march 28, 2011 city union bank...
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March 28, 2011
ICICIdirect.com | Equity Research
Initiating Coverage
ICICI Securities Limited
Rating Matrix Rating : Buy
Target : | 52
Target Period : 12-15 months
Potential Upside : 18 %
Performance Highlights | Crore FY09 FY10 FY11E FY12E FY13E
NII 243 278 388 483 598
PPP 227 256 338 417 511
PAT 122 153 213 269 337
Stock Metrics
Bloomberg Code CTBK.BO
Reuters Code CUBK.IN
Face Value (|) 1
Market Cap (| cr) 1,770
52 week H/L 54 /28
Sensex 18,993
2W Average volumes (BSE) 135,000
Comparable Return Matrix (%)
Company 1M 3M 6M 12M
City Union Bank 23.2 0.2 -0.7 60.8
Lakshmi Vilas Bank 10.0 -3.9 -27.9 26.5
South Indian Bank 14.1 -13.9 -0.7 41.8 Price Movement
0
20
40
60
Mar
-10
May
-10
Jun-
10
Aug-
10
Oct-1
0
Nov
-10
Jan-
11
Mar
-11
(|)
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3000
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7000
City Union Bank Nifty (RHS)
Analyst’s name
Kajal Gandhi [email protected]
Viraj Gandhi [email protected]
Mani Arora [email protected]
Sticking to basics ensures profitability… City Union Bank (CUB) is a South India based small sized bank. The bank stands out from the rest due to its target SME customer profiling and loan product mix resulting in higher NIM and best in class returns matrix. While other banks build up scale through the wholesale business first and enter retail subsequently, CUB’s growth, though stemming in from retail, is in principle not for consumption as the bank mainly lends to small businesses, traders, etc. It has been growing steadily albeit relatively conservatively and aims to continue with this strategy for the next four or five years in order to reach a larger scale before embarking on an aggressive growth trajectory. We believe this strategy works for the bank and estimate that a 26% CAGR in business would lead to 30% CAGR in PAT with RoA and RoE being maintained at 1.7% and 22.7%, respectively, over FY10-13E. Business loans, high short-term loan book to maintain NIM at 3.1% CUB’s loan book is high interest yielding in nature as: It has higher proportion of SME-trade loans segment (constitutes 54%
of its loan book). Short-term loans remain high (~58% in FY10) Approx. 80% of its loan book is on a floating basis enabling frequent
repricing of its book, resulting in higher pricing power, which helps maintain NIM
We expect advances to grow at a sturdy 28% CAGR over FY10-13E resulting in NIM stabilising at 3.1% by FY13E. Small ticket secured loans sustain healthy asset quality… CUB has been successful in bringing its GNPA and NNPA down from peak levels of 2% and 1.5% in Q1FY10 to 1.3% and 0.5%, respectively, in Q1FY11 and maintaining them ever since. Its lending philosophy of providing small ticket secured loans (~1:1 loan to collateral ratio) helps control asset quality. We expect GNPA and NNPA to decline further to 1.1% and 0.4%, respectively, over FY10-13E.
Valuations At the CMP of | 44, the stock is currently trading at 1.2x its FY13E ABV. We believe CUB is capable of sustaining its high RoA and RoE of over 1.4% and 20%, respectively, while continuing its business strategy as a niche banker to small businesses having a working capital loan oriented business model. We have valued the stock at 1.4x FY13E ABV and arrive at a target price of | 52, giving 18% upside. We are initiating coverage on the stock with a BUY rating.
Exhibit 1: Valuation Metrics FY09 FY10 FY11E FY12E FY13E
NP (| Crore) 122.1 152.8 213.5 268.6 336.6EPS (|) 3.8 3.8 5.3 6.4 8.0Growth (%) 20.1 0.2 39.7 19.8 25.3P/E (x) 11.5 11.5 8.2 6.9 5.5ABV (|) 18.7 19.7 24.0 30.7 37.7Price / Book (x) 2.1 2.1 1.8 1.4 1.1P/ABV (x) 2.3 2.2 1.8 1.4 1.2GNPA (%) 1.8 1.4 1.2 1.2 1.1NNPA (%) 1.1 0.6 0.5 0.4 0.4RoNA (%) 1.5 1.5 1.7 1.7 1.7RoE (%) 19.9 20.6 23.3 23.0 22.7
Source: Company annual reports, ICICIdirect.com Research
City Union Bank (CITUNI) | 44
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Company background City Union Bank (CUB) is an old private sector bank with a legacy of over 100 years. Based out of Kumbakonam, Tamil Nadu, it has a network of 236 branches with 209 branches concentrated in Southern India. CUB has a history of 100 years of profits and dividend payouts. The bank, which is concentrated primarily in Tamil Nadu with 63% of its total branch network, derives ~72% of its business from the state alone. The bank, which is 100% CBS based, offers diverse products and services catering primarily to SME, traders and retail customers. It has a bancassurance tie-up with LIC and National Insurance Company. CUB has entered in contract with Export Credit & Guarantee Corporation Ltd (ECGC) for marketing export credit insurance products through its branch network and has also obtained a license to function as a depository participant (DP) under National Securities Depository Ltd.
City Union Bank was founded in Kumbakonam, Tamil Nadu in 1904 as 'The Kumbakonam Bank Ltd’, incorporated as a limited company and spread out gradually to become a regional bank in the Thanjavur district. In 1945, the bank was converted into a scheduled commercial bank. It went on to acquire small banks with Common Wealth Bank Ltd being the first in 1957. It amalgamated two more local banks 'The City Forward Bank Ltd' and 'The Union Bank Ltd' with itself in 1965 and was rechristened as the 'The Kumbakonam City Union Bank Limited'. It stepped out of Tamil Nadu for the first time in 1980 opening its first branch in Sultanpet, Bangalore. It changed its name to 'City Union Bank Ltd' in December 1987 in sync with its new national image.
It has a history of steady corporate leadership since its inception, with only six CEOs so far. V Narayanan who was with the bank since 1974 and went on to become the Chairman and CEO of the bank in 1980 was famous in the industry for his illustrious leadership skills and vision. S Balasubramanian took charge in 2004 as the Chairman and CEO with Mr Kamakodi being promoted as the executive director of the bank.
