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ALLAHABAD BANK MAKING THE RIGHT CHOICE

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ALLAHABAD BANK

MAKING THE

RIGHT CHOICE

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Recommendation BUY Well positioned among mid-sized PSU banks Allahabad bank (ALBK) is a mid-sized PSU bank with major focus on agri and priority sector and loan book size of Rs 111,145 cr in FY12. Allahabad bank is well placed among its peers on parameters like strong NIMs, healthy asset quality, superior return ratios and comparatively lower restructured book. Although NIMs are expected to moderate going forward and near term concerns over increasing slippages from the retail and agri does persist, we believe that the positives definitely outweighs the concerns and the stock can be bought at current levels.

Investment Rationale

Growth in advances to continue Allahabad bank has been able to sustain high growth in advances which was above the industry growth rate over last 3-4 years. Going forward, Management expects its advances to grow 21% for FY13E. We have factored in growth of 18.5% for FY13E and expect advances to grow at CAGR of 18.4% for FY12‐FY14E.

Continued focus on Retail and MSME The retail and MSME segment of the bank has been the key driver of loan growth. Retail advances grew by 16% in FY12 whereas MSME advances grew by 28.3% in FY12. Going ahead Management intends to increase share of retail book from present 13.6% to 17% by FY13E and 20% by FY14E.

Sustainable NIMs Increasing focus on Retail & MSME loans has enabled the bank to improve its net interest margins. Management is confident that the bank will be able to maintain NIMs above 3% for FY13E. We have factored in a NIM of 3.1% for FY13 & FY14E respectively.

Asset quality remains a cause of concern in near term Despite having a higher exposure to the retail and MSME, the bank has been able to maintain comparatively stable asset quality; lower as compared to most of its peers. However, from the past 2-3 quarters the bank has been facing problem of higher slippages. Considering the macroeconomic environment and a higher restructured book we expect Gross NPA to increase to 1.9% for FY13E before improving to 1.83% in FY14E.

Valuation & Recommendation At CMP of Rs 147, Allahabad Bank is trading at 0.72x of its FY13E ABV and 0.61x of its FY14E ABV whereas on PE it is trading at 3.64x and 2.96x for FY13E and FY14E respectively. The bank enjoys healthy return ratios with Return on Equity of 17.9% and 18.9% expected in FY13E and FY14E respectively. Based on our estimated adjusted BV of Rs.205 per share for FY13E and P/ABV target multiple of 1.0x we arrive at a target price of Rs.205. We recommend BUY on the stock indicating a potential upside of 39%.

CMP (22/06/2012) Rs. 147

Target Price Rs. 205

Sector Banking

Stock Details

BSE Code 532480

NSE Code ALBK

Bloomberg Code ALBK IN

Market Cap (Rs cr) 7,367

Free Float (%) 44.76

52- wk HI/Lo (Rs) 222/114

Avg. volume BSE (Quarterly) 198,379

Face Value (Rs) 10

Dividend (FY 12) 60%

Shares o/s (Crs) 50.0

Relative Performance 1Mth 3Mths 1Yr

Allahabad Bank -4.0% -25.1% -27.5%

Sensex 4.2% -2.6% -3.7%

Shareholding Pattern 31st

March 2012

Promoters Holding 55.24%

Institutional (Incl. FII) 33.48%

Corporate Bodies 1.37%

Public & others 9.91%

Silky Jain – Research Analyst (022 39268178) [email protected]

Sunil Jain – HOR Retail (022 39268196) [email protected]

Bhavya Sundesha – Research Associate (022 3926 8022) [email protected]

Year

NII (Rs crs)

Growth (%)

Profit bef prov (Rs crs)

PAT (Rs. crs) EPS (Rs) P/E (x) P/ABV (x) P/ABV (x) ROE %

FY 11A 4,022 51.8% 3,055 1,423 29.88 4.93 150 0.98 18.7%

FY 12A 5,163 28.3% 3,770 1,867 38.72 3.81 178 0.83 19.6%

FY13E 5,987 16.0% 4,229 2,024 40.47 3.64 205 0.72 17.9%

FY14E 6,959 16.2% 4,885 2,485 49.71 2.96 243 0.61 18.9%

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Investment Rationale Growth in advances to continue Allahabad bank has been able to sustain high growth in advances which was above the industry growth rate over last 4 years. The bank’s advances have grown at a CAGR of 22% over FY07‐FY12 compared to 19% CAGR growth in the overall industry. It is noteworthy to mention that despite the challenging environment in FY12 where other banks faced the difficulty in increasing their loan book, Allahabad bank has maintained the trend of outgrowing the industry once again. The bank's total business has grown by 20.5% on the back of 21% growth in deposits and 18.7% growth in advances in FY12. Going forward, Management expects its advances to grow 21% for FY13E. We have factored in growth of 18.5% for FY13E and expect advances to grow at CAGR of 18.4% for FY12‐FY14E.

