Result Review | Banking

November 2012

Banking - 2QFY2013 Result Review

Economic environment tough
2QFY2013 snapshot - Asset quality pain persists: Annualized slippage ratio for banks under our coverage came in sequentially higher at 3.3%, compared to 3.1% in 1QFY2013. Our coverage mid PSU banks witnessed a surge in the annualized slippage ratio to 3.8% compared to 2.7% in 1QFY2013, while for our coverage large PSU banks, even though slippages declined 8% qoq, the slippage ratio still remains elevated at 3.3% in absolute terms. Most of our coverage PSU banks also witnessed sequentially lower recoveries & upgrades, which led to a 13.9% qoq increase in gross NPAs for them. Private banks continued to fare relatively much better on the asset quality front. Though slippages for our coverage Private banks were higher sequentially by 30.7%, compared to 14.8% qoq increase in 1QFY2013, but higher provisioning coupled with healthy performance on the recoveries/upgrades front restricted increase in gross NPAs to 3.7% qoq (5.9% qoq in 1QFY2013). Asset quality pressures also weighed on the banking sectors margins during the quarter. Out of 27 banks under our coverage, 15 reported sequentially lower margins, primarily due to higher interest reversals on increased slippages during 2QFY2013. Overall, PSU banks reported a weak performance during 2QFY2013, as interest reversals and higher provisioning led to a 1.8% yoy decline in bottom-line (exSBI). Private banks continued to outperform, with an operating profit growth of 22.8% yoy. On the earnings front, new private banks reported a strong growth of 27.0% yoy, while old private banks witnessed a healthy growth of 19.7% yoy. Given the economic environment, continue to prefer Private banks: A decelerating economic growth environment, policy woes in select sectors and elevated inflation and interest rates point towards further economic stress and are not suggesting any conclusive trigger for improvement in asset quality in the near-term. Hence, we continue to prefer private banks, given their stronger capital adequacy and growth prospects as well as cyclically better asset quality profile, with Yes Bank, Axis Bank and ICICI Bank being our top picks. In the back-drop of the near-term environment, in our view, the larger PSU banks like BOB and SBI are better placed. While PSU bank valuations a couple of months back offered bottom-fishing opportunities, after the 20-40% surge in several of these stocks, further upsides in our view would have to be driven by catalysts such as lower re-pricing of high-cost deposits (relative benefit for lowCASA banks) and higher recoveries (relative benefit for banks that have experienced maximum asset quality pain, and importantly, also provided for it already). Screening for these criteria, as well as Tier 1 capital adequacy and trailing adjusted valuations, in our view, PSU banks that would stand to gain most from an eventual cyclical turn-around include Canara Bank and Bank of India in the large-caps as well as Indian Bank, Allahabad Bank and United Bank amongst the mid-caps.

Banking indicators
Particulars* Latest yoy credit growth Latest yoy deposit growth Latest credit-to-deposit ratio Monthly Avg. LAF (` cr) Monthly Avg. 1 yr G-Sec yield Monthly Avg. 10 yr G-Sec yield Monthly Avg. 3M CP Monthly Avg. 12M CP (%) 16.2 13.7 75.5 92,363 8.1 8.2 8.9 9.4

Source: RBI, Bloomberg, Angel Research; Note*: Monthly averages are on preceding 30 day basis

Policy rates
Particulars Repo rate Reverse repo rate MSF rate Cash reserve ratio (CRR) Statutory liquidity ratio (SLR)
Source: RBI, Angel Research

(%) 8.0 7.0 9.0 4.25 23.00

Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com

Sourabh Taparia
022 3935 7800 Ext: 6872 sourabh.taparia@angelbroking.com

Please refer to important disclosures at the end of this report

Banking | Result Review

Asset quality pressures weigh on margins

Asset quality pressures weighed on the banking sectors margins during the quarter. Out of 27 banks under our coverage, 15 reported sequentially lower margins. United Bank (UTDBK), Allahabad Bank (ALBK) and Indian Overseas Bank (IOB) witnessed the highest sequential margin compression, primarily due to higher interest reversals on increased slippages during 2QFY2013 (slippages for UTDBK, ALBK and IOB were higher by 50.6%, 191.3% and 114.3% qoq, respectively).

Exhibit 1: Margins compressed for most banks

40.0 30.0 20.0 10.0 (10.0) (20.0) (30.0) (40.0) (50.0)

Exhibit 2: New Private Banks outperformed on NII front

30.0 25.0 20.0 15.0 10.0 % chg yoy % chg qoq

26.9

BOI FEDBK J&KBK SYNBK CANBK YESBK AXSB BOM CENTBK UNBK BOB OBC ICICIBK IDBI VIJAYA SIB CRPBK HDFCBK PNB INDBK SBI UCOBK ANDBK DENABK IOB ALLBK UTDBK

0.0 Pvt New (5.0) Pvt Old PSU Large PSU Mid

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

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

Exhibit 3: Our coverage banks performance on reported margins front

Bank HDFCBK J&KBK SBI* FEDBK PNB AXSB SYNBK BOB* ANDBK INDBK SIB UNBK ICICIBK BOM

2QFY2013 4.20 3.94 3.68 3.58 3.50 3.46 3.33 3.23 3.13 3.12 3.09 3.02 3.00 2.99

1QFY2013 4.30 3.80 3.86 3.42 3.60 3.37 3.19 3.22 3.33 3.30 3.15 3.01 3.01 2.91

Chg (bps) (10.0) 14.0 (18.0) 16.0 (10.0) 9.0 14.0 1.0 (20.0) (18.0) (6.0) 1.0 (1.0) 8.0

Bank YESBK DENABK BOI* ALLBK OBC CENTBK UTDBK CANBK IOB UCOBK CRPBK VIJAYA IDBI

2QFY2013 2.90 2.86 2.84 2.80 2.79 2.68 2.60 2.53 2.33 2.24 2.23 2.10 2.05

1QFY2013 2.80 3.06 2.56 3.17 2.79 2.64 3.05 2.40 2.59 2.44 2.29 2.14 2.09

Chg (bps) 10.0 (20.0) 28.0 (37.0) 4.0 (45.0) 13.0 (26.0) (20.0) (6.0) (4.0) (4.0)

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

November 2012

(1.5)

6.7

9.6

1.9

7.1

0.6

2.3

5.0

Banking | Result Review

Exhibit 4: CD ratios for banks under our coverage

Bank IDBI YESBK BOM HDFCBK VIJAYA J&KBK OBC SIB SYNBK IOB BOI SBI INDBK UNBK CD ratio 2QFY13 CD Ratio 1QFY13 92.4 80.4 73.8 84.5 69.1 62.4 71.8 73.2 81.3 79.3 77.0 81.8 72.4 76.5 87.5 76.7 71.2 82.8 68.6 62.6 72.0 73.6 82.1 80.2 77.9 83.1 73.9 78.3 Chg (bps) 488 361 257 166 53 (15) (25) (46) (78) (92) (94) (136) (149) (183) Bank ANDHBK FEDBK ALLBK ICICIBK PNB BOB CANBK AXSB UTDBK UCOBK DENABK CENTBK CRPBK CD ratio 2QFY13 CD Ratio 1QFY13 78.5 73.3 68.4 97.7 73.6 71.6 64.1 73.1 66.1 72.6 70.4 73.7 68.3 80.4 75.2 70.4 100.2 76.4 74.7 67.4 76.9 70.1 76.9 74.8 78.3 73.5 Chg (bps) (191) (194) (198) (250) (286) (309) (335) (382) (394) (426) (436) (458) (519)

Source: Company, Angel Research,

Growth in saving deposits remains moderate, while current deposits grow at subdued pace
The persistent high differential between savings and term deposit rates resulted in moderate growth of 13.7% yoy in saving deposits for our coverage banks, while decelerating economic environment led to subdued growth of 7.0% yoy in current deposits for our coverage banks. Private banks outperformed their PSU peers on the savings deposits (SA) front, with a growth of 17.3% yoy. Amongst our coverage Private banks, Yes Bank witnessed the highest SA growth (significant traction being witnessed post the hike in savings rate to 6-7%). Large private banks too fared well, with Axis Bank, ICICI Bank and HDFC Bank reporting a healthy growth of 20.1%, 14.9% and 14.7%, yoy respectively. Continued outperformance on the SA front aided Private banks to gain market share (17.5% as of 2QFY2013, compared to 16.6% in FY2011), which was largely at the expense of market share loss for mid and small PSU banks (25.9% as of 2QFY2013 compared to 30% as of FY2011). Within PSU banks, the top three performers on the SA front were IDBI Bank (30.0% yoy growth on account of traction post waiver of CASA charges during FY2012), J&K Bank (21.4% yoy growth considering insulation from competition in its parent state of J&K) and United Bank (16.5% yoy growth owing to majority presence in eastern and North-eastern states of India).