Exhibit 2: Strong foothold in Southern India
Branches
Others, 5%
Gujarat, 3%Kerala,
4%Maha-rashtra,
5%
Karna-taka, 8%
Andhra Pradesh,
13%
Tamil Nadu, 63%
Source: Company quarterly presentation, ICICIdirect.com, Research
Exhibit 3: Business concentration in Tamil Nadu
Business
Others4%
Gujarat1%
Kerala2%
Maharashtra6%
Karnataka6%
Andhra Pradesh
9%
Tamil Nadu72%
Source: Company quarterly presentation, ICICIdirect.com, Research
Founded in 1904
Converted to a scheduled bank in 1945
Acquired Common Wealth Bank Ltd | 3000 crore
‘The City Forward Bank Ltd’ and ‘The Union Bank Ltd’ amalgamated with City Union Bank in 1965
IPO, listing of the bank’s shares on BSE, NSE and MSE in 1998
Procured licenses to act as agent for procuring life and general insurance business in 2003
Equity shares preferential allotment in 2007
Rights issue of 8 crore shares offering one share for every four shares held with issue price of | 6 in 2009
Shareholding pattern (Q3FY11)
Shareholders Holding (%)Promoters 0.0Institutional investors 23.4General public 76.6
FII & DII holding trend (%)
1214 15
17
8 8 86
0
4
8
12
16
20
Q4FY10 Q1FY11 Q2FY11 Q3FY11
(%)
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Investment Rationale City Union Bank is a pure play on the small and conservative growth story in the Indian banking space. The bank has made profits and paid dividends for the past 100+ years of its existence. Moreover, it has one of the best returns matrices across the industry with RoA and RoE above 1.4% and 20%, respectively, since FY07 with returns scaling a new high with RoA at 1.7% and RoE at 24% in 9MFY11. We are initiating coverage and adding the stock to our existing coverage universe of 18 banks on this count.
The bank is different from a Yes Bank or an IDBI Bank since they forayed into the wholesale business first, built a scale and then went aggressive on retail business. Though CUB’s growth is stemming in from retail, the bank mainly lends for business purpose rather than consumption.
The bank capitalises on knowledge of its niche market of small businesses, SME and traders primarily based in South India. Its loan product composition leans towards high interest yielding working capital loans. It is this target customer profiling and right product mix that enables the bank to charge a premium or pricing power, which helps sustain the spread. This enables it to maintain NIM of over 3% (on account of better pricing power) and has helped the bank to keep a reasonable check on its cost of funds despite a low CASA of 19% (since bulk deposits form only 3%) of total deposits. The bank has a healthy asset liability management with 71% of deposits and 69% of advances having maturity period of one to three years in FY10. Moreover, it balances its asset-liability by lending to small businesses (classified as retail) through retail term deposits that help maintain the spread.
The bank also boasts a healthy asset quality, which was maintained throughout the recession riddled years of FY09-10 while most banks grappled with mounting NPA. Moreover, with low ticket size and ~1:1 ratio of loan to collateral value the bank is placed comfortably with GNPA ratio at 1.3% and NNPA ratio at 0.5% in 9MFY11.
CUB plans to continue with the same strategy for the next four or five years in order to reach a comfortable size before embarking on an aggressive expansion trajectory. We believe this strategy works for the bank and estimate that a 26% CAGR in business would lead to 30% CAGR in PAT with RoA and RoE being maintained at 1.7% and 22.7%, respectively, over FY10-13E.
Exhibit 4: Balance sheet to grow at 24% CAGR over FY10-13E…
4127 53637349
925111559
14308
18056
22289
0
5000
10000
15000
20000
25000
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(| c
rore
)
CAGR:29% CAGR:24%
Source: Company annual reports, ICICIdirect.com Research
City Union Bank’s business model entails:
Management mantra of consistent business growth
over aggressive expansion plans for larger size
Focus on loans for business purposes rather than
consumption
Loan profile focused on SME-traders and high short-
term loans gives a competitive advantage in the form of
pricing power
This competitive advantage helps maintain higher NIM
of over 3%
Healthy asset quality due to low ticket size and loan to
collateral value ratio of ~1:1
These strategies help the management to ensure
operating efficiency and higher returns
The management wants to continue with this existing
business strategy for the next four or five years before embarking on a higher growth trajectory
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CUB- Small in size but high on returns…
CUB’s unique business model is capable of sustaining higher returns (one of the best across industry) while achieving a larger scale of business. We expect the core business performance to strengthen profits through FY10-13E due to steady business growth and higher spreads protected by its pricing power. With return ratios scaling all-time highs in 9MFY11 with RoA at 1.7% and RoE at 24%, we estimate 26% CAGR in business would lead to returns being maintained at 1.7% and 22.7% over FY10-13E.
Exhibit 5: Core business performance set to boost return ratios further from here on… FY09 FY10 FY11E FY12E FY13E
Net interest income/ avg. tota 2.9 2.7 3.0 3.0 3.0
Non-interest income/ avg. tot 1.5 1.4 1.1 1.1 1.0
Non-operating profit/ avg. tot 4.4 4.1 4.1 4.1 4.0
Operating expenses/ avg. tota 1.7 1.6 1.5 1.5 1.4
Operating profit/ avg. total as 2.7 2.5 2.6 2.6 2.5
Provisions/ Avg. total assets 0.6 0.6 0.5 0.4 0.4
Return on Avg. assets 1.5 1.5 1.7 1.7 1.7
Leverage (Avg assets/ Avg e 13.5 14.0 14.1 13.8 13.6
Return on equity 19.9 20.6 23.3 23.0 22.7
Source: Company annual reports, ICICIdirect.com Research
The bank will be able to capitalise on its asset utilisation (refer exhibit 5) even though the leverage factor will moderate from 14.1x to 13.6x over FY10-13E post the equity dilution of 5% (| 100 crore) factored in FY12E required to fuel the bank’s growth plans. Despite the dilution, the bank would be able to maintain higher RoE of ~23% till FY13E derived from pure banking play.
Exhibit 6: High returns since past five years…
1.41.5
1.61.5 1.5
1.7 1.7 1.7
19.7
22.0
19.920.6
23.323.0 22.7
21.8
0.5
1.0
1.5
2.0
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(%)
16
18
20
22
24
(%)
RoA* RoE* (RHS)
Source: Company annual reports, ICICIdirect.com Research
CUB has outshone its peers despite its small size when it comes to returns. The bank is set to deliver higher returns than South Indian Bank and Lakshmi Vilas Bank in the forthcoming years. The bank’s small size and niche positioning generates pricing power on the lending front leading to higher returns on its assets as well as equity employed.
