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Banking Monthly

Manish AgarwallaSachit Motwani, CFA, FRM

26 February 2014

SummaryIndustrial indicators such as IIP, PMI, and core sector data have improved vs previous months; however, this is only a marginal positive as most macro indicators are already subdued (December 2013 IIP was �0.6), and a significant pickup is unlikely in the near term. While we see some respite in industrial indicators, core inflation has continued to move up and remains a cause of concern.

Banking PerformanceEven in Q3FY14, the outperformance of private banks continued —

they reported a healthy earnings growth of 19% YoY driven by stable NIMs and controlled opex. In line with expectations, PSU banks reported a 31% YoY decline in earnings owing to elevatedcredit costs, higher opex and higher tax due to creation of DTL (deferred tax liability) on special reserves. While private banks reported stable NIMs, some large PSU banks (SBI, PNB and BOB) saw NIM improvement while most others reported flat NIMs. Large banks also benefited from mobilization of FCNR (B) deposits raised in Q3FY14.

Private banks managed asset quality well with absolute GNPAs increasing only by 4.7% QoQ. However, their absolute NNPAs increased by 15% QoQ and PCR (provision coverage ratio) declined

marginally. Within private banks, ICICI Bank and IndusInd Bank reported higher�than�expected asset�quality stress while HDFC Bank surprised positively. ICICI Bank also reported a sharp spike (2x QoQ) in fresh restructuring.

For PSU banks, the fresh NPL accretion moderated with slippage ratio almost flat QoQ. Consequently, GNPAs increased by 5.3% QoQ while NNPAs increased by 7.8% QoQ and PCR declined marginally. Within the PSU space, BOB, PNB and Indian Bank reported a QoQ decline in slippages. However, SBI disappointed on asset quality with 37% QoQ increase in slippages; however, higher write�offs enabled SBI to report only a 5.6% QoQ increase in absolute GNPAs. Most PSU banks in our coverage reported decline in outstanding restructured book due to receipt of SEB (State Electricity Board) bonds.

Guidance highlights and management commentaryThe guidance and management commentary was divergent, not just between private and PSU banks, but also within PSU/private banks. For instance, while SBI and few other PSU banks indicated

that the asset quality stress will probably continue over the next few quarters, BOB and PNB advised sustainability in their performance. Private Banks like Axis Bank and ICICI Bank signaled further asset quality stress, but Indusind Bank said its asset quality might witness marginal improvement.

2

3

BFSIBFSI

4

Banking: Business aggregates

•

Credit growth continues to remain moderate at 15.9% YoY as on Feb 7, 2014 due to poor demand amidst weak economic environment.

•

Deposit accretion which had garnered pace due to FCNR deposit mobilization has also now moderated to 15.6% YoY as on Feb 7, 2014.

•

Within sectors, the credit growth was driven by services and retail, while within industry, the growth was led by power segment.

Source: Bloomberg, PhillipCapital India Research

Growth Rate (%)

Basic Metal & Metal products 15.1

CRE 14.6

All engineering 16.3

NBFC 15.1

Housing 17.7

Iron & Steel 14.9

Power 21.2

646668707274767880

8

13

18

23

28

33

Feb

7, 20

14

Nov

29, 2

013

Oct

4, 2

013

Aug

23, 2

013

Jun

14, 2

013

Apr

19, 2

013

Feb

22, 2

013

Dec

14, 2

012

Oct

19,

201

2

Au g

31, 2

012

Jun

29, 2

012

May

4, 2

012

Mar

23, 2

012

Jan

13, 2

012

Nov

18, 2

011

Sep

30, 2

011

SCB Business aggregates

Deposit Gwth (%) Credit Gwth (%) CD ratio (rhs)

0

5

10

15

20

25

Dec

-11

Feb-

12

Apr

-12

Jun-

12

Aug

-12

Oct

-12

Dec

-12

Feb-

13

Apr

-13

Jun-

13

Aug

-13

Oct

-13

Dec

-13

Sector wise credit growth (%)Non-Food Credit AgricultureIndustry RetailServices

5

Banking: Deposit and base rate of top banks

•

Given the subdued credit offtake, most banks also maintained their base rates despite revision in policy rates.

•

If credit outlook improves, banks will have to raise

deposit rates in order to attract more deposits for meeting the credit demand, which will eventually result in increase in base rates.