November 2012

Banking | Result Review

Exhibit 5: CASA yearly growth rate trends

Bank YESBK IDBI J&KBK AXSB UTDBK OBC CORPBK FEDBK ICICIBK PNB ANDHBK HDFCBK CENTBK BOM BOB INDBK SBI ALLBK DENABK BOI UNIONBK SYNBK IOB CANBK SIB UCOBK VIJBK SA 2QFY13 3,877 19,781 16,408 56,189 28,757 29,676 19,276 11,758 80,618 115,389 22,219 79,151 56,119 24,742 77,824 31,546 396,543 40,240 20,135 70,978 53,311 36,126 37,052 70,494 6,321 28,022 14,083 SA 2QFY12 859 15,216 13,515 46,786 24,693 25,558 16,645 10,183 70,149 100,491 19,355 69,017 49,071 21,699 68,541 27,804 352,408 35,875 17,988 63,513 47,800 32,578 33,610 64,043 5,764 25,787 13,261 yoy growth 351.4 30.0 21.4 20.1 16.5 16.1 15.8 15.5 14.9 14.8 14.8 14.7 14.4 14.0 13.5 13.5 12.5 12.2 11.9 11.8 11.5 10.9 10.2 10.1 9.7 8.7 6.2 CA 2QFY13 5,157 19,726 4,552 39,349 8,603 9,945 10,786 2,458 33,800 28,040 5,937 46,675 11,061 7,662 27,436 6,448 79,671 8,824 6,485 13,192 15,652 10,419 10,231 13,062 1,362 10,517 4,353 CA 2QFY12 4,113 18,265 4,590 35,354 6,513 8,624 9,660 1,983 32,997 23,531 5,338 40,093 12,717 6,550 21,639 6,813 82,632 7,609 4,891 13,140 14,954 10,497 11,301 16,732 1,274 6,257 4,596 yoy growth 25.4 8.0 (0.8) 11.3 32.1 15.3 11.7 23.9 2.4 19.2 11.2 16.4 (13.0) 17.0 26.8 (5.4) (3.6) 16.0 32.6 0.4 4.7 (0.7) (9.5) (21.9) 6.9 68.1 (5.3) CASA 2QFY13 9,034 39,507 20,960 95,538 37,360 39,621 30,062 14,216 114,418 143,429 28,156 125,826 67,180 32,404 105,260 37,994 476,214 49,064 26,620 84,170 68,963 46,545 47,283 83,556 7,683 38,539 18,436 CASA 2QFY12 4,839 33,481 18,105 82,140 31,206 34,182 26,306 12,166 103,146 124,022 24,693 109,110 61,788 28,249 90,180 34,617 435,040 43,484 22,879 76,652 62,754 43,075 44,912 80,775 7,038 32,044 17,857 yoy growth 86.7 18.0 15.8 16.3 19.7 15.9 14.3 16.8 10.9 15.6 14.0 15.3 8.7 14.7 16.7 9.8 9.5 12.8 16.4 9.8 9.9 8.1 5.3 3.4 9.2 20.3 3.2 CASA Ratio 17.3 21.9 38.2 40.5 40.2 24.1 20.9 28.7 40.7 35.8 25.9 45.9 33.0 37.4 31.7 29.0 45.0 30.3 31.9 31.8 30.5 29.9 25.0 24.8 20.0 23.7 21.6

Source: Company, Angel Research

November 2012

Banking | Result Review

On the Current deposits (CA) front, UCO Bank registered a strong growth of 68.1% due to substantial float being made available on opening of rupee accounts with the bank for facilitating Indo-Iran trade payments, as per the management. Private banks outperformed their PSU counterparts on the CA front too and gained market share (32.7% as of 2QFY2013 compared to 27.3% in FY2011), which was at the expense of market share loss for large PSU banks (35.3% as of 2QFY2013 compared to 42% in FY2011).

Exhibit 6: CASA ratio and Investment-to-deposits ratio for our coverage PSU banks as of 2QFY2013
45 40 35
25 38 41 45 40 36 32 37 35 36 32 30 26 27 BOI BOM 25 32 SYNBK

50
39 37 36 35

CASA ratio- (%)

36

Investments to Deposits - (%)

34

33

33 32

32 32

31

30

24

22

25 20 15 10 5 0

21

22

24

25

30

26 29

29

UNIONBK

ALLBK

OBC

CORPBK

INDBK

VIJBK

IOB

31 32

32

ANDHBK

DENABK

J&KBK

UCOBK

CANBK

CENTBK

Source: Company, Angel Research

Exhibit 7: Yield on advances# for banks under our coverage

Bank YESBK FEDBK JKBK SIB ANDBK OBC HDFCBK DENABK ALBK VIJBK INDBK IDBI CNTBK UTDBK 1HFY13 12.7 12.5 12.4 12.3 12.0 11.8 11.7 11.6 11.5 11.4 11.3 11.3 11.2 11.2 1HFY12 12.0 12.4 11.4 12.0 12.3 11.1 10.9 11.0 12.0 11.1 11.2 11.2 11.1 10.6 Chg (bps) 68 14 97 36 (29) 67 81 58 (45) 36 5 4 11 57 Bank UCOBK CRPBK CANBK PNB AXSB BOM SYNDBK IOB UNBK ICICIBK SBI BOI BOB 1HFY13 11.2 11.2 11.0 11.0 11.0 10.8 10.7 10.7 10.6 10.1 10.0 9.0 8.9 1HFY12 Chg (bps) 11.1 10.5 10.5 11.1 10.1 10.8 10.7 10.7 10.2 9.2 9.8 8.9 9.0 12 70 51 (9) 82 0 6 (2) 41 90 12 17 (15)

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

November 2012

UTDBK

BOB

IDBI

PNB

SBI

33

Banking | Result Review

Exhibit 8: Risk adjusted yield on assets# for banks under our coverage
Bank YESBK SIB FEDBK ANDBK JKBK DENABK HDFCBK INDBK VIJBK OBC ALBK CANBK UNBK CRPBK 1HFY13 9.7 9.7 9.6 9.4 9.3 9.0 8.8 8.7 8.7 8.6 8.5 8.5 8.3 8.3 1HFY12 9.2 9.1 8.7 8.9 8.2 8.5 8.0 8.4 8.0 7.8 8.5 8.0 7.5 7.8 Chg (bps) 54 68 89 53 114 49 79 38 67 83 3 51 81 52 Bank CNTBK IDBI AXSB SYNDBK IOB UCOBK PNB BOM SBI* ICICIBK* UTDBK BOI* BOB* 1HFY13 1HFY12 Chg (bps) 8.3 8.2 8.2 8.2 8.1 8.0 8.0 7.8 7.8 7.6 7.4 6.9 6.7 7.9 8.5 7.7 7.8 7.6 7.6 7.9 7.5 6.9 7.1 7.0 6.6 6.9 33 (23) 50 35 52 46 12 27 87 47 34 35 (19)

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

Subdued performance on the non-interest income (excluding treasury) front, during the quarter
After registering moderate growth of 11.4% yoy on the non-interest income (excluding treasury) front during the last quarter, our coverage banks performance in 2QFY2013 came in much lower at 4.7% yoy, largely due to muted performance on the fee income front. Slowed credit off-take and sanctions were amongst the reasons for sluggish performance on the fee income front for most banks. Private banks under our coverage registered a moderate growth of 12.0% yoy on the non-interest income (excluding treasury) front, but were able to comfortably outperform the coverage PSUs, which saw marginal growth of 1.3% yoy. Amongst PSUs, mid and small ones (growth of 6.8% yoy) performed much better than larger ones (de-growth of 0.9% yoy), whose performance was dragged by yoy decline witnessed in four of seven large PSU banks. Amongst mid PSUs, the better performers were Andhra Bank and Oriental Bank of Commerce (witnessed significant jump in recoveries from written-off accounts).