The bank has a consistent track record of declaring profits
and paying dividends for more than 100 years
CUB has one of the best returns matrices across the
industry with RoA and RoE above 1.4% and 19%,
respectively, since FY07 with returns scaling a new high
with RoA at 1.7% and RoE at 24% in 9MFY11
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Exhibit 7: Best in class returns…
FY09 FY10 FY11E FY12E FY09 FY10 FY11E FY12ECity Union Bank 1.5 1.5 1.7 1.7 19.9 20.6 23.3 23.0Dhanlaxmi Bank 1.2 0.3 0.3 0.5 19.3 5.4 4.6 8.4Federal Bank 1.4 1.1 1.2 1.3 12.1 10.3 12.0 13.5Karnataka Bank 1.3 0.7 0.8 0.9 18.1 9.8 12.9 15.3South Indian Bank 1.0 1.1 1.0 1.1 16.0 17.9 17.8 19.5
ROA ROEPeer Banks
Source: Company annual reports, ICICIdirect.com Research
…derived from consistent profitability
We expect PAT to double from | 153 crore in FY10 to | 337 crore in FY13E registering a growth of 30% CAGR resulting from steady business growth percolating to the NII and boosting its core fee based income. Moreover, an efficient cost to income ratio of ~36% and lower credit costs on account of healthy asset quality would reduce the burden on the bottomline through FY11-13E. The strategies envisaged and implemented by the bank would lead to a shift in its PAT growth trajectory from 28% CAGR over FY06-10 to 30% CAGR over FY10-13E.
Exhibit 8: PAT to double by FY13E…
56 72 102 12
2 153
213
269
337
0
100
200
300
400
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(| C
rore
)
PAT
CAGR: 28%
CAGR:30%
Source: Company annual reports, ICICIdirect.com Research
We expect 26% CAGR in business to percolate to the
bottomline with PAT registering 30% CAGR over FY10-13E
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Higher return ratios boosted by effective business strategy...
City Union Bank (CUB) has positioned itself as a niche banker for small businesses and traders with its South India centric and high yielding working capital loans oriented business model. It is embarking on a steady growth trajectory aimed at increasing its business size by ~30% YoY in FY11E-12E targeting a business size of above | 30000 crore by FY13E. CUB derives its competitive advantage from:
• Steady business growth vs. aggressive pace to expand balance sheet
• Digging deeper in South India, expanding in lucrative centres across India
• Loans to small businesses and traders, high proportion of short term loans
• Focus on retail based term deposit mobilisation
Steady business growth vs. aggressive pace to expand balance sheet… The bank’s business growth has been steady over the past five years growing at 30% CAGR over FY06-10 with a declining C-D ratio (down from 72% in FY06 to 66% in FY10), which provides it sufficient headroom to push up its advances growth, going ahead. We expect the business to expand at 26% CAGR with advances surging at 28% CAGR and deposits rising at 25% CAGR over FY10-13E.
Exhibit 9: C-D Ratio to inch up to 71% by FY11E, stabilise at 72% by FY13E...
3518
4699
6425
8207
1028
5
1275
1
1606
6
1988
1
2550
3329
4537
5645
6833
9068
1151
7
1433
7
7271 71
69
66
71 72 72
0300060009000
12000150001800021000
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(| C
rore
)
62
64
66
68
70
72
74
(%)
Deposits Advances CD Ratio (RHS)
Source: Company annual reports, ICICIdirect.com Research
Exhibit 10: Bank’s business growth trajectory across business cycles…
57 55 51 52 5465
72 71 71 69 66
5
15
25
35
45
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
(%)
1020304050607080
(%)
Advances Growth YoY Deposits Growth YoY C-D ratio (RHS)
Source: Company annual reports, ICICIdirect.com Research
The historical growth trend reveals that the advances and deposits follow a lead-lag pattern albeit with a wider gap across business cycles. This is
We expect the business momentum to continue with the
bank expanding its business at 26% CAGR over FY10-13E
with the C/D ratio stable at ~ 72%
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the third phase since FY00 where the deposit mobilisation exceeded loan growth during FY09-10, marking the first leg of the phase.
However, the bank has changed its growth trajectory with advances pacing ahead of deposits since Q1FY11 (refer exhibit 11) with the bank utilising the headroom created by a lower C/D ratio in FY10. Advances have already grown 40% YoY vis-à-vis deposit growth at 35% YoY in 9MFY11.
Exhibit 11: Credit offtake shifting gears post FY10, pacing ahead of deposits…
2730
2225 27 29
35
2319 18
21
30
38 40
-400-200
0200400600800
1000120014001600
Q1FY10 H1FY10 9MFY10 FY10 Q1FY11 H1FY11 9MFY11
(| C
rore
)
051015202530354045
(%)
Incremental Deposits (QoQ) Incremental Advances (QoQ)
Deposits Growth YoY (RHS) Advances Growth YoY (RHS)
Source: Company quarterly presentation, ICICIdirect.com Research
Digging deeper in South India, expanding in lucrative centres across India…
CUB has a network of 236 branches with 209 branches concentrated in Southern India. The bank, which is concentrated primarily in Tamil Nadu with 63% of its total branch network, derives ~72% of its business from the state alone.
Exhibit 12: Total 72% of business derived from Tamil Nadu
State No. of Branches Statewise % of Branches Statewise % of BusinessTamil Nadu 148 63 72Andhra Pradesh 30 13 9Karnataka 19 8 6Maharashtra 12 5 6Kerala 10 4 2Gujarat 6 3 1Others 11 5 4Total 236 100 100
Source: Company quarterly presentation, ICICIdirect.com Research
The small sized bank aims to strengthen its existing concentration down South by opening up new branches across Tier I to Tier VI centres and targets a pan-India presence by expanding its branch network to 500 branches in the next three years.
It had received 62 branch licenses of which it plans to open
the remaining 48 by July 2011. The bank is opening 33
branches in Tamil Nadu alone and expanding across India
opening branches in strategic business centres
State Tier I & II centers Tier III to VI centersTamil Nadu 15 18Andhra Pradesh 4Karnataka 1Maharashtra 4Chattisgarh 1New Delhi 2Orisaa 1Punjab 1Uttar Pradesh 1Total 30 18Source: Company quarterly presentation
State-wise planned business expansion
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Loans to small businesses and traders; high proportion of short-term loans…
CUB has gained from its target customer profiling and loan product composition, which provides it with pricing power (the ability to charge a higher interest rate). It is adept at catering to the requirements of its target market of SME and traders, which constitute 54% of its loan book. Its competitive advantage lies in its loan book, which is skewed towards high interest yielding short-term loans (~58% in FY10). Moreover, 80% of its loan book is on a floating basis enabling it to reprice its book frequently (beneficial in a rising interest rate scenario).