•

Deposit rates were largely unchanged in most of the buckets across banks. Private banks maintained status quo while PSU banks marginally reduced rates at longer end.

•

The effective cost in rupee terms for banks on FCNR deposit translates to 8.6%-8.8% and moreover these

deposit are exempted from CRR and SLR requirement.

•

These cost effective liquidity flow will enable banks to reduce cost of deposit and help boost margin though marginally.

Current less than 1yr

1-2yr More than 2yr

Axis Bank 3.5-8.75 8.75-9.0 8.5-8.75

BOB 4.5-8.25 9.1 9.1

BOI 4.0-8.0 9.05 8.75-9.05

HDFC BANK 3.5-8.75 8.75 8.25-8.75

ICICI Bank 4.5-7.75 8.0-9.0 8.5-8.75

PNB 4-8.0 9.0 9.0

SBI 7.5 9.0 8.5-9.0

UBI 4.0-8.55 9 8.75-9.0

Base Rate Oct 2013 Nov 2013

Axis Bank 10.25 10.25

BOB 10.25 10.25

BOI 10.25 10.25

HDFC BANK 9.80 10.00

ICICI Bank 10.25 10.25

PNB 10.25 10.25

SBI 9.80 10.00

UBI 10.25 10.25

Source: Company, PhillipCapital India Research

6

Banking: Capex

data

0%

2%

4%

6%

8%

10%

12%

-1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

10,000

Mar

-07

Jun-

07Se

p-07

Dec

-07

Mar

-08

Jun-

08Se

p-08

Dec

-08

Mar

-09

Jun-

09Se

p-09

Dec

-09

Mar

-10

Jun-

10Se

p-10

Dec

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Project Stalled

Stalled, bn % of implementation (rhs)

0%

10%

20%

30%

40%

50%

60%

010,00020,00030,00040,00050,00060,00070,00080,00090,000

Mar

-07

Jun-

07Se

p-07

Dec

-07

Mar

-08

Jun-

08Se

p-08

Dec

-08

Mar

-09

Jun-

09Se

p-09

Dec

-09

Mar

-10

Jun-

10Se

p-10

Dec

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Under ImplementationUnder implementation Rs bn YoY (%), RHS

Source: CMIE, PhillipCapital India Research

•

New project announcements have shown a strong increase of 165% YoY and 55% QoQ.

•

Outstanding project under implementation however has remained stagnant at Rs 83 trn.

•

Proportion of stalled projects remain at 10% of project under implementation compared to average proportion of 5% largely on account of land/environment clearance & fuel availability.

-100%

-50%

0%

50%

100%

150%

200%

01,0002,0003,0004,0005,0006,0007,0008,0009,000

Mar

-07

Jun-

07Se

p-07

Dec

-07

Mar

-08

Jun-

08Se

p-08

Dec

-08

Mar

-09

Jun-

09Se

p-09

Dec

-09

Mar

-10

Jun-

10Se

p-10

Dec

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

New Projects

New Projects, Rs bn YoY (%), RHS

7

Banking: Asset quality aggregates

•

Pace of gross slippages have moderated with improvement seen in banks like PNB, BOB and Indian Bank. Slippage ratio for the industry was flat at 2.5%.

•

Gross slippages (annualized) for PSBs stood at 2.8% while it was 1.2% for private banks.

•

The stress has now broad-based covering most of the industry.

•

Outstanding restructured stock of PSBs declined by 35 bps QoQ to 5.6% driven by conversion of SEB loans into bonds under the FRP. The restructured portfolio of private banks increased by 13 bps QoQ to 1.6% driven by higher restructuring for ICICI Bank.

•

Huge CDR pipeline and delays in infrastructure will lead to elevated level of fresh restructuring during

FY15 as well.

•

CDR referrals as on Q3FY14 stood elevated at Rs 377 bn.

•

Given the elongated period of slowdown, corporate

which were restructured previously has high probability of slipping to non performing category.