November 2012

Banking | Result Review

Exhibit 9: Non-interest income (excl. treasury) performance for banks under our coverage
Bank AXSB HDFCBK ICICIBK YESBK SBI OBC IDBI BOI PNB INDBK IOB CRPBK UNBK ANDHBK FEDBK BOM BOB CANBK SIB ALLBK UTDBK SYNBK DENABK J&KBK VIJAYA CENTBK UCOBK 2QFY2013 1,386 1,451 1,871 277 3,117 355 650 791 765 333 375 280 471 214 104 162 716 534 62 255 143 245 115 65 106 282 168 1QFY2013 1,185 1,463 1,901 288 3,278 422 473 740 1,030 200 401 285 436 211 98 155 689 594 55 255 134 213 110 73 103 220 220 % chg (qoq) 16.9 (0.8) (1.6) (3.9) (4.9) (15.9) 37.4 6.8 (25.7) 66.2 (6.5) (1.8) 7.9 1.4 5.6 4.6 3.9 (10.1) 12.8 0.2 6.2 15.3 4.6 (11.5) 2.8 28.0 (23.8) 2QFY2012 1,207 1,213 1,820 214 3,399 259 434 687 784 321 378 275 401 156 103 147 724 679 42 302 115 232 109 63 100 279 162 % chg (yoy) 14.8 19.6 2.8 29.3 (8.3) 37.0 49.9 15.1 (2.4) 3.7 (0.8) 1.6 17.4 37.6 0.7 10.0 (1.1) (21.4) 48.5 (15.6) 24.5 5.5 4.8 3.3 5.9 0.9 3.6 As % to avg. assets 1HFY2012 1.75 1.63 1.55 1.44 0.92 0.85 0.81 0.79 0.77 0.73 0.69 0.69 0.68 0.67 0.67 0.67 0.61 0.60 0.56 0.55 0.53 0.50 0.49 0.45 0.43 0.43 0.43 1HFY2013 1.87 1.60 1.65 1.25 1.10 0.61 0.67 0.70 0.87 0.82 0.77 0.75 0.66 0.57 0.75 0.80 0.69 0.75 0.45 0.71 0.48 0.58 0.66 0.46 0.50 0.43 0.44 Chg (bps) (0.12) 0.03 (0.09) 0.20 (0.18) 0.24 0.14 0.08 (0.09) (0.09) (0.08) (0.06) 0.02 0.11 (0.08) (0.14) (0.08) (0.16) 0.11 (0.16) 0.05 (0.08) (0.16) (0.01) (0.07) 0.00 (0.02)

Source: Company, Angel Research

Slippages surge, recoveries/upgrades sluggish, resulting in continued asset quality stress

The entire FY2012 was a challenging year for the banking sector, as it was grappled with increased asset quality concerns. Even during 1HFY2013, incremental slippages have remained high (relatively more in 2QFY2013, than in 1QFY2013), considering further deterioration in economic growth environment and persisting burden of high interest servicing costs. During 2QFY2013, annualized slippage ratio for banks under our coverage (excl. HDFCBK and YESBK, due to unavailability of data), came in sequentially higher at 3.3%, compared to 3.1% in 1QFY2013. Mid PSU banks under our coverage witnessed 37.4% sequential increase in slippages (annualized slippage ratio surged to 3.8% compared to 2.7% in 1QFY2013). Slippages for coverage large PSU banks, even after witnessing moderation of 8.2% qoq in 2QFY2013, still remains elevated (annualized slippage ratio at 3.3% compared to 3.6% in the last quarter).

November 2012

Banking | Result Review

Exhibit 10: Gross NPA trends (%) Private vs PSU

3.76 3.60 3.30 3.00 2.70 2.40 2.10 1.80 1.50 2.34 2.42 2.35 2.25 2.45 2.24 2.17 2.01 2.05 2.06 2.80 2.70 2.57 2.36 2.33 2.85 3.02 2.98 3.34

Exhibit 11: Net NPA trends (%) Private vs PSU

2.20 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 2.04 1.47 1.12 1.13 1.07 1.08 1.16 1.56 1.73 1.50

0.92

0.79

0.69

0.55

0.56

0.54

0.54

0.46

0.49

0.54

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13
1.49

Pvt Banks

PSU Banks

Pvt Banks

PSU Banks

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 12: Gross NPA trend (%) for the banking industry
3.50 3.30 3.10 2.90 2.70 2.50 2.30 2.10 2.47 2.40 2.27 2.43 2.73 2.85 2.80 3.09 3.42

Exhibit 13: Net NPA trend (%) for the banking industry
1.80 1.70 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 1.07 1.00 0.98 1.04 1.28 1.36 1.30 1.74

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

Source: Company, Angel Research

Mid PSU banks such as Indian Bank (INDBK), ALBK, IOB, UCOBK and UTDBK and large PSU banks such as Bank of India (BOI), Punjab National Bank (PNB) and Canara Bank (CANBK), witnessed much higher level of slippages. Taken together, slippages for these banks were higher by 74.9% qoq in 2QFY2013 compared to marginal increase of 1.1% qoq in 1QFY2013. State Bank of India (SBI), IDBI Bank and Union Bank of India (UNBK) amongst the large PSU banks and Bank of Maharashtra (BOM) and Corporation Bank (CRPBK) amongst the mid PSU banks, which had seen a sharp jump in slippages in 1QFY2013, managed to lower their slippage levels by ~30-55% qoq. Slippages for most of the PSU banks were higher on account of large ticket size NPAs, mainly emanating from the mid corporate and SME segments. Sectorally, a higher chunk of NPAs for most of the PSU banks came from infrastructure, iron and steel, textiles and metals & mining. A large corporate group each in the pharma and media sector were the most prominent common slippage for many banks. Allahabad bank faced `700cr of slippages on account of classification differences arising at the Reserve Bank of India (RBI)s annual financial inspection, as it had earlier classified the sum as standard, which the RBI contested to be an NPA.

November 2012

2QFY13

2QFY13

Banking | Result Review

Despite reportedly stepping up recoveries/upgrades efforts, most of our coverage PSU banks witnessed sequentially lower recoveries/upgrades, which led to a 13.9% sequential increase in gross NPA levels for our coverage PSU banks during the quarter. Even worse, this was accompanied by significant decline in the provisioning coverage for almost all PSU banks, with the few exceptions being Syndicate Bank and Bank of Maharashtra (in line with our relatively positive view on asset quality compared to peers) as well as OBC, BOI, IDBI Bank and UNBK. Private banks continued to fare relatively much better vis--vis PSU banks on the asset quality front. Though slippages for our coverage Private banks were higher sequentially by 30.7% compared to a 14.8% qoq increase in 1QFY2013, higher provisioning coupled with inspired performance on the recoveries/upgrades front aided them to cap the increase in their gross NPA levels to 3.7% qoq as compared to an increase of 5.9% qoq in 1QFY2013. Going forward, considering the weakening GDP growth environment and with downward movement in interest rates expected to be relatively much slower than earlier estimated, the mid-corporate and SME are expected to remain vulnerable to being NPAs going ahead as well, in our view.