20%18% 22%

31%

19% 18.5%18%

22%

17% 17%22%

17% 18% 17%

0%

5%

10%

15%

20%

25%

30%

35%

FY08 FY09 FY10 FY11 FY12 FY13E FY14E

Allahabad Bank advances v/s industry advances

Allahabad Bank Advances Industry advances

Source: Company data, Nirmal Bang Research

Continued focus on Retail and MSME The retail and MSME segment of the bank has been the key driver of loan growth. Retail advances grew by 29.2% and 16% in FY11 and FY12 whereas MSME advances grew by 47.2% and 28.3% in FY11 and FY12 respectively. The proportion of MSME advances to total credit increased to 16.4% in FY12 from 9.4% in FY09 thereby resulting in an improvement in margins. Moreover, the share of retail book has remained steady at around ~14% from the last 4 years.

Going ahead Management has indicated that the key focus areas will continue to be retail and MSME segment. Management intends to increase share of retail book from present 13.6% to 17% by FY13E and 20% by FY14E.

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34% 34% 33% 33%

8%11%

13% 14%10%14%

15% 16%

34%

28%26%

22%

14% 14%14%

14%

0%

10%

20%

30%

40%

FY09 FY10 FY11 FY12

Break up of Advances

Priority MSE MSME Retail Corporate and Others

Source: Company data, Nirmal Bang Research

Allahabad Bank has been consistently focusing on credit quality and maintaining the margins of the bank over growth. Moreover, Allahabad Bank has a strong footing in the agriculture segment which is likely to remain strong going forward. Besides this, Management also plans to focus on priority lending in Eastern and Northern areas. Strong presence in rural areas ALBK has strong presence in rural areas with 41% of branches in rural areas; highest amongst its peer group. With years of expertise in the rural areas, Allahabad bank has carved a niche for itself in the rural areas. Moreover, the bank follows a prudent risk management process in these areas and thus the risk of default remains low for the bank. We believe that Allahabad bank is strategically poised to reap the benefit of greater rural demand due to rising food prices, high minimum support prices and rising government expenditure on rural projects and employment-generating schemes.

Source: Company data, Nirmal Bang Research

41.0% 39.5% 36.7% 35.9%

27.8%20.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

ALBK United Bank

Dena Bank Uco IOB OBC

Rural Branches (%) FY12

41%

20%

20%

19%

Branch Network as on FY12

Rural Semi urban Urban Metro

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Sustainable NIMs Increasing focus on Retail & MSME loans has enabled the bank to improve its net interest margins. NIMs stood at 3.48% (reported) in FY12 resulting from higher yield on advances (MSME segment) & better loan book mix (constant reduction in unsecured lending). Going forward, we expect NII to grow at CAGR of ~16% for FY12‐FY14E resulting from higher CASA deposits, focus on retail and MSME portfolio. Management is confident that the bank will be able to maintain NIMs above 3% for FY13E. We have factored in a NIM of 3.1% for FY13E & FY14E respectively.

2.5% 2.5%

3.2% 3.2% 3.1% 3.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1000

2000

3000

4000

5000

6000

7000

8000

FY09 FY10 FY11 FY12 FY13E FY14E

Net interest margins

NII NIMs

Source: Company data, Nirmal Bang Research

Focus on fee income The bank has been witnessing a de growth in its non interest income from the past two years. Fee income, being an important component of non interest income was the major reason for the decline in non interest income.

In order to increase the non interest income, Management intends to improve the banks core fee income. For the same, Management has taken active steps like increasing product base of third party product distribution, introducing specific products to meet the requirements of NRI/NRE clients, focus on bancassuarance, syndication and introducing bullion trading in FY12.

The bank has also made tie-ups with many educational institutes where the bank will provide banking services and will charge fees for the services. Management is encouraged by the positive feedback in its gold coins business and plans to launch silver coins as well in order to garner a higher fee income. Moreover, ALBK has also entered into a strategic alliance with Aditya Birla Money Ltd for providing online facility for trading to the Demat holders of the bank. We believe that all these factors will help the bank in increasing its fee income, and we factor in 14.5% CAGR over FY12‐FY14E.