Exhibit 13: Advances to grow at 28% CAGR over FY10-13E…
2550
3329
4537
5645
6833
9068
1151
7
1433
7
14
31
36
2421
33
2724
0
4000
8000
12000
16000
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(| C
rore
)
0
10
20
30
40
(%)
Advances Advances Growth YoY (RHS)
Source: Company annual reports, ICICIdirect.com Research
CUB has expanded its loan book at 28% CAGR over FY06-10 growing aggressively in FY07-08 with growth peaking at 36% YoY in FY08. However, the recession hit years of FY09-10 saw growth moderating to 24% YoY (FY09) and 21% YoY (FY10), respectively. The bank has grown its loan book by 40% YoY in 9MFY11. Since CUB has no plans to change its loan profile for runaway growth, we estimate the loan book will grow at a sturdy 28% CAGR over FY10-13E.
Exhibit 14: SME-traders constitute 54% of total loans
9MFY11
MSME30%
Services29%
Wholesale Traders12%
Retail Traders10%
Large Ind.6%
Agri13%
Source: Company quarterly presentation, ICICIdirect.com Research
The bank’s comparative advantage lies in its positioning as a niche lender to small businesses like the local money lender of old times. The bank has stuck to its old private sector roots capitalising on its concentration in South India, understanding of the market dynamics and its target customer needs. It is adept at catering to the requirements of its target market of SME and traders, which constitutes 54% of its loan book, charging a higher rate of interest.
The bank believes in lending for wealth creation rather than
consumption, which explains its lack of thrust in retail
consumption loans like auto and personal loans
It is not looking at a wholesale business based model for
the next four or five years
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Exhibit 15: Loan product mix: short term loans constitute 58% of total advances…
9MFY11
Bills purchased/ discounted
2%
Term Loans39%
OD/CC and Demand Loans35%
Demand Loans24%
Source: Company quarterly presentation, ICICIdirect.com Research
The bank has an interesting loan product mix as 58% of its advances are high interest yielding short-term loans fulfilling working capital requirements. This also helps in generating a faster loan book churn as the average maturity of working capital loans is 1.75-3 years.
Exhibit 16: High interest yielding working capital loans lead to consistent profitability… Advances FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13EShort term advances (%) 64.6 65.4 47.6 52.6 58.1 58.4 58.7 58.9Term loans (%) 35.4 34.6 52.4 47.4 41.9 41.6 41.3 41.1
Short term advances 1648 2176 2161 2971 3973 5293 6760 8438Term loans 902 1153 2376 2674 2860 3775 4757 5899Total advances 2550 3329 4537 5645 6833 9068 11517 14337
Source: Company annual reports, ICICIdirect.com Research
Approximately 80% of its loan book is on a floating basis, which allows frequent loan book repricing during rising interest rate scenario. This reduces interest rate risk, thus protecting its NIM. Moreover, the bank keeps its asset quality healthy as it has low average ticket size loans backed by collaterals. Unsecured loans for the bank amount to a mere 3% of total advances.
Exhibit 17: Credit offtake to key industries: Textile accounts for 10% of total loans
370
835
146
401
205150
249
0
300
600
900
Construction(CRE)
Textiles FoodProcessing
Iron & Steel Paper Other Metal& MetalProducts
OtherIndustries
(| C
rore
)
Source: Company quarterly presentation, ICICIdirect.com Research
Approximately 80% of its loan book is on a floating basis,
which allows frequent loan book repricing during a rising
interest rate scenario, thus reducing interest rate risk and
protecting its NIM
Short-term loans constitute 58% of CUB’s advances as
opposed to the industry average of 42%
Industry wise, textiles and iron and steel are two major
sectors with a 10% and 5% share in total advances,
respectively. The bank is not a major player in
infrastructure lending due to its smaller size
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ICICI Securities Limited
Focus on retail based term deposit mobilisation….
CUB’s deposits grew at 31% CAGR over FY06-10 with accretion of core retail term deposits. The bank had lowered its C/D ratio from 71% in FY08 to 66% in FY10 with deposit growth a step ahead of loan book growth and has been leveraging this headroom for faster loan book expansion in FY11.
The bank has a low CASA of ~19%, which does not play a major role in controlling cost of funds and maintaining high margins for the bank. Interestingly, a positive for the bank is its proportion of high cost bulk deposits, which is as low as 3% of total deposits. This protects it from a sudden spike in costs. We expect deposits to increase at 25% CAGR over FY10-13E with the CASA ratio inching up to ~20%.
Exhibit 18: CASA to remain subdued as deposit mobilisation leans on retail term deposits…
23 2421
1922
19 19 2019
0
5000
10000
15000
20000
25000
FY06 FY07 FY08 FY09 FY10 9MFY11 FY11E FY12E FY13E
(| C
rore
)
0
5
10
15
20
25
30
(%)
Term Deposits CASA CASA ratio (RHS)
Source: Company annual reports, ICICIdirect.com Research
Although the bank has been trying to garner a higher proportion of CASA, it has to undertake higher term deposit mobilisation in order to increase its deposit base, which explains its CASA declining to 19% in 9MFY11. With the bank aiming at 30% YoY business growth in the next two years, we believe it would need aggressive deposit mobilisation to fund its expanding loan book focusing more on long-term deposits, thus putting CASA under pressure.
Exhibit 19: Term deposit to grow faster than CASA, going forward…
31
43
31
21
28
2326
42
18 15
45
10
2526
0
10
20
30
40
50
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(%)
0
10
20
30
40
50(%
)
Term Deposits Growth YoY CASA Growth YoY (RHS)
Source: Company annual reports, ICICIdirect.com Research
The CASA ratio improved from 19% in FY09 to 22% in FY10
even as total deposit growth slackened from 28% YoY in
FY09 to 25% YoY in FY10. This can be attributed to term
deposits declining faster than demand deposits, thus
improving the CASA ratio
We expect the CASA ratio to inch up to ~20% as the bank
undertakes deposit growth at 25% CAGR over FY10-13E
driven by retail term deposits
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ICICI Securities Limited
Effective business strategy helps sustain NIM over 3%…
CUB has historically maintained a higher NIM of above 3% (refer exhibit 21) due to its pricing power protecting the spread. The bank gets its pricing power (the ability to charge a higher interest rate) from its SME focused, short-term loans oriented loan book. We expect NIM to stabilise at 3.1% by FY13E.