November 2012

Banking | Result Review

Exhibit 14: Asset quality witnessed higher sequential deterioration during 2QFY2013
Slippages (%) Bank ALLBK IOB PNB UCOBK INDBK SIB BOI UTDBK CENTBK CANBK DENABK ICICIBK VIJAYA AXSB J&KBK BOB YESBK HDFCBK SYNBK OBC ANDHBK IDBI CRPBK FEDBK BOM SBI UNBK 2QFY13 1QFY13 chg (bps) 6.2 5.3 6.2 5.3 3.3 3.4 4.4 2.8 4.8 3.3 2.0 1.9 3.8 1.5 1.2 2.0 NA NA 3.3 2.3 3.7 1.4 1.8 1.5 1.5 3.3 1.8 2.1 2.5 3.8 3.0 1.0 1.3 2.8 1.9 3.9 2.6 1.4 1.4 3.3 1.1 1.0 1.8 NA NA 3.4 2.5 4.0 2.3 2.9 3.1 3.1 5.0 3.7 407 281 242 235 222 211 159 96 91 73 68 55 52 41 15 15 NA NA (16) (20) (29) (93) (110) (154) (165) (172) (189) 2QFY13 3,311 5,930 14,024 5,888 1,980 496 8,899 2,418 8,507 5,610 1,171 10,036 1,897 2,191 552 5,879 103 2,133 3,179 3,466 3,014 5,848 1,949 1,435 1,292 49,202 6,470 GNPA(` cr) 1QFY13 2,162 4,410 9,988 4,624 1,554 295 6,752 2,210 7,510 4,498 1,076 9,817 1,693 2,092 541 5,319 110 2,086 3,077 3,378 2,358 5,496 1,689 1,409 1,294 47,156 6,541 qoq (%) 53.1 34.5 40.4 27.3 27.4 68.2 31.8 9.4 13.3 24.7 8.8 2.2 12.0 4.7 2.0 10.5 (6.1) 2.3 3.3 2.6 27.8 6.4 15.4 1.9 (0.2) (1.1) 2,331 3,378 7,883 3,468 1,260 242 5,228 1,188 5,696 4,569 721 2,134 1,116 654 55 2,385 20 387 1,164 2,393 1,831 3,395 1,351 245 559 3,559 NNPA(` cr) 2QFY13 1QFY13 1,191 2,152 4,917 2,614 963 95 4,413 1,106 4,853 3,756 597 1,905 979 605 48 1,845 24 396 1,185 2,306 1,293 3,478 1,185 236 549 20,324 3,747 qoq (%) 95.7 57.0 60.3 32.7 30.8 154.2 18.5 7.4 17.4 21.6 20.7 12.0 14.1 8.2 14.9 29.3 (15.1) (2.3) (1.7) 3.8 41.6 (2.4) 14.0 3.8 1.7 11.3 (5.0) 2QFY13 60.8 58.5 54.3 49.1 71.0 51.2 61.0 69.2 39.9 63.0 72.5 78.7 61.8 70.1 93.3 75.7 78.4 81.9 82.3 64.5 53.2 65.8 60.4 82.9 80.1 62.8 61.5 PCR (%) 1QFY13 chg (bps) 73.6 67.1 62.8 52.7 75.1 67.7 60.9 69.3 40.8 66.5 75.6 80.6 64.1 71.1 94.1 79.0 79.2 81.0 80.7 64.4 60.4 65.5 61.0 83.2 79.3 64.3 59.0 (1,277) (858) (850) (359) (411) (1,650) 10 (17) (90) (351) (315) (186) (232) (94) (79) (330) (82) 85 155 5 (723) 31 (58) (31) 80 (151) 245

4.3 22,615

Source: Company, Angel Research

Exhibit 15: Aggregate gross NPA levelsPrivate Banks

Bank (` cr) Pvt. New Pvt. Old Total 2QFY13 15,613 4,719 20,332 1QFY13 15,154 4,255 19,409 2QFY12 14,670 3,706 18,376 %yoy 6.4 27.4 10.6 %qoq 3.0 10.9 4.8

Exhibit 16: Aggregate gross NPA levels PSU Banks

Bank (` cr) PSU Large PSU Med Total 2QFY13 95,931 45,622 141,553 1QFY13 85,749 38,400 124,149 2QFY12 61,866 29,148 91,014 %yoy 55.1 56.5 55.5 %qoq 11.9 18.8 14.0

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 17: Aggregate net NPA levels Private Banks

Bank (` cr) Pvt. New Pvt. Old Total 2QFY13 3,651 1,695 5,346 1QFY13 3,370 1,300 4,670 2QFY12 3,405 1,010 4,414 %yoy 7.2 67.9 21.1 %qoq 8.3 30.3 14.5

Exhibit 18: Aggregate net NPA levels PSU Banks

Bank (` cr) PSU Large PSU Med Total 2QFY13 49,634 27,285 76,919 1QFY13 42,480 21,605 64,084 2QFY12 32,091 14,503 46,594 %yoy 54.7 88.1 65.1 %qoq 16.8 26.3 20.0

Source: Company, Angel Research

Source: Company, Angel Research

November 2012

10

Banking | Result Review

Lower accretion to the restructuring book

During 2QFY2013, the accretion to the restructuring book was lower compared to what was witnessed in the last two quarters (where discoms restructuring constituted a major chuck). Amongst our coverage PSU banks, Andhra bank, Allahabad bank and Vijaya bank witnessed the highest sequential increase in their restructuring book during the quarter. The total restructured book as a percentage to total advances, remains the highest for mid-PSU banks such as Central Bank (14.1%), Allahabad Bank (11.5%) and Indian Bank (10.9%), while for new private banks, it remains low in the range of 0-2.5%. Going ahead, the restructuring pipeline remains substantial for PSU banks such as OBC (~`2,500cr, Punjab SEB accounting for `1,200cr) and Andhra bank (~`1,200cr, out of which ~`450cr to be accounted by Tamil Nadu SEB), as guided by their respective managements. Though many banks have stated that they expect no major restructuring to be in the pipeline, however fresh approvals through the CDR route (`18,925cr in 2QFY2013 vs `17,957cr in 1QFY2013) are likely to keep the restructuring pipeline for most banks active.

75bp increase in provisioning for standard restructured advances to impact mid PSU banks the most
As per RBIs recent 75bp increase in provisioning requirement for standard restructured advances, mid-sized PSU banks would be impacted the most, as standard restructured advances for them as a percentage to total advances as of 2QFY2013, stand at a high of 8.8%. Within mid-PSU banks, Central Bank and IOB would be the worst affected, as for them standard restructured advances constitute 12.9% and 9.5%, respectively of their total advances. Meanwhile, the least affected amongst the PSU banks would be SBI and BOB, while there would be negligible impact on new private banks and moderate impact in case of old private banks. The RBI can be expected to soon clarify regarding upgrading of restructured advances once the account performs satisfactorily over a stipulated period to enable banks to write-back provisions on those advances and offset the same for higher provisioning on other advances.