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32.8%

23.0%

11.2%

15.0% 14.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

200

400

600

800

1000

1200

1400

FY10 FY11 FY12 FY13E FY14E

Fee income growth

Fee income growth

Source: Company data, Nirmal Bang Research

Going forward, Management is targeting aggressive recoveries which is likely to strengthen the banks non interest income. Coupled with increase in fee income and strong recoveries, we expect banks non-interest income to witness a growth of 8.5% in FY13E as compared to de growth of 9.6% in FY11 and de growth of 5.2% in FY12. Declining CASA: Albeit higher than peers ALBK has a strong franchise in the rural and semi urban areas (~60%) which gives the bank access to low‐cost deposits thereby helping the bank to garner higher CASA. In FY12, the Bank's CASA ratio stood at a healthy 30.8% which was higher than most of its peer group.

22.2% 24.0% 25.2% 26.4% 26.4%30.8% 30.8% 33.2% 33.3% 34.5%

40.8%

0%

10%

20%

30%

40%

50%

Corp OBC Canara Bank

Andhra Bank

IOB Uco ALBK BOB Central Bank

Dena Bank

United Bank

CASA % (FY12)

Source: Company data, Nirmal Bang Research

In FY12 growth in low cost deposits have moderated and the bank has reported growth of only 10.2% YoY as compared to 20.8% YoY growth in FY11 as a result of higher term deposit rate as compared to deposit rate on savings. Going forward, Allahabad Bank is looking to leverage on its wide distribution network and vast customer base in CASA-rich Central Indian states which would help in garnering higher share of CASA. The bank has already secured permission from the West Bengal State Government for opening accounts for disbursal of salaries. Moreover, the bank is planning to diversify its branch network by expanding in the states of Gujarat, Maharashtra, Haryana, Karnataka and Andhra Pradesh. Also, the bank has been reducing reliance on bulk deposits and focusing more on retail deposits. Bulk deposits as a % of total deposits has reduced from

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28.0% in FY08 to ~11% in FY12. These initiatives are expected to sustain the CASA ratio at current levels. Management intends to increase CASA ratio to 31-31.5% by FY13E. We expect CASA ratio to be at 31% and 31.4% in FY13E and FY14E.

34.6% 34.5%

33.5%

30.5%31.0%

31.4%

28.0%

29.0%

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

FY09 FY10 FY11 FY12 FY13E FY14E

CASA (%)

CASA CASA %

Source: Company data, Nirmal Bang Research

Healthy asset quality: However issues over slippages persists Despite having a dominant presence in the east which is said to result in higher NPAs and a higher exposure to the retail and MSME, the bank has been able to maintain comparatively stable asset quality. The bank has always followed the practice of prudent lending to quality borrowers and refraining from risky businesses. This has resulted in the bank enjoying a relatively better asset quality as compared to most of its larger peers in the industry.

1.3% 1.5% 1.5% 1.7% 1.8%

2.7%3.2% 3.4% 3.5%

4.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Peer comparison of Gross NPAs (FY12)

Source: Company data, Nirmal Bang Research

However, from the past 2-3 quarters the bank has been facing problem of higher slippages. Gross NPA increased 24.9% YoY & 9.1% QoQ to Rs 2,059 cr in Q4FY12 with slippages of Rs 963 crs of which Rs 276 crs were attributed to Agri sector and Rs 400 crs towards MSME. Management stated that the slippages in Agri book is seasonal in nature and expects recoveries from these accounts in Q1FY13.

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An overview of the banking industry reveals in the past 2 years, the corporate portfolio has faced the brunt of pain in the asset quality the most. Comparatively, the retail and agri portfolio has emerged to be the safe harbors and therefore most of the banks have started to focus more on the retail and agri portfolio. We believe that the strategy of the bank to focus primarily on agri (primarily priority) and retail sector has helped the bank to sustain in the current economic scenario where the overall banking industry has faced slow down and has resulted in the bank to maintain its asset quality.

Considering the overall macroeconomic environment and the banks huge concentration in the retail and agri segment and a higher restructured book we expect the bank’s asset quality to remain under pressure in the near term. We expect Gross NPA to increase to 1.9% for FY13E and then gradually improve to 1.83% in FY14E.