Getting its asset-liability match right… The bank has matched its ALM with 71% of deposits and 69% of advances having maturity period of one to three years in FY10. As CUB’s loan mix is skewed towards short term loans it helps generate a higher churn for the bank. On the deposits front, fixed rate term deposits immunise the bank from frequent spike in deposit rates. This asset liability match helps maintain NIM across interest rate cycles as a similar maturity pattern helps to pass on deposit rate hikes to repricing of loans. Exhibit 20: Well matched ALM…
FY08* FY09 FY10 FY08* FY09 FY101 day - 0.6 0.7 - 0.2 0.32-7 days - 0.6 2.2 - 0.5 0.88-14 days* 4.9 0.7 2.6 6.4 1.1 1.115 to 28 days 0.8 0.8 1.0 3.9 1.0 1.129 days to 3 months 1.9 1.9 2.2 10.5 5.0 4.8>3 mnths to <6 mnths 0.5 0.2 1.3 8.9 4.2 4.3>6 mnths to <1 yr 0.2 0.3 2.9 20.4 12.2 13.0>1 yr to <3 yrs 60.6 64.2 68.7 46.3 71.9 71.6>3 yrs to <5 yrs 11.4 11.2 8.4 3.2 3.6 2.8> 5 yrs 19.7 19.5 10.0 0.4 0.3 0.3Total 100 100 100 100 100 100
(%)Loans and advances Deposits
Source: Company annual reports, ICICIdirect.com Research
Moreover, it balances its asset-liability by lending to small businesses (classified as retail) through retail term deposits, which helps maintain spread.
Defying stereotype of high CASA for higher NIM… Historically, high NIM of above 3% for more than five years despite having a lower CASA base (~19%) lies at the heart of the bank’s business strategy. Unlike most banks, which control their cost of deposits through a higher CASA base, CUB is able to sustain high margins on account of the higher premium it is able to command from its niche market of SME and traders. Consequently, the bank has enjoyed high yields of over 12% since FY08 and has maintained NIM of over 3%. We estimate NIM will stabilise at 3.1% by FY13E by maintaining its spread given its pricing power advantage. Exhibit 21: Historically high NIM of over 3% sustainable in future…
3.6 3.73.2
3.0 3.23.6 3.7
3.53.1 3.1 3.1
1.0
2.0
3.0
4.0
FY06
FY07
FY08
FY09
FY10
Q1FY
11
Q2FY
11
Q3FY
11
FY11
E
FY12
E
FY13
E
(%)
NIM
Source: Company annual reports and quarterly presentation ICICIdirect.com Research
We estimate NIM will stabilise at 3.1% by FY13E by
maintaining its spread given its pricing power advantage
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ICICI Securities Limited
As discussed extensively in this report, given its positioning as a SME-trader focused bank catering to their specific requirements, higher churn and yields due to greater proportion of short-term loans (working capital loans), extensive knowledge about its market dynamics and a floating loan book size of approximately 80%, the bank has been able to manage its yields on advances across business cycles, thus maintaining the spread.
Moreover, the deposit base consists mainly of retail term deposits, which have a higher maturity. This reduces the bank’s dependence on high cost bulk deposits, which constitutes only 3% of the total deposits.
Exhibit 22: …due to competitive advantage in managing yields.
9.99.0 8.7
7.97.0
6.1 5.8 6.07.2
8.0 7.76.8
15.113.8
12.6 11.7 11.4 11.0 10.9 11.312.8 13.5 13.0 12.3
2
4
6
8
10
12
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
Q3FY
11
(%)
0
4
8
12
16
(%)
CoD YoA (RHS)
Source: Company quarterly presentation, ICICIdirect.com Research
Exhibit 23: NIM relatively higher than peers…
3.2
3.0 3.2
2.8
2.6
2.2
3.5
4.3
3.8
2.6
2.2
1.3
2.0 2.2
2.8
2.5 2.
9
2.5
0.00.51.01.52.02.53.03.54.04.5
FY08 FY09 FY10
(%)
City Union Bank Dhanlakshmi Bank Federal Bank
Karnataka Bank Lakshmi Vilas Bank South Indian Bank
Source: Company annual reports, ICICIdirect.com Research
CUB ranks well above its peer set in terms of NIM, coming
second only to Federal bank.
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ICICI Securities Limited
Asset quality concerns at bay…
The bank has not only gained from steady business growth and loan book profiling, it has been successful in maintaining its asset quality as well. CUB’s asset quality concerns have been swept away since the recession hit years of FY09-10 leading to deteriorating asset quality. CUB has been successful in bringing its GNPA and NNPA down from peak levels of 2% and 1.5% in Q1FY10 to 1.3% and 0.5%, respectively, in Q1FY11 and maintaining them ever since. The provision coverage ratio has been shored up from 56% to a comfortable 71% (including tech. write-offs) over the same period. We expect GNPA and NNPA to decline further to 1.1% and 0.4%, respectively, over FY10-13E.
What is intriguing is the fact that the asset quality deterioration for CUB has been relatively contained as opposed to the industry (especially small banks), which saw heavy slippages during Q4FY09-Q1FY10.
Exhibit 24: Asset quality concerns at bay…
2.0 2.0 2.0
1.4 1.3 1.3 1.31.2 1.1
0.6 0.5 0.5 0.5
1.5 53.5 53.3
70.3 71.6 72.4 71.4
56.1
0
1
1
2
2
3
Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
(%)
20
40
60
80
(%)
GNPA ratio NNPA ratio Provision Coverage Ratio (RHS)
due to tech.w/offs.
Source: Company quarterly presentation, ICICIdirect.com Research
It is CUB’s lending philosophy, which helps rein in the asset quality as the bank mainly lends small ticket secured loans to SME and traders for wealth creation. Best practices of secured lending ensure paring of losses in case of default as the bank maintains ~1:1 loan to collateral ratio. Moreover, a small ticket size mitigates concentration risk with no single large account turning into NPA, thus exposing the bank to greater risk.