November 2012

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Banking | Result Review

Exhibit 19: Restructuring book as of 2QFY2013

Bank (` cr) CENTBK ALLBK INDBK ANDHBK IOB OBC PNB CRPBK UNBK BOI DENABK IDBI SYNBK UCOBK VIJAYA FEDBK CANBK UTDBK BOB SIB SBI AXSB ICICIBK YESBK HDFCBK Total Rest. adv as of 2QFY13 21,199 12,748 10,349 9,077 14,775 11,483 27,852 8,867 14,360 20,786 4,500 12,534 9,263 NA 4,294 2,538 14,895 4,214 16,680 1,293 40,454 4,068 4,158 192 695 Total Rest. adv as of 1QFY13 20,686 10,727 9,918 6,769 13,368 10,954 25,519 8,352 13,521 20,589 4,255 10,886 8,302 9,200 3,629 2,238 14,056 4,093 15,745 1,195 36,904 3,827 4,172 197 640 Ch.qoq (%) 2.48 18.84 4.34 34.09 10.53 4.83 9.14 6.17 6.21 0.95 5.76 15.14 11.58 NA 18.32 13.40 5.97 2.96 5.94 8.20 9.62 6.30 (0.34) (2.19) 8.58 % to total adv. 14.1 11.5 10.9 10.6 9.8 9.7 9.4 9.0 8.3 8.1 7.6 7.5 7.3 NA 7.3 7.0 6.9 6.9 5.7 4.6 4.4 2.4 1.5 0.5 0.3 Std Rest. adv as of 2QFY13 19,296 11,781 NA NA 14,257 NA 25,895 7,667 8,321 17,786 4,375 10,237 8,700 7,310 NA 1,956 NA 3,200 15,180 NA 32,796 NA NA NA NA % to total adv. 12.9 10.6 NA NA 9.5 NA 8.8 7.8 4.8 6.9 7.4 6.2 6.9 6.2 NA 5.4 NA 5.2 5.2 NA 3.5 NA NA NA NA

Source: Company, Angel Research; Note: Total and standard restructured advances in some cases might not be comparable bank-wise on account of limitation of available information regarding reporting of restructured advances (account-wise/borrower-wise, sanctioned basis/disbursed basis).

Exhibit 20: CDR Snapshot

Year (` cr) FY2010 FY2011 1QFY12 2QFY12 3QFY12 4QFY12 FY2012 1QFY13 2QFY13 1HFY13 Outstanding
Source: Company, Angel Research

Referred No. of cases 31 49 18 18 23 28 87 41 33 74 433 Additions 20,175 22,614 4,595 21,095 19,187 23,012 67,889 20,528 18,907 39,435 227,021

Approved No. of cases 31 27 10 7 17 16 50 17 18 35 309 Additions 17,763 6,615 8,141 2,095 21,364 8,001 39,601 17,957 18,925 36,882 168,472

November 2012

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Banking | Result Review

Private banks continue to outperform their PSU counterparts on earnings front

PSU banks reported weak performance during 2QFY2013, primarily marred by asset quality pressures, as interest reversals and higher provisioning led their bottom-lines to decline by 1.8% yoy for PSU banks (excluding SBI). On the operating front, large PSU banks (excluding SBI) registered a moderate growth of 7.6% yoy (including SBI, growth was even lower at 5.7% yoy), while the growth in the mid PSU banks segment was muted at 3.7% yoy. However, higher increase in operating expenses (growth of 11.8% and 8.6% yoy, respectively for large PSU banks excluding SBI and mid PSU banks) resulted in the operating profit growing at a subdued pace of 4.7% yoy for large PSU banks (excluding SBI), while remaining flattish for mid PSU banks.

Exhibit 21: Large PSU banks P&L (excl. SBI)

Parameter (` cr) NII Other Income Operating Income Operating Expenses Pre provision profit Provisions PBT Tax Net Profit 2QFY13 1QFY13 % chg (qoq) 2QFY12 % chg (yoy)

Exhibit 22: Mid- PSU banks P&L

Parameter (` cr)

2QFY13 1QFY13 13,538 3,680 17,217 7,855 9,363 4,380 4,982 1,102 3,880 13,707 3,509 17,216 7,594 9,622 3,987

% chg % chg 2QFY12 (qoq) (yoy)

13,764 4,464 18,228 7,737 10,491 4,675 5,816 1,448 4,368

13,473 4,478 17,951 7,406 10,545 3,842 6,703 1,717 4,986

2.2 (0.3) 1.5 4.5 (0.5) 21.7 (13.2) (15.6) (12.4)

12,668 4,273 16,942 6,918 10,023 3,844 6,179 1,596 4,583

8.6 4.5 7.6 11.8 4.7 21.6 (5.9) (9.2) (4.7)

NII Other Income Operating Income Operating Expenses Pre provision profit Provisions PBT Tax

(1.2) 4.9 0.0 3.4 (2.7) 9.9

13,200 3,406 16,606 7,235 9,370 4,352 5,018 1,202 3,817

2.6 8.0 3.7 8.6 (0.1) 0.7 (0.7) (8.3) 1.7

5,635 (11.6) 1,230 (10.4) 4,406 (11.9)

Net Profit

Source: Company, Angel Research

Source: Company, Angel Research

Provisioning expenses for most of the PSU banks increased during 2QFY2012, partly on account of switchover to system based NPAs recognition (for SBI; due to the cleanup done in 1QFY2012). However, despite having a high base, continued asset quality pressures (evident in 55.1% and 56.5% yoy increase in gross NPA levels for large PSU banks and mid-sized PSU banks respectively), led to provisioning expenses growing by 21.6% yoy for large PSU banks excluding SBI (for SBI, provisioning expenses declined by 46.1% yoy), and remaining flattish for mid-PSU banks (as many of them resorted to lowering their PCR). Higher provisioning expenses resulted in PBT declining by 5.9% yoy for large PSU banks excluding SBI, while it remained flattish for mid-sized PSU banks. Tax expenses declined by 9.2% and 8.3% yoy, respectively for large PSU banks and mid-sized PSU banks, primarily on account of higher provisioning expenses, which limited the bottom-line decline to 4.7% yoy in case of large PSU banks (excl SBI), and aided mid-sized PSU banks to post a muted bottom-line growth of 1.7%.

November 2012

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Banking | Result Review

Exhibit 23: New Private banks P&L

Parameter (` cr) NII Other Income Operating Income Operating Expenses Pre provision profit Provisions PBT Tax Net Profit % chg % chg 2QFY13 1QFY13 2QFY12 (qoq) (yoy)

Exhibit 24: Old Private banks P&L

Parameter (` cr) NII Other Income Operating Income Operating Expenses Pre provision profit Provisions PBT Tax Net Profit

2QFY13 1QFY13 2,056 714 2,770 1,452 1,318 153 1,165 351 814 1,968 719 2,687 1,367 1,320 207 1,113 334 779

% chg 2QFY12 (qoq)

% chg (yoy)

11,222 5,829 17,051 7,721 9,330 1,462 7,868 2,392 5,476

10,534 5,593 16,127 7,321 8,806 1,330 7,476 2,281 5,195

6.5 4.2 5.7 5.5 5.9 9.9 5.2 4.8 5.4

8,868 4,852 13,720 6,366 7,354 1,173 6,181 1,870 4,311

26.5 20.1 24.3 21.3 26.9 24.6 27.3 27.9 27.0

4.4 (0.7) 3.1 6.2 (0.2) (26.1) 4.7 5.0 4.5

1,779 636 2,414 1,238 1,176 210 966 286 680

15.6 12.4 14.7 17.2 12.1 (27.3) 20.6 22.8 19.7

Source: Company, Angel Research

Source: Company, Angel Research

Private banks continued to outperform their PSU counterparts and reported impressive performance during 2QFY2013, with operating profit growth of 22.8% yoy. They were however not sparred from asset quality pressures either (though they faced relatively much lower asset quality pressures than their PSU peers, with sequential increase in gross NPAs limited to 4.8% for private banks compared to increase of 14.0% for PSU banks). Hence, provisioning expenses for the new private banks was higher by 24.6% yoy, however the older private banks reported a 27.3% yoy decline in provisioning expenses (despite a 27.4% yoy increase in their gross NPA levels, lower provisioning lead to net NPA levels increasing by 67.9% yoy). On the overall earnings front, new private banks reported a strong growth of 27.0% yoy, while old private banks witnessed a healthy growth of 19.7% yoy.