1.81%1.69% 1.74% 1.84% 1.90% 1.83%

0.72%0.66%

0.79%0.99%

0.77% 0.74%

0.00%

0.50%

1.00%

1.50%

2.00%

FY09 FY10 FY11 FY12 FY13E FY14E

NPA Movement

GNPA (%) NNPA (%)

Source: Company data, Nirmal Bang Research

Restructured book : Better off than peers – Provides comfort The bank has restructured asset worth Rs 2,640 cr in Q4FY12 (Air India Rs 500 cr, Uttar Haryana SEB Rs 620 cr and Rajasthan SEB Rs 400 cr) taking the bank’s total outstanding restructured book to Rs 6,350 cr (5.7% of the total advances). Going forward, Management has mentioned that around Rs 2,100 cr towards UP SEB, Rs 120 cr towards Punjab SEB and Rs 200 cr towards Bharti Shipyard totaling to ~Rs 2,500 cr are in the restructuring pipeline for the bank. Post this almost 75% of ALBK’s SEB exposure would have been restructured. The restructured advances as % of total advances stood at 5.7% which is much lower than the peers. Moreover, the chunk of the restructuring book comprises of SEBs which are backed by government security. The bank has lower restructured book in the corporate sector. We believe that in the current economic scenario the banks which have a relatively lower restructured book amongst the PSU banks is more preferred than the banks which have a higher restructured book.

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3.4%4.2% 4.6%

5.3% 5.7% 6.0% 6.3% 6.6% 7.0% 7.2%8.4% 8.8%

11.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0% Restructured book % of advances (FY12)

Source: Company data, Nirmal Bang Research

Operational efficiency: Continue to remain attractive Allahabad bank has been consistently enjoying lower cost to income ratio in the peer group. Productivity ratios of the bank remain as one of the best, regardless of having large number of branch and employee additions. Moreover, higher efficiency of branches to generate business than its peers is also the reason for lower cost to income ratio for the bank.

37.6% 38.9% 39.1%41.7% 42.2% 42.4% 42.5% 43.0% 43.1% 44.0% 45.2%

47.2%

57.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0% Cost to income ratio (FY12)

Source: Company data, Nirmal Bang Research

To further improve staff productivity various steps like specialized training, recruitment of specialized officers and various other incentive schemes are being offered by the bank. Allahabad bank’s total business per employee stands at Rs.12.2 cr and total business per branch improved to Rs.108.1 cr in FY12.

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Source: Company data, Nirmal Bang Research

In our view, the bank will continue to enjoy cost efficiencies with Cost to income (C/I) ratio remaining low as compared to its peers group. Management targets to open 250 branches and 1,000 ATMs in FY13E. We expect the bank’s cost to income ratio to increase to 42.4% in FY13E and remain flat at 42.3% in FY14E resulting from significant expansion in the bank’s branch network in FY13E.

42.4%

38.8%

43.4%

41.7%

42.8% 42.8%

36.0%37.0%38.0%39.0%40.0%41.0%42.0%43.0%44.0%

0500

1,0001,5002,0002,5003,0003,5004,000

FY09 FY10 FY11 FY12 FY13E FY14E

Rs.

in C

rs

Cost to income ratio

Operating expenses Cost to income ratio

Source: Company data, Nirmal Bang Research

Return ratios to remain stable ALBK is amongst the very few PSU banks which have healthy Return on Net worth (RoNW) and Return on Assets (RoA). We are positive on the bank’s ability to strengthen its core business performance and fee income and lower its operating costs which would drive the profits of the company and thus help the bank to maintain stable return ratios.

0.8%

1.1%1.0%

1.1%1.0%

1.1%

0.5%

0.7%

0.9%

1.1%

1.3%

FY09 FY10 FY11 FY12 FY13E FY14E

Return on Assets

Source: Company data, Nirmal Bang Research

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We are factoring in a 13.8% CAGR in operating profit over FY12‐FY14E. PAT growth is likely to be at 15.4% CAGR during the same period resulting from CAGR growth of only 5.2% in provisions. We believe that the return ratios of the bank will marginally decline in FY13E resulting from higher operating costs and provisions. However, with an improvement in the economic conditions we believe that the return ratios will improve in FY14E.

13.5%

18.9% 18.7%

19.6%

17.9%

18.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

FY09 FY10 FY11 FY12 FY13E FY14E

Return on Equity

Source: Company data, Nirmal Bang Research

Risk and Concerns

In the event of the macro-economic scenario worsening again, there is a strong possibility of higher-than-expected NPA provisions.

More than expected slippages from the retail and agri segment can have an impact on the company’s valuation and impact the target price.

High restructuring book poses a threat to the bank’s asset quality in the near term.