Exhibit 25: Consistently improving asset quality over the years
5.9
4.3
2.61.8 1.8
1.4 1.2 1.2 1.1
3.4
2.01.1 1.0 1.1
0.6 0.5 0.4 0.40
1
2
3
4
5
6
7
FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(%)
GNPA NNPA
Source: Company annual reports, ICICIdirect.com Research
Both GNPA and NNPA levels have declined in Q3FY10 from
a high of | 121 crore and 66 crore in Q3FY10 after spiking
again in Q2FY11 to | 109 crore and | 45 crore,
respectively
We estimate GNPA and NNPA will decline further to 1.1%
and 0.4%, respectively, by FY13E
According to the bank; it expects slippages of ~ 1% of
advances, going forward, with average recovery time being
two years
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ICICI Securities Limited
Exhibit 26: Restructured assets well on path of recovery
S. no. No. of Borrowers Amount (| Crore)1 Restructured in Phase I -FY09 213 318.792 Restructured in Phase II - FY10 51 165.56
3=1+2 Total 264 484.35
4 Accounts closed by Q3FY11 67.495 Accounts turned as NPA 12.366 Accounts repaid till Q3FY11 185.06
7=3-6 Balance Outstanding 299.29
Source: Company quarterly presentation, ICICIdirect.com Research
Restructured assets have declined from | 484 crore in FY10 to | 299 crore with 2.5% of restructured assets turning into NPA and no new accounts being restructured for the past six quarters. Recovery has also been strong as 38% of restructured assets have already been recovered.
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ICICI Securities Limited
Financials
NII growth spurt in FY11E to set base for steady growth in FY11-13E…
Aggressive business growth in FY11E of ~27% YoY driven by loan book surging 33% YoY would lead to a sharp spike in NII growth to ~39% YoY. This is in stark contrast to NII growth declining from the historical average of ~20% maintained since FY07-09 to 15% YoY in FY10. We expect NII growth to get pared down to ~24% YoY in both FY12E and FY13E, albeit on a higher base.
Interest expenses soared ahead of interest income over the past five years as the bank focused on higher deposit mobilisation with deposits growing at 31% CAGR as opposed to advances expanding at 28% over FY06-10. Consequently, interest expenses grew at 38% CAGR as against 31% CAGR for interest income over the same period. With advances growth picking up in the next two years, we estimate interest income will grow in tandem with expenses at 28% CAGR and 27% CAGR, respectively, over FY10-13E.
Exhibit 27: NII growth spike in FY11E to build base for future growth...
140 167 20
0 243 27
8
388
483
598
26
20 1921
15
39
24 24
0
100
200
300
400
500
600
700
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(| C
rore
)
10
20
30
40
50
(%)
NII NII Growth YoY
Source: Company annual reports, ICICIdirect.com Research
Despite the high lending and deposit rates industry-wide, the bank will be successful in moderating its effect on its margins and NII by repricing its loan book at short intervals as ~80% of its loan book is on a floating basis. Going forward, we expect business growth of 26% CAGR to strengthen NII at 29% CAGR over FY10-13E.
We expect NII growth to shoot up to ~39% YoY in FY11E
before it settles to ~24% YoY in FY12E and FY13E,
respectively. This is mainly on account of a pick-up in core
business growth in the coming years as the bank increases
its business at ~26% CAGR leading to 29% CAGR in NII
over FY10-13E, respectively
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ICICI Securities Limited
CEB* to provide thrust to non-interest income…
We expect that non-interest income will grow in tandem with the strengthening core business performance. Historically, higher trading profits in FY09-10 led to a smart rise in the bank’s otherwise sluggish non-interest income. We believe that with higher interest rates prevailing in FY11E, trading gains will diminish with core fee based income taking the lead from here on. Commission, exchange and brokerage (CEB*) has improved YoY from | 45 crore in 9MFY11 to | 68 crore in 9MFY11 (equalling FY10 CEB of | 69 crore). We estimate non-interest income to expand at ~12% CAGR over FY10-13E.
Exhibit 28: Trading gains to get wiped out in FY11E…
40 54 90 124
143
148
175
203
8
-4
14
3127
1215 15
0
50
100
150
200
250
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(| C
rore
)
-10-505101520253035
(%)
Non-Interest Income Trading/Non Interest Income (RHS)
Source: Company annual reports, ICICIdirect.com Research
Exhibit 29: CEB* to provide impetus to non-interest income…
27 35 48 59 69 6812 817
4846
14
516
24
1426
20
01
1
2
3
11
-
20
40
60
80
100
120
140
160
FY06 FY07 FY08 FY09 FY10 9MFY11
(| C
rore
)
CEB & Charges Treasury Profit Suit Recoveries Others
Source: Company annual reports, ICICIdirect.com Research *CEB: Commission, Exchange and Brokerage
The bank is also the largest bancassurance partner of LIC in Southern India. Moreover, given LIC and L&T’s strategic investment in the bank (they have a stake of 4.9% and 4.8%, respectively, in the bank), CUB can leverage this relationship to promote its products with them.
The bank has also benefited from stronger suit recoveries,
which have been flowing in at a steady pace since FY10.
The bank has recovered | 20 crore as suit recoveries in
9MFY11
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ICICI Securities Limited
Operational efficiency: Outperforms peers…
CUB has been able to contain its opex growth better than its peers like South Indian Bank, Karur Vysya etc. (refer exhibit 31). This is evident from its cost to income ratio (C/I ratio), which declined by 300 bps from 39% in FY10 to 36% in 9MFY11 due to total income growth outpacing opex growth. The bank received branch licenses for 62 branches and plans to open the remaining 48 branches before July 2011. This would lead to higher staff cost and rental expenses. However, we expect a higher total income growth to offset the cost burden and the cost to income ratio to moderate to 36% by FY13E.
Exhibit 30: C/I ratio to moderate as income growth outpaces opex growth…
70 90 110
140
166
150
198
241
290
36 44 49 65 80 72 98 120
147
39 4138 38 39
36 37 37 36
0
50
100
150
200
250
300
350
FY06 FY07 FY08 FY09 FY10 9MFY11 FY11E FY12E FY13E
(| C
rore
)
10
20
30
40
50
(%)
Operating expenses Employee expenses C/I ratio (RHS)
Source: Company annual reports and quarterly presentation, ICICIdirect.com Research
City Union Bank has fared better than its peers in terms of operational efficiency, ranking well above Lakshmi Vilas Bank, South Indian Bank and Karnataka Bank, which hover between 40% and 50%.