Exhibit 25: Advances growth (%)

Banks-Type Large PSU Mid PSU New Pvt. Old Pvt. 2QFY13 1QFY13 % chg (qoq) 2QFY12 % chg (yoy)

Exhibit 26: Deposits growth (%)

Banks-Type Large PSU Mid PSU New Pvt. Old Pvt. Grand Total 2QFY13 1QFY13

2,362,139 2,357,536 1,397,964 1,374,589 805,746 162,680 771,011 159,180

0.2 2,036,400 1.7 1,187,813 4.5 2.2 665,636 137,479

16.0 17.7 21.0 18.3 17.4

% chg (qoq)

2QFY12

% chg (yoy)

3,018,180 1,890,139 936,706 216,415 6,061,439

2,958,479 1,831,198 884,872 212,980 5,887,528

2.0 3.2 5.9 1.6 3.0

2,625,803 1,644,839 789,056 187,967 5,247,665

14.9 14.9 18.7 15.1 15.5

Grand Total 4,728,529 4,662,316

1.4 4,027,328

Source: Company, Angel Research; Note:*excluding DHB and LVB

Source: Company, Angel Research; Note:*excluding DHB and LVB

November 2012

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Banking | Result Review

Tier I CAR, low for many PSU banks

As of 2QFY2013, amongst our coverage, Bank of Maharashtra, Central Bank and Indian Overseas Bank had the lowest tier-I CAR at 7.1%, 7.5% and 7.6%, respectively (excluding 1HFY2013 profits). Finance Ministry has recently reiterated the need of capital infusion in PSU banks, and can be expected to finalize the amount of capital infusion in PSU banks in the coming few weeks. They have budgetary earmark funds to the tune of `15,888cr for capital requirement of PSBs, RRBs, NABARD and other financial institutions. However, capital infusion is expected to be book-dilutive for most of these banks, as they trade much below their book.

Exhibit 27: Capital adequacy across PSU banks, as of 2QFY2013

Bank BOM CENTBK IOB IDBI BOI DENABK UCOBK UNIONBK CORPBK SYNBK UTDBK

Total CAR 10.8 11.5 12.1 13.9 11.1 12.1 12.3 11.4 13.1 11.3 12.1

Tier-I CAR 7.1 7.5 7.6 8.1 8.1 8.1 8.1 8.2 8.4 8.4 8.5

Core Equity Tier-I CAR* NA 6.1 7.1 7.3 7.3 7.7 6.0 7.5 7.8 7.8 7.2

Bank ANDHBK PNB ALLBK SBI VIJBK BOB OBC CANBK INDBK J&KBK

Total CAR 12.4 11.7 12.2 12.6 12.7 12.9 12.1 13.1 13.0 13.7

Tier-I CAR 8.5 8.7 8.9 9.0 9.5 9.6 9.7 10.1 10.7 11.6

Core Equity Tier-I CAR* 8.3 8.1 8.6 8.5 7.3 9.0 9.0 9.4 10.3 11.6

Source: Company, Angel Research, Note: *as of 2QFY2013, adjusting for non-core equity tier-I as of FY2012

Exhibit 28: DuPont analysis

Pvt. New* Parameter NII (-) Prov. Exp. Adj NII Treasury FY11 3.1 0.6 2.5 0.0 2.5 1.8 4.3 2.2 2.1 0.6 1.5 10.4 15.1 FY12 3.1 0.4 2.7 (0.0) 2.7 1.7 4.4 2.2 2.2 0.7 1.5 10.9 16.5 FY13E 3.2 0.4 2.8 0.0 2.9 1.6 4.5 2.2 2.3 0.7 1.6 11.3 17.8 FY14E 3.3 0.4 2.9 0.0 3.0 1.6 4.6 2.2 2.4 0.8 1.6 11.8 19.0 FY11 2.8 0.7 2.1 0.1 2.2 1.0 3.2 1.8 1.4 0.5 0.9 18.0 16.7 PSU Large FY12 2.8 0.8 2.0 0.0 2.0 0.9 2.9 1.6 1.3 0.4 0.9 18.6 17.2 FY13E 2.7 0.8 1.9 0.1 2.0 0.9 2.9 1.6 1.3 0.4 0.9 17.6 15.6 FY14E 2.8 0.7 2.1 0.0 2.1 0.9 3.0 1.6 1.4 0.4 0.9 17.7 16.7 FY11 2.8 0.8 2.1 0.1 2.2 0.7 2.8 1.7 1.2 0.3 0.9 21.4 18.3 PSU Mid FY12 2.7 0.9 1.7 0.1 1.8 0.6 2.5 1.5 1.0 0.2 0.8 21.0 16.0 FY13E 2.5 0.8 1.8 0.1 1.8 0.6 2.5 1.5 1.0 0.2 0.7 20.4 15.1 FY14E 2.7 0.7 1.9 0.0 2.0 0.6 2.6 1.5 1.1 0.3 0.7 20.3 15.0

Int. Sens. Inc.

Other Inc. Op. Inc. Opex PBT Taxes ROA Leverage ROE

Source: Company, Angel Research, Note: *our coverage universe only

November 2012

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Banking | Result Review

Outlook and valuation

The decelerating economic growth environment, policy woes in select sectors and elevated inflation and interest rates are pointing towards further economic stress and are not suggesting any conclusive trigger for improvement in asset quality in the near-term. Hence, we continue to prefer private banks, given their stronger capital adequacy and growth prospects as well as cyclically better asset quality profile, with Yes Bank, Axis Bank and ICICI Bank being our top picks. In the back-drop of the near-term environment, in our view larger PSU banks like BOB and SBI are better placed. While PSU bank valuations a couple of months back offered bottom-fishing opportunities, after the 20-40% surge in several of these stocks, further upsides in our view would have to be driven by catalysts such as lower re-pricing of high-cost deposits (relative benefit for low-CASA banks) and higher recoveries (relative benefit for banks that have experienced maximum asset quality pain, and importantly, also provided for it already). Screening for these criteria, as well as Tier 1 capital adequacy and trailing adjusted valuations, in our view, PSU banks that would stand to gain most from an eventual cyclical turnaround include Canara Bank and BOI in the large-caps space and Indian Bank, Allahabad Bank and United Bank amongst the mid-caps.

Exhibit 29: Dashboard for our coverage PSU banks

PSU Banks Large BOI CANBK IDBI BOB UNBK PNB SBI Mid UTDBK IOB CRPBK ALLBK VIJAYA BOM SYNBK INDBK DENABK ANDHBK CENTBK OBC UCOBK JKBK 2.4 1.9 1.1 1.8 1.8 2.2 2.6 1.9 1.9 1.5 1.5 2.2 1.7 1.1 44.6 43.9 45.7 46.0 54.8 48.5 55.7 64.0 35.9 57.7 64.8 64.6 NA 32.4 40.2 25.0 20.9 30.3 21.6 37.4 29.9 29.0 31.9 25.9 33.0 24.1 23.7 38.2 36.5 31.6 37.2 35.8 34.7 35.4 26.4 33.5 32.4 29.5 31.8 33.7 30.5 41.0 8.5 7.6 8.4 8.9 9.5 7.1 8.4 10.7 8.1 8.5 7.5 9.7 8.1 11.6 0.58 0.61 0.71 0.71 0.76 0.78 0.78 0.78 0.80 0.80 0.87 0.90 0.95 1.37 0.48 0.51 0.59 0.58 0.68 0.69 0.70 0.65 0.65 0.70 0.63 0.69 0.82 1.16 16.4 11.1 20.4 21.6 12.6 12.9 17.9 20.4 20.7 19.2 5.4 10.7 19.4 21.2 14.1 7.9 17.9 15.3 12.1 15.8 22.6 19.4 21.8 17.6 16.3 12.8 14.5 23.8 1.8 1.9 2.1 1.4 1.9 1.8 2.5 60.2 52.3 48.9 55.5 52.5 61.7 43.3 31.8 24.8 21.9 31.7 30.5 35.8 45.0 27.1 36.0 38.6 24.9 31.8 32.2 32.8 8.1 10.1 8.1 9.6 8.2 8.7 9.0 0.81 0.94 0.97 1.00 1.01 1.02 1.68 0.69 0.80 0.64 0.85 0.82 0.81 1.36 15.0 17.0 13.4 20.6 14.8 21.1 16.5 12.0 13.5 11.3 17.6 16.3 17.7 18.8 (Prov + TW)* as Sub-std# Investments CASA ratio Trailing^ % to 2QFY13 as % to to Deposits ratio Tier-I CAR as of 2QFY13 P/ABV (x) total assets GNPA as of 2QFY13 FY2014E P/ABV (x) FY2012 ROE 1HFY2013 ROE