Source: Company, PhillipCapital India Research

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

FY08 FY09 FY10 FY11 FY12 FY13 Q1FY14 Q2FY14 Q3FY14

Outstanding restructured portfolio (% to gross advances)

Private PSB

4

5

6

7

8

9

10

0.00.51.01.52.02.53.03.54.0

Gross SlippagePrivate bank PSB Real GDP Growth %, rhs

8

Banking valuation

0.0

0.4

0.8

1.2

1.6

2.0

2.4

0

2

4

6

8

10

Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14

Public Bank

GDP Growth %, lhs Interest rate %, lhs PS Banks (P/ABV)+1.65SD -1.65SD

•

Historically, 90% of the time, PSBs have traded in the range of 1.65x –

0.75x, 1yr forward ABVPS. Current valuation of 0.7x is a 40% discount to median

valuation of 1.2x.

•

The slowing economic activity (slowest in last 10 years) may lead to further downside in asset quality and therefore its valuation.

•

Historically, 90% of the time, Private banks have traded in the range of 3x –

1.4x, 1yr forward ABVPS

•

Current valuation of 2x is below the median valuation of 2.2x.

•

Private banks are trading at ~ 140% premium to PSBs (highest since peak of March 2008)

Source: PhillipCapital India Research

0.0

0.8

1.6

2.4

3.2

4.0

4.8

0

2

4

6

8

10

Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14

Private BankGDP Growth %, lhs Interest rate %, lhs P/ABV+1.65SD -1.65SD

9

NBFC –

Contribution of fleet operator; Mortgage rate; Funding cost


0.75

0.80

0.85

0.90

0.95

1.00

1.05

0.40

0.45

0.50

0.55

0.60

0.65

Contribution (Freight‐fuel cost) Rs per tone Kilometer

Delhi ‐Mumbai‐Delhi Delhi ‐ Kolkata‐DelhiDelhi ‐ Chennai‐Delhi Delhi ‐ Nagpur‐Delhi (rhs0

•

The contribution (freight –

fuel cost) has improved across

various route in last 2-3 months. However there is no definitive signs of improvement in utilization levels, thus keeping the cash flows of the fleet operators under stress.

•

The mortgage rates continues to drift downward during FY14 (despite some hardening of deposit rate) owing to increased competition in the segment.

•

Barring two wheelers, the auto sales (passenger car /

Commercial vehicle) continued to decline on YoY basis.

8

9

10

11

12

13

14

HDFC Ltd lending rates

-40

-30

-20

-10

0

10

20

30

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Auto SalesPassenger vehicles growth (YoY)CV sales growth (YoY)Two wheeler sales (YoY)

10

Life Insurance: Total premium

•

Total premium for the life insurance industry (new + renewal) declined by 0.3% YoY in FY13 (-1.3% in FY12).

•

Total premiums for LIC increased by 2.9% YoY in FY13 (-0.2% YoY in FY12)

•

In terms of new business, APE for life insurance industry declined by 15.3% YoY driven by a sharp decline in APE for LIC due to higher growth in single premium policies and a sharp decline in First year premiums.

•

Private insurer’s total premium declined by 8.1% YoY in FY13 as against a decline of 3.8% in FY12.

•

In terms of new business, APE of private players increased by 3.9% YoY in FY13 (-17.8% in FY12)

•

Owing to a sharp decline in LIC’s APE over the last few months, private players’

market share has stabilized at 40%+.

-10

0

10

20

30

40

50

60

0

500

1000

1500

2000

2500

3000

3500

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Total IndustryTotal premium (Rs bn) Growth (YoY) (rhs)

-20

0

20

40

60

80

100

120

0100200300400500600700800900

1000

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Private Insurers

Total premium (Rs bn) Growth (YoY) (rhs)


•

New business premium (NBP) for life insurance companies increased by 22.5% YoY to Rs 847.2 bn as on 9MFY14. NBP for LIC increased by 30.6% YoY while for private insurers increased only marginally by 0.3% YoY.

•

Healthy growth was driven by strong product push before the new regulatory product regime (new norms for traditional insurance plans) coming into play from Jan 1, 2014.

•

New traditional products from Jan 1, 2014 will have lower surrender values, high risk cover and agent’s commission linked to tenure of the policy. This will also impact the NBAP margins on traditional products which had been dominating the product mix in the last few years.

•

In terms of APE, the total industry growth was 9.5% YoY as LIC had witnessed a strong growth in single premiums.

•

Amongst major private insurers, strong growth was witnessed by Reliance Life, SBI Life and Max Life, while HDFC Life and ICICI Life saw contraction in their NBP collection.

