7 14.7 17.7 22.0

Growth (%) (27.3) 93.1 25.8 20.5 24.0

PE (x) 18.0 9.3 7.4 6.1 5.0

PABV (x) 2.3 2.3 1.9 1.5 1.3

RoE (%) 10.3 18.0 20.1 21.1 22.5

RoA (%) 0.4 0.8 0.8 0.8 0.9

Dividend yield (%) 1.0 2.4 2.7 3.2 3.8

Net NPA (%) 0.8 1.4 1.1 0.9 0.7



Conference

18 November 2010

Vijaya Bank


Profile.A mid-size government-owned bank with 1,158 branchesand 435 ATMs, Vijaya Bank is geographically concentrated in itshome state of Karnataka, focusing on the SME and retail sectors.

Prudent business growth; focus on profitability. Businessgrowth is subdued as the bank allowed its below-base-rateadvances to mature. We expect it to prudently grow its business(19.8% CAGR over FY10-13e) focusing on higher-yielding loansin the SME and retail segments. We expect a higher NIM, of 2.8%in FY13e (from 2.3% in FY10), with an expected rise in CASAshare to 27% by FY13e (from 25% in FY10).

Management succession plan. Since he joined in Aug 08,Albert Tauro, CMD, has led the turnaround by focusing on skillenhancement, and improving systems and processes. His termends in Mar 11.

Allaying asset quality concerns; sufficient capital. Assetquality concerns have been allayed with a steady drop in NNPAsover the past five quarters and a respectable NPA coverage, at68.8%; to reach the 70% mark, the bank has obtained extensiontill Mar 11. Current capital adequacy at 14.3%, of which tier-1capital is 9.6%, is sufficient to support future growth.

Valuation and risks. At our target price of`107, the stock wouldtrade at 1.5x FY12e and 1.2x FY13e ABV. Risks: Higher-than-expected credit cost and change in management.

Rating: Buy

Target Price: `107

Share Price: `109

Key data VJYBK IN/VJBK.BO52-week high/low `115/`46

Documents

India BFSI Conference - 18-19 November 2010 Final