Source: Company, Angel Research, Note: *Cumulative provisions including technically written-off, as of 2QFY2013, #substandard GNPA assets, as of FY2012, as % to total FY2012 GNPA (including technically written-off), wherein technically written-off considered as part of loss assets), ^Equity Net worth calculated on a trailing basis (i.e) including 1HFY2013 profits and adjusting for 75% PCR (incl. technical write-off)

November 2012

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Banking | Result Review

Exhibit 30: Growth in Networth* for Large PSU banks

(` cr) 210,000 190,000 170,000 150,000 130,000 110,000 90,000 FY2011 FY2012 1HFY13
Source: Company, Angel Research, Note:*after adjusting for capital infusion, equity dividend payout and minimum 75% PCR including technical write-offs

Exhibit 31: Growth in Networth* for Mid PSU banks

(` cr) 100,000 90,000 80,000 70,000 60,000 50,000 FY2011 FY2012 1HFY13
Source: Company, Angel Research, Note:*after adjusting for capital infusion, equity dividend payout and minimum 75% PCR including technical write-offs

Exhibit 32: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Reco. Buy Accumulate Neutral Buy Accumulate Buy Buy Neutral Accumulate Accumulate Neutral Accumulate Neutral Accumulate Buy Neutral Accumulate Neutral Neutral Accumulate Accumulate Buy Accumulate Neutral Accumulate Accumulate Neutral CMP (`) 1,290 461 680 1,034 23 435 136 105 729 273 55 437 74 407 107 102 182 76 1,347 319 754 2,112 121 72 234 68 56 Tgt. price (`) 1,550 491 1,270 25 512 158 817 294 463 445 123 209 347 843 2,437 131 250 77 Upside (%) 20.1 6.5 22.8 6.7 17.8 16.0 12.0 8.0 5.9 9.3 15.0 14.9 8.9 11.8 15.4 7.8 6.6 14.2 FY2014E P/ABV (x) 1.7 1.1 3.8 1.7 1.0 2.2 0.6 0.7 0.8 0.7 0.7 0.8 0.6 0.7 0.7 0.6 0.7 0.5 1.2 0.7 0.8 1.4 0.7 0.8 0.8 0.48 0.7 FY2014E Tgt. P/ABV (x) 2.1 1.2 2.0 1.1 2.6 0.7 1.0 0.8 0.9 0.7 0.8 0.8 0.8 0.9 1.6 0.8 0.9 0.6 FY2014E P/E (x) 9.3 8.9 18.9 12.4 6.0 10.3 4.1 4.8 5.3 4.3 4.6 5.5 3.5 4.1 4.4 4.6 4.4 3.8 7.0 4.9 4.6 8.2 4.5 4.9 5.0 3.2 5.4
#

FY2012-14E EPS CAGR (%) 16.0 6.7 27.9 21.7 4.2 23.5 (5.6) (4.8) 6.4 16.9 38.9 4.0 102.4 (3.4) 2.5 17.5 2.8 23.0 7.9 29.0 6.8 21.5 11.5 2.0 20.3 18.4 6.1

FY2014E RoA (%) 1.6 1.1 1.9 1.5 0.9 1.5 0.8 0.8 1.0 0.8 0.7 0.8 0.6 0.7 0.8 0.9 1.1 0.6 1.3 0.9 1.0 1.0 0.7 0.5 0.8 0.7 0.5

FY2014E RoE (%) 20.2 13.3 22.0 15.7 16.9 23.5 14.5 13.8 17.0 15.8 16.1 14.6 14.9 14.7 15.6 13.9 16.3 13.1 17.7 14.4 17.3 17.7 16.6 13.4 16.4 15.7 11.9

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), CMP as of 27th November, 2012.

Without adjusting for SASF,

November 2012

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Banking | Result Review

Banking indicators watch

Exhibit 33: Credit and deposit growth trends
Credit growth (%)
24.0 22.0 20.0 18.0 16.0 14.0 12.0 10.0

Exhibit 34: Investment-Deposit ratio

Credit/Deposit (%) 82.0 80.0 78.0 76.0 74.0 72.0 70.0 Investment/Deposit (%) 32.0 31.0 30.0 29.0 28.0 27.0

Deposit growth (%)

Dec-11

Jan-12

Jun-12

Aug-11

Mar-12

Aug-12

Apr-12

Nov-11

Feb-12

Oct-11

Sep-11

May-12

Sep-12

Oct-12

Jul-12

68.0

Sep-11

Feb-12

May-12

Dec-11

Aug-11

Nov-11

Mar-12

Aug-12

Sep-12

Jul-11

Jan-12

Oct-11

Apr-12

Jun-12

Jul-12

Oct-12 Sep-12

Source: RBI, Angel Research

Source: RBI, Angel Research

Exhibit 35: CP rates have eased considerably...

(%) 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 CP 3M CP 12M

Exhibit 36: ...similar to CD rates

(%) 12.0 11.0 10.0 9.0 8.0 7.0 6.0 CD 3M CD 12M

Dec-11

Jan-12

Jun-12

Mar-12

Aug-12

Apr-12

Nov-11

May-12

Nov-12

Feb-12

Sep-12

Oct-12

Jul-12

Feb-12

May-12

Dec-11

Jan-12

Jun-12

Jul-12

Nov-11

Mar-12

Aug-12

Apr-12

Nov-12 Sep-12 Nov-12 Oct-12 Nov-12 Oct-12

Source: RBI, Angel Research

Source: Bloomberg, Angel Research

Exhibit 37: LAF borrowings

(` bn) (500) (1,000) (1,500) (2,000) (2,500)

Exhibit 38: Forex reserves trends

US$ Bn 340 320 300 280 260 240

Feb-12

Jul-12

Jul-12

May-12

May-12

Dec-11

Dec-11

Mar-12

Feb-12

May-12

Dec-11

Aug-12

Mar-12

Sep-12

Jan-12

Apr-12

Jun-12

Jul-12

Source: RBI, Angel Research

Nov-12

Oct-12

Source: RBI, Angel Research

November 2012

Mar-12

Aug-12

Sep-12

Jan-12

Apr-12

Jun-12

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Banking | Result Review

Exhibit 39: Corporate and government bond yields

(%) 10.0 9.5 9.0 8.5 8.0 27-Aug-12 26-Nov-12

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

G-Sec 1Yr and 10Yr Spread (%) 4.0 3.0 2.0 1.0 (1.0) Repo Rate (%, RHS) 9.5 8.5 7.5 6.5 5.5 4.5

9.41 8.93

9.45 9.03

9.47 9.07

9.45 9.01

8.09 8.10

8.00 7.99

8.18 8.19

7.5 7.0

8.19 8.20

Jun-05

Jun-07

Jun-09

Jun-11

Oct-06

Oct-08

Oct-10

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

Gsec 10Yr

Source: Bloomberg, Angel Research;

Source: Bloomberg, Angel Research

Sectoral and Industry-wise distribution of credit

Exhibit 41: Credit growth driven by industry and personal loans segment
Sector Agriculture Industry - Micro & Small - Medium - Large Services Personal Loans - Housing - Vehicle Non-food Credit
Source: RBI, Angel Research

Feb-06

Sep 2011 (` cr) 433,791 1,742,163 242,991 195,666 1,303,507 912,413 708,526 366,889 83,981 3,796,893 % of total 11.4 45.9 6.4 5.2 34.3 24.0 18.7 9.7 2.2 100.0 (` cr) 526,204 2,013,412 260,030 196,781 1,556,601 1,040,772 818,835 421,336 102,663 4,399,223