•

LIC dominance continued with its market share improving to 65.5% as on 9MFY14 as against 60.5% as on FY13 driven by aggressive pushing of traditional products before new product norms kicking in.

11

Life insurance: Annualized Premium Equivalent (APE)

0

100000

200000

300000

400000

500000

FY09 FY10 FY11 FY12 FY13 9MFY14

LIC V/s Private APE (Rs mn)LIC Pvt

LIC V/s Private Market Share

42.2 46.958.7 65.2 60.5 65.5

57.8 53.141.3 34.8 39.5 34.5

0

20

40

60

80

100

120

FY09 FY10 FY11 FY12 FY13 9MFY14

LIC Pvt


12

Life insurance: APE Trend

-60

-40

-20

0

20

40

60

80

100

0

10000

20000

30000

40000

50000

60000

70000

FY08 FY09 FY10 FY11 FY12 FY13 9MFY14

SBI Life

APE (Rs mn) Growth (YoY) (rhs)

-100

-50

0

50

100

150

200

0

5000

10000

15000

20000

25000

30000

35000

40000


Reliance Life


-40

-20

0

20

40

60

80

0

5000

10000

15000

20000

25000

30000

35000

40000


HDFC Standard


-40

-20

0

20

40

60

80

0

10000

20000

30000

40000

50000

60000

70000

80000

90000


ICICI Prudential



13

MACROMACRO

14

Policy rates

-5

0

5

10

15

20

25

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

Real Interest Vs Deposit GrowthReal Interest rate (%) Deposit Growth (%)

•

With inflation coming down and deposit rates remaining high, the real interest rates have become positive.

•

Stable positive real interest will augur well for the

banks deposit growth going forward.

•

Adequate liquidity available with banks, lack of credit demand, interest on deposit may remain stable in

near terms.

•

WPI for January declined 5.05% (Vs 6.2% in Dec’

13).

•

In the previous monetary policy, the central bank increased its repo rate by 25bps to 8%. RBI hiked repo rate in the last monetary policy due to higher core inflation. Thus, we believe even if headline inflation has fallen significantly, possibility of rate cut stands weak as long as core inflation is rising. As per our economist Anjali Verma, inflation is expected to inch higher in the next few months, thus, expect RBI to maintain status quo in the April monetary policy review.

•

Our in-house view on average WPI for FY15 is 6%-

6.5%.


Policy Rate (%)

0

2

4

6

8

10

12

Jan-

11

Apr

-11

Jul-1

1

Oct

-11

Jan-

12

Apr

-12

Jul-1

2

Oct

-12

Jan-

13

Apr

-13

Jul-1

3

Oct

-13

Jan-

14

WPI Repo Rate SBI 1yr Dep Rate CRR

15

•

Yield curve February has shifted upward following repo hike by RBI. 10Yr Gsec

touched a high of 8.92% during the month before softening marginally.

•

The short term corporate bond rates and CD rates have also witnessed increase following policy rate hike.

Yield curve


AAA Corporate Bond Spread over G-Sec

1 Yr spread

2 Yr spread

3 Yr spread

4 Yr spread

5 Yr spread

Oct-13 0.52 1.15 1.22 1.10 0.94

Nov-13 0.73 1.16 1.27 1.19 1.12

Dec-13 0.89 1.26 1.29 1.01 0.74

Jan-14 1.19 1.11 0.96 0.77 0.83

Feb-14 1.33 0.98 1.07 0.83 0.75

Yield Curve (%)

8

8.25

8.5

8.75

9

9.25

G-Sec 1yr G-Sec 2yr G-Sec 3yr G-Sec 4yr G-Sec 5yr G-Sec 10yr

Jan‐14 Dec‐13 Feb‐14

1 yr CD rate

0

2

4

6

8

10

12

14

16

Feb-

08

Aug

-08

Feb-

09

Aug

-09

Feb-

10

Aug

-10

Feb-

11

Aug

-11

Feb-

12

Aug

-12

Feb-

13

Aug

-13

Feb-

14

16

Money supply data

8

10

12

14

16

18

Jan-

12

Mar

-12

May

-12

Jul-1

2

Sep-

12

Nov

-12

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

M3 Growth (YoY %)

-800-600-400-200

0200400600800

Apr

-11

Jul-1

1

Oct

-11

Jan-

12

Apr

-12

Jul-1

2

Oct

-12

Jan-

13

Apr

-13

Jul-1

3

Oct

-13

Jan-

14

Factors affecting liquidityChange in Curr. In circulation (m-o-m Rs bn)

Change in Govt. cash balance (m-o-m Rs bn)

•

M3 growth at 14.3% YoY has increased above RBI’s

projection of 13%. YTD M3 growth was 11.5%.