A change in management could impact the bank’s strategic target leading to a phase of uncertainty for the bank.

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Peer Comparison We are comparing Allahabad Bank with UCO bank, United Bank of India as they operate in

the eastern region and Oriental Bank of Commerce (OBC), Indian Overseas Bank (IOB) and

Dena Bank as these banks are of similar size. Allahabad Bank enjoys superior return ratio,

higher NIMs and better asset quality as compared to its peer group which justifies the

premium valuation of the bank.

ALBK Uco United IOB OBC Dena

Loan book (FY12) 111,145 117,504 63,873 143,273 113,050 57,159

EPS (FY13E)* 40.5 16.9 22.7 18.4 51.9 26.2

Adj BV (FY12) 171.1 60.7 87.0 111.4 304.8 106.3

P/E 3.64 4.57 2.69 4.56 4.72 3.68

P/ABV 0.86 1.28 0.70 0.75 0.80 0.91

RoE 19.6% 17.6% 15.0% 9.7% 9.6% 18.7%

Div. Yield (%) 4.1% 3.9% 3.9% 5.4% 3.2% 3.1%

NIMs (FY12 reported) 3.5% 2.8% 3.2% 2.8% 2.8% 3.2%

Gross NPAs (FY12) 1.8% 3.5% 3.4% 2.7% 3.2% 1.7%

restructured as % of advances 5.7% 6.3% 4.9% 8.8% 8.4% 6.0%

* Based on Nirmal Bang estimates for ALBK and Dena Bank and Bloomberg estimates for FY13 for others

Company Background Allahabad Bank (ALBK) was founded in 1865 by a group of Europeans at Allahabad and was

nationalized in 1969 along with 13 other banks. Allahabad Bank came up with an IPO in 2002,

reducing the Government shareholding to 71.1%. The bank is headquartered in Kolkata and is

largely present in the eastern (~70% branch network in UP and Eastern states) part of the

country. The bank has established international presence in Hong Kong, Singapore, Dhaka

and China. The bank has a strong retail network with 2,516 branches with 100% Core

Banking Solution (CBS) implemented across all branches.

20%18%

24%

27%

20%18% 19%

0%

5%

10%

15%

20%

25%

30%

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

FY08 FY09 FY10 FY11 FY12 FY13E FY14E

Rs.

in C

rs

Business growth

Business Growth

Source: Company data, Nirmal Bang Research

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Valuation and Recommendation Allahabad bank is uniquely positioned amongst the PSU banks. The banks focus on the 4 C

principles (CASA, Credit quality, Compliance and Cost & capital efficiency) has helped it to

emerge as a strong player amongst its peer group. We believe that the bank will continue to

focus on strengthening its balance sheet and in course outperform the industry performance.

Being an attractive mid size public bank with above average credit growth, stable NIMs and

comparatively healthy asset quality we believe that Allahabad bank is a preferable bet over

its peers.

At CMP of Rs 147, Allahabad Bank is trading at 0.72x of its FY13E ABV and 0.61x of its FY14E ABV whereas on PE it is trading at 3.64x and 2.96x in FY13E and FY14E respectively. The bank enjoys healthy return ratios with Return on Equity of 17.9% and 18.9% expected in FY13E and FY14E respectively. Based on our estimated adjusted BV of Rs.205 per share for FY13E and P/ABV target multiple of 1.0x we arrive at a target price of Rs.205. We recommend BUY on the stock indicating a potential upside of 39%.

0

100

200

300

400 P/BV forward

Close Price PBV - 0.3 PBV - 0.6

PBV - 0.9 PBV - 1.2 PBV - 1.5

Source: Company data, Nirmal Bang Research

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Financials

Profitability (Rs. Crs) FY10 FY11 FY12 FY13E FY14E Balance Sheet (Rs. Crs) FY10 FY11 FY12 FY13E FY14E

Interest earned 8,369 11,015 15,523 18,220 21,242 Deposits 106,056 131,887 159,593 188,740 223,837

Interest expended 5,719 6,992 10,361 12,233 14,283 (of which CASA) (36,587) (44,182) (48,668) (58,509) (70,285)

Net interest income 2,650 4,022 5,163 5,987 6,959 Borrowings 5,435 6,918 9,094 10,798 13,409

Non interest income 1,516 1,370 1,299 1,409 1,578 Other liab and prov 3,455 3,974 3,740 4,189 4,608

Total income 4,166 5,393 6,461 7,396 8,537 Total liabilities 114,946 142,779 172,428 203,728 241,854