Exhibit 31: C/I ratio best among peers…
83.5
50.2 48.2 48.536.1 36.2 37.3
0
20
40
60
80
100
DLB* KarnatakaBank
LVB* SIB* Karur Vysya CUB Federal bank
(%)
DLB* Karnataka Bank LVB* SIB* Karur Vysya CUB Federal bank
Source: Company quarterly presentations Q3FY11, ICICIdirect.com Research *DLB: Dhanlaxmi Bank, LVB: Lakshmi Vilas Bank, SIB: South Indian Bank
Positives for the bank include no pressure from provisioning for gratuity and second pension option as faced by public sector banks. Moreover, the bank is fully CBS based implying no major expenditure on technology investment.
The bank has maintained its operational efficiency as its C/I
ratio, which hovered around 40% for the past five years,
decelerated to 36% in 9MFY11. We expect the C/I ratio to
be in the range of 36% by FY13E
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ICICI Securities Limited
Investment book: Growth to moderate, well protected from MTM hits…
We expect investment growth to moderate from 32% CAGR over FY06-10 to 22% CAGR over FY10-13E as the bank steps up its loan growth in the forthcoming years. If we analyse the investment-deposit ratio (I-D ratio) since FY06, we find that as CUB was conservative on the lending front during FY09-10, its I-D ratio scaled up from 27% to 31% over FY08-10. Going forward, we expect the bank to accelerate its loan book growth, thereby maintaining its I-D ratio at ~29% over FY10-13E. Exhibit 32: Investments to grow at 22% CAGR over FY10-13E…
1057 13071718
23973210
3740
4720
5899
0
2000
4000
6000
8000
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
(| C
rore
)
24
27
30
33
(%)
Investments Investment-Deposit Ratio (RHS)
Source: Company annual reports, ICICIdirect.com Research
CUB’s Investment book is well protected from mark to market (MTM) hit caused by elevated G-Sec yields as the bank’s AFS book constitutes only 13% of the book with a modified duration of 2.89 years. Moreover, as discussed earlier, we expect the trading income proportion in non-interest income to moderate from 27% in FY10 to ~15% by FY13E. Exhibit 33: Well protected investment book
Q3FY11 Q4FY10 Q3FY10Total Investments (| Crore) 3545 3219 3022SLR 80 80 84Investments Breakup (| Crore) AFS 472 393 410 HTM 3073 2826 2608 HFT - - 5Modified Duration AFS 2.89 2.89 2.88 HTM 5.68 5.98 6.07 HFT 0 0 6.91Overall 5.25 5.49 5.56
Source: Company quarterly presentations Q3FY11 , ICICIdirect.com Research
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ICICI Securities Limited
Capital raising plan on the anvil…
The bank has a strong Tier-I ratio of 12.1% in 9MFY11 albeit with a lower Tier-II ratio at 0.97% as the bank has a sub-debt of only | 40 crore on its books. The bank has kept headroom for raising Tier-II capital when required and is looking forward to raise more Tier-I capital in the coming years. The bank has received board approval to raise equity worth | 300 crore, which it intends to raise in tranches from FY12E onwards.
Exhibit 34: Tier-I ratio strong, option for raising Tier-II at bank’s discretion…
8.411.8 11.5 12.4 12.1
2.9
1.6 1.21.1 1.0
0
4
8
12
16
FY07 FY08 FY09 FY10 9MFY11
(%)
Tier-I Tier-II
Source: Company annual reports, ICICIdirect.com Research
In FY05, the bank had a target of increasing its net worth to | 1000 crore by December 2010. It expects to cross the mark before the end of FY11 (current net worth of ~ | 993 crore).
Exhibit 35: Targeted net worth of | 3000 crore over next five years
Source: Company, ICICIdirect.com Research
CUB has planned to further increase its net worth to | 3000 crore (addition of | 2000 crore) over the next five years with internal accruals and fresh capital issue contributing | 1000 crore each.
Target net worth: | 3000 crore over next five years
| 1000 crore by end of FY11E
| 1000 crore via internal accruals
Addition of | 2000 crore over next five years
| 1000 crore via fresh capital raising
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ICICI Securities Limited
Risk & concerns High concentration risk… The bank gets 72% of the total business from 63% of its branches concentrated in Tamil Nadu. Although this gives the bank a competitive advantage in its niche expertise, it also makes it vulnerable to region-specific risks. Even though the bank is planning to open branches in lucrative centres in other parts of India, concentration risk would still be high given the business model. Small size makes bank gullible to consolidation… CUB’s small size exposes it to risk of consolidation. Its branch concentration in southern India and SME-focused business strategy make the bank attractive as a probable acquisition target for big banks looking to strengthen their footprint in southern India. Rising rate scenario to impact costs even more… High inflation has led to a tight monetary policy with higher policy rates pushing up both bank’s lending rates as well as deposit rates. Banks have been increasing their deposit rates in order to attract deposits, thus increasing costs. Such a situation would have an even greater effect on CUB on account of its small size and low CASA base. However, its impact on margins would be relatively lesser than those banks dependent on low cost deposits to maintain high margins. Trouble in India Inc growth story to hurt asset quality as SME sector gets hit Concerns on global geo-political condition, rampant inflation and slowdown in Indian economic growth have been voiced frequently. Any slowdown in the India Inc growth story would trigger defaults by the SME segment. CUB’s asset quality may be hit by virtue of its SME focused business strategy.
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ICICI Securities Limited
Valuation At the CMP of | 44, CUB is currently trading at 1.4x its FY12E ABV and 1.2x its FY13E ABV. The stock historically traded at sub 1.2x its one year forward ABV levels from H2FY09 till end of FY10. The stock has climbed up steadily since then scaling a high of 2x before sliding down to the present 1.4x levels.
Exhibit 36: One year forward P/ABV band
0
10
20
30
40
50
60
Apr-0
5
Aug-
05
Dec-
05
Apr-0
6
Aug-
06
Dec-
06
Apr-0
7
Aug-
07
Dec-
07
Apr-0
8
Aug-
08
Dec-
08
Apr-0
9
Aug-
09
Dec-
09
Apr-1
0
Aug-
10
Dec-
10
(|)
Price 1x 1.2x 1.4x 1.8x 2x
Source: Bloomberg, ICICIdirect.com Research
CUB has a superior return matrix as compared to its peers with both RoA and RoE well ahead of South Indian Bank (SIB), Federal Bank, etc. (refer exhibit below). Despite the bank’s small size, its consistent performance across all operational metrics is reflected in its P/ABV ratio. It has continued to maintain its lead over its peer set trading at 1.4x its FY12E ABV as opposed to Federal Bank and SIB, which are trading at 1.3x their FY12E ABV.