•

Borrowing under LAF window have narrowed since July on account of limitations enforced by RBI.


0

2

4

6

8

10

12

-2500

-2000

-1500

-1000

-500

0

500

Apr

-11

Jul-1

1

Oct

-11

Jan-

12

Apr

-12

Jul-1

2

Oct

-12

Jan-

13

Apr

-13

Jul-1

3

Oct

-13

Jan-

14

LAF (Repo) / Rev. Repo LAF (Rs bn) Call Rate (rhs)

17

Fiscal conditions

•

Increase in policy rate, rising global treasury yields and weak macro-economic fundamentals sent 10-year benchmark bond yields vaulting over 8.9%.

•

The fiscal deficit for FY14 stood at 4.6% (4.8%

budgeted). The over achieved figure of 4.6% is driven by cut in plan expenditure & deferment of subsidy despite slippage in tax collection and disinvestment target.

•

FY15 Gross government borrowing is aimed at Rs

5.97tn vs. Rs 5.63tn in FY14.


Date% of FY14

Budgeted borrowingAmount (Rs bn) Date

% of FY13 borrowing

Amount (Rs bn)

Apr-13 9 450 Apr-12 5 230May-13 19 923 May-12 12 540Jun-13 28 1382 Jun-12 24 1124Jul-13 40 1972 Jul-12 34 1594

Aug-13 54 2623 Aug-12 50 2344Sep-13 52 2553 Sep-12 58 2694Oct-13 64 3153 Oct-12 69 3234Nov-13 77 3753 Nov-12 79 3704Dec-13 86 4203 Dec-12 87 4074Jan-14 95 4653 Jan-13 92 4314Feb-14 100 4888 Feb-13 100 4674Mar-14 Mar-13 100 4674

Net borrowing FY14 (budgeted) 4888 Net borrowing FY13 (Actual) 4674

GOI Borrowing

0

1000

2000

3000

4000

5000

6000

Feb-

12

Apr

-12

Jun-

12

Aug

-12

Oct

-12

Dec

-12

Feb-

13

Apr

-13

Jun-

13

Aug

-13

Oct

-13

Dec

-13

Feb-

14

4.0

5.0

6.0

7.0

8.0

9.0

10.0Incremental net borrowing (Rs bn) GIND10YR Index (rhs)

18

Macro snapshot

Latest 1M-Ago 3M-Ago 6M-Ago 12M-Ago

Forex Reserves, $Bn 290.6 295.2 294.5 290.5 295.0

Government Borrowing, Rs Bn 5580 5340 4740 3240 4980

WPI,% 6.8 6.6 7.2 8.0 7.6

CPI,% 11.6 11.2 9.6 9.8 5.3

Index of Industrial Production,% 2.4 -0.5 8.4 -0.1 1.0

6-core Industry,% 4.7 2.5 4.2 1.2 2.1

Exports, $ Bn 26.3 24.8 22.7 22.0 25.2

Imports, $ Bn 41.2 45.7 41.3 37.4 40.1

Trade Deficit, $ bn -14.9 -20.8 -18.6 -15.3 -14.9

GDP,% 5.3 - 5.5 5.3 6.7

Agriculture,% 1.2 - 2.9 1.7 3.1

Industry,% 1.2 - 0.8 0.7 2.7

Services,% 7.1 - 7.4 7.5 8.5

Exports, $ Bn 69.8 - 76.7 80.2 79.6

Imports, $ Bn 118.2 - 119.0 131.7 124.1

Trade Deficit, $ Bn -48.3 - -42.3 -51.5 -44.5

Invisibles, $ Bn 25.9 - 25.8 29.8 25.6

Current Account Deficit, % of GDP -22.4 - -16.6 -21.8 -18.9

Net capital flows, $ Bn 23.9 - 16.1 16.6 17.2


19

Valuation matrix: Coverage universeMCap MCap CMP __Gwth (12-14E)____ ____P/Adj. BV____ _____RoE (%)_____ ____NII(Rs bn)____ ______NIM(%)______ _____CAR(%)_____ Opg. Profit (Rs bn) Cost to Income ratio