Operating expenses 1,618 2,338 2,691 3,167 3,652 Equity capital 447 476 500 500 500

Staff costs 1,011 1,558 1,835 2,165 2,489 Reserves and Surplus 6,306 8,031 10,007 11,621 13,639

Other Op Exp 606 781 857 1,003 1,163 Net worth 6,753 8,507 10,507 12,122 14,139

Operating profit 2,549 3,055 3,770 4,229 4,885 Total liab and equity 121,699 151,286 182,935 215,849 255,992

Provisions 777 1,124 1,607 1,699 1,778 Cash and bank bal 9,168 11,027 14,025 15,975 19,581

Profit before tax 1,772 1,931 2,163 2,530 3,107 Investments 38,429 43,247 54,283 64,440 76,437

Taxes 565 508 296 506 621 Advances 71,605 93,625 111,145 131,674 155,960

Net profit 1,206 1,423 1,867 2,024 2,485 Fixed assets 1,118 1,148 1,198 1,318 1,449

Quarterly (Rs. Crs) Mar.11 June.11 Sep.11 Dec.11 Mar.12 Other assets 1,379 2,239 2,283 2,443 2,565

Net interest income 1,151 1,176 1,318 1,381 1,288 Total assets 121,699 151,286 182,935 215,849 255,992

Non interest income 469 286 309 348 355 Key Ratios FY10 FY11 FY12 FY13E FY14E

Total income 1,621 1,461 1,627 1,729 1,644 Yield Ratios

Operating expenses 841 572 678 699 742 Avg Yield on Assets 7.9% 8.4% 9.7% 9.5% 9.3%

Operating profit 780 890 949 1,030 901 Yield on Advances 9.8% 10.0% 11.4% 11.3% 11.0%

Provisions 466 320 412 421 454 Yield on Investments 5.7% 6.5% 7.6% 7.4% 7.4%

Profit before tax 315 570 538 609 447 Cost of Int Bearing Liab 5.7% 5.6% 6.7% 6.6% 6.5%

Taxes 57 152 50 48 46 Cost of Deposits 5.7% 5.4% 6.6% 6.5% 6.4%

Net profit 258 418 488 560 400 Net Interest Spread 2.2% 2.8% 3.0% 2.9% 2.8%

Profitability Ratios FY10 FY11 FY12 FY13E FY14E NIM 2.5% 3.2% 3.2% 3.1% 3.1%

Cost / Income Ratio 38.8% 43.4% 41.7% 42.8% 42.8% Balance Sheet Ratios

Net profit margin 29.0% 26.4% 28.9% 27.4% 29.1% Gross NPA 1.7% 1.7% 1.8% 1.90% 1.83%

RONW 18.9% 18.7% 19.6% 17.9% 18.9% Net NPA 0.7% 0.8% 1.0% 0.77% 0.74%

Growth Ratios FY10 FY11 FY12 FY13E FY14E Return on Assets 1.1% 1.0% 1.1% 1.0% 1.1%

Advances Growth 21.8% 30.8% 18.7% 18.5% 18.4% CASA 34.5% 33.5% 30.5% 31.0% 31.4%

Deposit Growth 24.8% 24.4% 21.0% 18.3% 18.6% Loan-deposit ratio 67.5% 71.0% 69.6% 69.8% 69.7%

NII Growth 22.8% 51.8% 28.3% 16.0% 16.2% Provision cov ratio 61.5% 55.3% 60.0% 60.0% 60.0%

PAT Growth 51.5% 18.0% 31.2% 8.4% 22.8%

Pre prov growth 34.1% 19.9% 23.4% 12.2% 15.5% Valuation Ratios FY10 FY11 FY12 FY13E FY14E

Non int income growth 32.8% -9.6% -5.2% 8.5% 12.0% EPS 27.0 29.9 38.7 40.5 49.7

Ratios FY10 FY11 FY12 FY13E FY14E BVPS 151 160 193 225 266

P/BV 0.97 0.92 0.76 0.65 0.55 Adjusted BVPS 144 150 178 205 243

P/ABV 1.02 0.98 0.83 0.72 0.61 Dividend per share 5.5 6.0 6.0 7.0 8.0

P/E 5.45 4.93 3.81 3.64 2.96 Dividend yield 3.7% 4.1% 4.1% 4.8% 5.4%

Source: Company data, Nirmal Bang Research

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NOTES

Disclaimer:

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herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. This document is meant for the use of the

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