Exhibit 37: Superior returns compared to peer set…
Branches Advances* Deposits* CASA (%)
9MFY11 9MFY11 9MFY11 9MFY11 FY09 FY10 FY11E FY12E FY09 FY10 FY11E FY12E FY09 FY10 FY11E FY12ECity Union Bank 232 8517 11977 18.6 1.5 1.5 1.7 1.7 19.9 20.6 23.3 23.0 2.3 2.2 1.8 1.4Dhanlaxmi Bank 274 7771 10532 20.2 1.2 0.3 0.3 0.5 19.3 5.4 4.6 8.4 1.7 1.7 1.2 1.1Federal Bank 737 28240 36914 29.6 1.4 1.1 1.2 1.3 12.1 10.3 12.0 13.5 1.5 1.4 1.4 1.3Karnataka Bank 466 16282 25424 24.9 1.3 0.7 0.8 0.9 18.1 9.8 12.9 15.3 0.9 0.8 0.8 0.7South Indian Bank 570 26998 19188 22.4 1.0 1.1 1.0 1.1 16.0 17.9 17.8 19.5 2.1 1.7 1.5 1.3
RoA (%) RoE (%) P/ABV (x)
Banks
Source: Company annual reports and quarterly presentation, ICICIdirect.com Research *Advances and Deposits are in | Crore
We believe the bank is capable of sustaining higher returns while continuing with its business strategy as a niche banker for small businesses due to its small size, south India centric and high yielding working capital loans oriented business model. It has one of the best returns matrices across the industry with RoA and RoE above 1.4% and 20%, respectively, since FY07 with returns scaling a new high with RoA at 1.7% and RoE at 24% in 9MFY11. We estimate that a 26% CAGR in business would lead to returns being maintained at 1.7% and 22.7%, respectively, over FY10-13E. We have arrived at the target multiple using the Gordon Growth model at a 10% discount to the computed multiple, based on cost of equity at 14%, long-term growth rate at 3% and sustainable RoE of 20%. We have valued the stock at 1.4x FY13E ABV and arrive at a target price of | 52 giving an upside of 18%. We are initiating coverage on the stock with a BUY rating.
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ICICI Securities Limited
Financial Scorecard Exhibit 38: Profit and loss account
| Crore FY09 FY10 FY11E FY12E FY13E
Interest Earned 804.4 956.6 1220.4 1589.9 1991.4
Interest Expended 561.8 678.5 832.6 1107.1 1393.7
Net Interest Income 242.6 278.1 387.8 482.8 597.7
growth (%) 21.4 14.7 39.4 24.5 23.8
Non Interest Income 123.7 143.5 147.7 175.0 203.5
Net Income 366.3 421.6 535.5 657.7 801.2
Operating expense 139.5 165.9 197.5 240.9 290.2
Gross profit 226.7 255.8 338.0 416.9 511.0
Provisions 48.4 60.5 62.5 68.0 73.9
Taxes 56.2 42.5 62.0 80.2 100.5
Net Profit 122.1 152.8 213.5 268.6 336.6
growth (%) 20.1 25.1 39.7 25.8 25.3
Source: Company annual reports, ICICIdirect.com Research
Exhibit 39: Balance sheet
| Crore FY09 FY10 FY11E FY12E FY13E
Sources of Funds
Capital 32 40 40 42 42
Reserves and Surplus 629 786 964 1294 1594
Networth 661 826 1004 1336 1636
Deposits 8207 10285 12751 16066 19881
Borrowings 40 40 44 48 58
Other Liabilities & Provisions 343 409 508 606 714
Total 9251 11559 14308 18056 22289
Applications of Funds
Fixed Assets 41 63 68 72 79
Investments 2397 3210 3740 4720 5899
Advances 5645 6833 9068 11517 14337
Other Assets 282 352 329 459 468
Cash with RBI & call money 885 1100 1103 1288 1506
Total 9251 11559 14308 18056 22289
Source: Company annual reports, ICICIdirect.com Research
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ICICI Securities Limited
Exhibit 40: Ratios FY09 FY10 FY11E FY12E FY13E
ValuationNo. of Equity Shares 32.0 40.0 40.0 42.0 42.0EPS (Rs.) 3.8 3.8 5.3 6.4 8.0BV (Rs.) 20.7 20.7 25.1 31.8 39.0ABV (Rs.) 18.7 19.7 24.0 30.7 37.7P/E 11.5 11.5 8.2 6.9 5.5P/BV 2.1 2.1 1.8 1.4 1.1P/ABV 2.3 2.2 1.8 1.4 1.2DPS (Rs.) 0.8 0.8 0.8 0.8 0.8
Yields & Margins (%)
assets 10.2 9.7 9.9 10.2 10.2
Avg. cost on funds 7.7 7.3 7.2 7.7 7.7
Net Interest Margins 3.1 2.8 3.1 3.1 3.1
Avg. Cost of Deposits 6.8 7.3 7.2 7.7 7.7
Yield on average advances 11.6 12.1 12.3 12.6 12.6
Profitabilty (%)
Interest income/ total avg. a 9.7 9.2 9.4 9.8 9.9
Net interest income/ total inc 26.1 25.3 28.3 27.4 27.2
Non-interest income/ total in 13.3 13.0 10.8 9.9 9.3
Non-interest income/ avg. as 1.5 1.4 1.1 1.1 1.0
Trading gains/ total income 10.4 9.3 3.4 3.9 3.9
Non-interest income/ total ne 33.8 34.0 27.6 26.6 25.4
Quality and Efficiency (%)Credit/Deposit ratio 68.8 66.4 71.1 71.7 72.1GNPA 1.8 1.4 1.2 1.2 1.1NNPA 1.1 0.6 0.5 0.4 0.4RONW 19.9 20.6 23.3 23.0 22.7ROA 1.5 1.5 1.7 1.7 1.7
Source: Company annual reports, ICICIdirect.com Research
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ICICIdirect.com Research Desk, ICICI Securities Limited, 7th Floor, Akruti Centre Point, MIDC Main Road, Marol Naka, Andheri (East) Mumbai – 400 093
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