Feb-08

Feb-10

Sep 2012 % of total 12.0 45.8 5.9 4.5 35.4 23.7 18.6 9.6 2.3 100.0 % chg (yoy) 21.3 15.6 7.0 0.6 19.4 14.1 15.6 14.8 22.2 15.9

Exhibit 42: Strong growth being witnessed in Chemicals & Engineering

Industry Infrastructure Metals Textiles Engineering Chemicals Food Processing Oil and Gas Construction Vehicles Gems & Jewellery Other Industries Total
Source: RBI, Angel Research

Sep 2011 (` cr) 564,958 230,161 145,482 101,632 96,670 85,516 64,062 50,977 50,097 46,786 305,823 1,742,164 % of total 32.4 13.2 8.4 5.8 5.5 4.9 3.7 2.9 2.9 2.7 17.6 100.0 (` cr) 650,072 272,939 157,769 122,960 117,738 102,255 65,044 59,484 60,095 54,099 350,957 2,013,412

Sep 2012 % of total 32.3 13.6 7.8 6.1 5.8 5.1 3.2 3.0 3.0 2.7 17.4 100.0 % chg (yoy) 15.1 18.6 8.4 21.0 21.8 19.6 1.5 16.7 20.0 15.6 14.8 15.6

November 2012

Feb-12

Oct-12

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Banking | Result Review

Valuation watch
Exhibit 43: Private banks* P/ABV trend
4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 P/ABV Median 15th percentile 85th percentile 1.80 1.50 1.20 0.90 0.60 0.30

Exhibit 44: Public sector banks P/ABV trend

P/ABV Median 15th percentile 85th percentile

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Apr-12

Oct-12

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Apr-12 Apr-12 Apr-12

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

Source: Company, Angel Research

Exhibit 45: New private banks P/ABV trend

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 P/ABV Median 15th percentile 85th percentile

Exhibit 46: Large public sector banks P/ABV trend

P/ABV 2.10 1.80 1.50 1.20 0.90 0.60 Median 15th percentile 85th percentile

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Apr-12

Oct-12

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Apr-11

Oct-11

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 47: Old private* banks P/ABV trend

1.80 1.50 1.20 0.90 0.60 0.30 P/ABV Median 15th percentile 85th percentile

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

P/ABV 1.80 1.50 1.20 0.90 0.60 0.30 Median 15th percentile 85th percentile

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Apr-12

Oct-12

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Apr-11

Oct-11

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

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

November 2012

Oct-12

Oct-12

Oct-12

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Banking | Result Review

Economy watch
Exhibit 49: Quarterly GDP trend
(%) 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 11.2 9.0 7.5 5.7 3.5 9.2 7.6 8.2 8.0 6.7 6.1 5.3 5.5

Exhibit 50: IIP trend

(%) 8.0 6.0 6.0 4.0 2.0 2.7 1.0 4.3 2.5 2.3

8.5

Feb-12

May-12

Dec-11

(2.0)

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Nov-11

(4.0) (6.0) (5.0)

(2.8)

(1.3)

(2.0)

(0.2)

Aug-12
CRR

Mar-12

(0.4)

Source: CSO, Angel Research

Source: MOSPI, Angel Research

Exhibit 51: Monthly WPI inflation trend

(%) 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 9.5 7.7 6.9 7.4 7.7 7.5 7.6 7.6 7.5 8.0 7.8 7.5

Exhibit 52: Manufacturing and services PMI

60.0 58.0 56.0 54.0 52.0 50.0 Mfg. PMI Services PMI

Feb-12

May-12

Dec-11

Nov-11

Mar-12

Aug-12

Sep-12

Jan-12

Apr-12

Jun-12

Jul-12

Oct-12

48.0

Dec-11

Jan-12

Jun-12

Mar-12

Nov-11

Aug-12

Oct-11

Apr-12

Feb-12

Source: MOSPI, Angel Research

Source: Markit, Angel Research

Exhibit 53: Exports and imports growth trends

(%) 45.0 30.0 15.0 0.0 Exports yoy growth Imports yoy growth

Exhibit 54: Policy rates - RBI

(%) 9.00 8.00 7.00 6.00 Repo rate Reverse Repo rate 8.00 7.00

Feb-12

Jul-12

May-12

Dec-11

Nov-11

Mar-12

Aug-12

Sep-12

Jan-12

Apr-12

Jun-12

Oct-12

5.00 4.00

May-12

Sep-12

4.25

Feb-12

May-12

Dec-11

Nov-11

Mar-12

Aug-12

Sep-12

Jan-12

Apr-12

Jun-12

Jul-12

(30.0)

Source: Bloomberg, Angel Research

Source: Office of the Economic Adviser, Angel Research

November 2012

Nov-12

Oct-12

(15.0)

Oct-12

Jul-12

Sep-12

Jan-12

Oct-11

Apr-12

Jun-12

Jul-12

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Banking | Result Review

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

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Banking | Result Review

Disclosure of Interest Statement

Analyst ownership of the stock AxisBk FedBk HDFCBk ICICIBk SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI IndBk IOB J&KBk OBC PNB SBI SynBk UcoBk UnionBk UtdBk VijBk No No No No No No No No No No No No No No No No No No No No No No No No No No No Angel and its Group companies ownership of the stock No No No No No No No No No No No No No No No No No No No No No No No No No No No Angel and its Group companies' Directors ownership of the stock No No No No No No No No No No No No No No No No No No No No No Yes No No No No No Broking relationship with company covered No No No No No No No No No No No No No No No No No No No No No No No No No No No

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

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

November 2012

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Banking | Result Review

6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai- 400 093. Tel: (022) 39357800
Research Team Fundamental: Sarabjit Kour Nangra Vaibhav Agrawal Bhavesh Chauhan Viral Shah Sharan Lillaney V Srinivasan Yaresh Kothari Ankita Somani Sourabh Taparia Bhupali Gursale Vinay Rachh Amit Patil Shareen Batatawala Twinkle Gosar Tejashwini Kumari Technicals: Shardul Kulkarni Sameet Chavan Sacchitanand Uttekar Derivatives: Siddarth Bhamre Institutional Sales Team: Mayuresh Joshi Hiten Sampat Meenakshi Chavan Gaurang Tisani Akshay Shah Production Team: Tejas Vahalia Dilip Patel Research Editor Production tejas.vahalia@angelbroking.com dilipm.patel@angelbroking.com VP - Institutional Sales Sr. A.V.P- Institution sales Dealer Dealer Sr. Executive mayuresh.joshi@angelbroking.com hiten.sampat@angelbroking.com meenakshis.chavan@angelbroking.com gaurangp.tisani@angelbroking.com akshayr.shah@angelbroking.com Head - Derivatives siddarth.bhamre@angelbroking.com Sr. Technical Analyst Technical Analyst Technical Analyst shardul.kulkarni@angelbroking.com sameet.chavan@angelbroking.com sacchitanand.uttekar@angelbroking.com VP-Research, Pharmaceutical VP-Research, Banking Sr. Analyst (Metals & Mining) Sr. Analyst (Infrastructure) Analyst (Mid-cap) Analyst (Cement, FMCG) Analyst (Automobile) Analyst (IT, Telecom) Analyst (Banking) Economist Research Associate Research Associate Research Associate Research Associate Research Associate sarabjit@angelbroking.com vaibhav.agrawal@angelbroking.com bhaveshu.chauhan@angelbroking.com viralk.shah@angelbroking.com sharanb.lillaney@angelbroking.com v.srinivasan@angelbroking.com yareshb.kothari@angelbroking.com ankita.somani@angelbroking.com sourabh.taparia@angelbroking.com bhupali.gursale@angelbroking.com vinay.rachh@angelbroking.com amit.patil@angelbroking.com shareen.batatawala@angelbroking.com gosar.twinkle@angelbroking.com tejashwini.kumari@angelbroking.com

Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302

November 2012

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