Rs bn US$ bn (Rs) NII % PPP% PAT% FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e

Public Sector Banks

Andhra Bank 31 0.6 55 -3.8 -4.1 -24.6 0.5 0.53 0.56 16.2 5.3 8.3 37.6 37.6 34.8 2.8% 2.3% 2.3% 11.8 10.7 10.0 27.7 22.3 25.5 42.4 53.3 54.6

Bank of India 100 1.8 168 8.5 13.0 16.3 0.6 0.56 0.50 12.9 12.6 13.6 90.2 90.2 106.3 2.2% 2.2% 2.2% 11.0 10.6 10.1 74.6 85.9 95.3 41.7 42.4 43.4

BOB 227 4.1 538 3.3 7.4 7.8 0.8 0.80 0.73 16.0 14.4 14.6 113.2 113.2 120.7 2.3% 2.1% 2.2% 13.3 13.1 12.6 90.7 91.7 104.6 39.3 43.4 44.1

Canara Bank 94 1.7 213 5.2 12.4 5.2 0.5 0.53 0.48 13.2 9.6 12.8 78.8 78.8 87.2 2.1% 2.0% 2.1% 12.4 10.3 9.9 58.9 64.4 74.5 46.6 48.0 48.4

Corp Bank 35 0.6 226 6.0 6.3 -6.8 0.4 0.45 0.43 16.1 7.3 11.6 34.3 34.3 38.5 2.0% 1.9% 1.8% 12.3 11.6 10.9 30.4 32.6 34.3 39.7 41.8 45.0

IOB 42 0.8 45 5.0 6.1 19.5 0.4 0.53 0.58 4.9 3.8 5.4 52.5 52.5 57.9 2.3% 2.3% 2.3% 11.9 11.5 11.2 38.2 40.6 42.9 47.2 49.0 52.3

Oriental Bank 47 0.9 161 4.2 2.5 2.2 0.5 0.47 0.45 11.5 8.9 10.2 47.0 47.0 51.0 2.5% 2.5% 2.5% 12.0 12.1 11.5 36.9 37.1 38.8 41.9 44.6 46.8

PNB 192 3.5 544 5.4 2.7 -2.2 0.7 0.70 0.64 16.5 10.7 12.8 148.6 148.6 165.1 3.2% 3.3% 3.3% 12.7 12.8 12.5 109.1 110.3 115.1 42.8 46.7 50.6

SBI 1042 19.0 1524 4.9 4.2 -5.3 1.0 1.00 0.97 15.4 10.1 10.8 611.6 611.6 673.4 3.2% 3.0% 3.1% 12.8 13.0 12.5 409.2 390.0 444.4 56.3 62.8 62.7

Union Bank 61 1.1 102 1.7 -1.7 -8.0 0.5 0.49 0.47 15.0 9.4 10.2 75.4 75.4 78.0 2.7% 2.4% 2.3% 11.5 11.8 10.8 55.8 52.1 53.9 44.7 50.2 53.1

Indian Bank 37 0.7 87 -1.0 4.3 -7.6 0.4 0.42 0.36 21.0 16.1 10.2 45.2 45.2 44.3 3.1% 2.6% 2.7% 13.1 12.4 11.5 30.6 28.8 33.3 47.3 49.9 49.6

Private Sector Banks

Axis Bank 577 10.5 1234 10.4 13.7 13.6 1.8 1.55 1.36 18.5 17.0 16.3 96.7 96.7 117.9 3.2% 3.4% 3.4% 17.0 17.6 17.5 93.0 109.3 120.3 42.6 41.7 42.5

HDFC Bank 1613 29.3 678 7.9 24.2 23.1 4.5 3.82 3.24 20.3 21.6 21.8 158.1 158.1 184.2 4.5% 4.5% 4.5% 16.8 17.8 17.6 114.3 146.6 176.2 49.6 44.8 44.1

ICICI Bank 1194 21.7 1035 9.5 18.0 13.9 1.8 1.68 1.55 13.1 13.9 14.1 138.7 138.7 166.3 2.9% 3.1% 3.2% 18.8 17.6 16.9 132.0 163.5 183.9 40.6 38.1 38.6

Dvpt Cr Bank 13 0.2 53 13.9 39.3 24.8 1.5 1.27 1.10 10.9 14.0 12.8 2.8 2.8 3.7 3.0% 3.1% 3.0% 13.6 13.1 12.3 1.3 1.9 2.4 68.6 62.1 58.9

NBFC's

HDFC Ltd 27 0.5 806 18.6 16.5 16.4 5.1 4.60 4.04 17.6 16.7 16.1 61.8 74.6 86.9 3.6% 3.6% 3.6% 14.7 13.8 13.1 67.2 78.5 91.2 7.8 7.7 7.8

Shriram Transport Fin 129 2.4 570 8.2 5.9 3.1 1.8 1.64 1.46 20.6 16.6 17.1 34.6 37.0 40.5 7.7% 7.0% 6.9% 16.6 15.6 16.1 28.7 30.2 32.2 22.4 23.7 25.6

Source: Company, PhillipCapital India Research Estimates

20

Valuation matrix: Coverage universe

_______PAT(Rs bn)_______ ________CASA(%)________ ________EPS (Rs)________ _________Adj BV (Rs)_________ ________GNPA(%)________ ________NNPA(%)________FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e FY13 FY14e FY15e

Public Sector Banks

Andhra Bank 12.9 4.6 7.3 25.5% 25.4% 25.0% 23 8 12 121 104 99 2.1 3.8 5.4 0.9 2.5 3.4

Bank of India 27.5 30.7 37.2 24.5% 23.6% 23.1% 46 48 58 281 302 334 2.4 3.0 2.9 1.5 2.1 1.8

BOB 44.8 45.8 52.1 25.1% 25.8% 25.9% 106 106 121 657 673 734 1.6 2.4 3.4 0.5 1.3 1.9

Canara Bank 28.7 22.3 31.8 24.1% 24.0% 24.1% 65 48 69 432 403 441 1.7 2.6 2.8 1.4 2.2 2.5

Corp Bank 14.3 7.3 12.5 21.6% 18.2% 18.2% 94 44 74 561 500 520 1.3 1.7 3.0 0.9 1.2 2.1

IOB 5.7 5.0 8.1 26.4% 25.9% 25.4% 6 4 6 103 84 78 2.8 4.1 5.2 1.4 2.6 3.2

Oriental Bank 13.3 11.2 13.9 24.5% 24.0% 23.9% 46 37 46 345 341 356 3.2 3.2 3.9 2.2 2.3 2.9

PNB 47.5 34.9 45.4 39.1% 40.2% 39.5% 134 99 128 741 776 847 3.0 4.4 5.0 1.5 2.4 2.7

SBI 179.2 136.3 160.7 40.3% 39.8% 39.8% 262 183 215 1596 1519 1574 4.3 4.6 5.7 1.8 2.1 3.4

Union Bank 21.6 15.6 18.3 30.9% 29.6% 29.6% 36 25 29 224 209 215 3.1 3.0 3.8 1.7 1.6 2.5

Indian Bank 15.8 11.2 13.5 27.6% 27.1% 27.1% 37 24 31 204 209 243 2.0 3.4 3.4 1.3 2.3 2.2

Private Sector Banks

Axis Bank 51.8 60.5 66.8 44.3% 46.3% 46.1% 111 129 141 697 796 905 1.1 1.2 1.6 0.3 0.4 0.5

HDFC Bank 67.3 85.4 101.9 46.5% 45.0% 44.2% 28 36 43 151 177 209 1.0 1.0 1.0 0.2 0.2 0.3

ICICI Bank 83.3 97.2 108.0 41.5% 43.1% 42.3% 72 84 93 565 614 669 3.7 3.3 3.2 0.6 0.8 0.9

Dvpt Cr Bank 1.0 1.5 1.6 27.2% 25.0% 24.0% 4 6 6 36 42 48 4.4 3.2 2.6 0.6 0.8 0.7

NBFC's

HDFC Ltd 48.5 56.6 65.7 - - - 31 36 42 157 175 200 – -1661.0 -2500.0 0.0 0.0 0.0

Shriram Transport Fin 13.6 12.6 14.5 - - - 60 56 64 314 348 391 3.1 3.2 3.7 0.5 0.8 0.8

Source: Company, PhillipCapital India Research Estimates

21

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