ING Vysya Bank (Q3 FY13)

IVB’s NIM improved by better-than-expected 16bps qoq to 3.6%. The margin expansion was solely driven by a sharp decline of 21bps qoq in cost of deposits.

January 30, 2013 2:39 IST | India Infoline News Service

CMP Rs586, Target Rs651, Upside 11.0% 
  • ING Vysya Bank’s (IVB) advances growth was healthy at 20% yoy driven by Agri (12% qoq/64% yoy) and Business Banking segments (8% qoq/29% yoy). Growth in retail segment was subdued due to muted growth in mortgages (80% of the book) especially in the home loan piece (increasing competition and lower profitability has been impacting bank’s inclination to grow here). However, smaller retail products viz personal loans, CV loans and Gold loans registered brisk sequential growth. During the quarter, bank received a large repayment of ~Rs7bn (2.3% of Q3 FY13 advances) from a telecom client. This led to modest growth in the wholesale book which otherwise would have grown by 8% qoq/21% yoy. Another large telecom company had repaid ~Rs11bn in the previous quarter. Excluding these repayments from the base, the overall advances have grown by robust 8% qoq/29% yoy. We estimate a higher-than-system FY12-15 loan CAGR of 21% for IVB. 
  • Deposits grew in-line with advances at 4% qoq/19% yoy. Terminal CASA ratio slipped 90bps qoq to 31.7% mainly contributed by 80bps contraction in the savings deposits share. The absolute decline in savings balances despite strong CASA acquisition (Rs3.9bn) and addition of salary accounts (~65,000) imply migration of balances to term deposits within the bank and to other savings account of customers with banks offering higher savings rate. This was the sixth consecutive quarter of sluggish savings deposits growth and therefore the bank needs to look at various strategies (intense cross-selling, offering competitive rate, enhancing service level, etc) for retaining the balances. 
  • IVB’s NIM improved by better-than-expected 16bps qoq to 3.6%. The margin expansion was solely driven by a sharp decline of 21bps qoq in cost of deposits. With the bank being significantly wholesale funded (15% CDs and 20-22% bulk deposits), it has benefited from significant decline in short-term borrowing rates. Blended loan yield declined by 10bps qoq mainly on account of change in portfolio mix. While the bank earlier guided for NIM of 3.2-3.3% for the year, we expect margin to be materially higher at 3.5%.
  • Core fee income was nearly flat yoy for second consecutive quarter with weakness persisting in liability related, trade finance & cash management and wealth management & advisory fees streams. We expect fee income growth to remain muted in the near term. Ending the consolidation process (no branch addition in the past 5 quarters), IVB added five branches during Q3 FY13 and plans to add 25 more in the subsequent three quarters. Aided by impressive NII growth and higher investment related income, the cost/income ratio declined sequentially by 230bps to 55.3%. Resumption of network expansion and weakness in fee line is likely to limit further improvement in cost/income ratio in the medium term.
  • IVB’s asset quality continues to remain pristine underpinned by robust loan profile (largely a working capital bank in corporate/SME segments and marginal exposure to ailing sectors). Aided by negligible slippages (Rs 160mn, delinquency ratio at 0.2%), Gross NPLs of the bank declined sequentially both in absolute and percentage terms. Conservative LLP of Rs160mn improved PCR to 97% and consequently lowered Net NPL ratio to 0.05%, lowest in the industry. Restructuring was negligible at Rs80-90mn and the outstanding book remained at marginal 1.3-1.4% of advances.
  • Driven by robust NIM and asset quality performance, RoA/RoE expanded to a multi-quarter high of 1.3%/14.7%. With Tier-1 capital at ~10.6% (considering 9m PAT), the bank would probably raise equity capital in Q2/Q3 FY14.
  • We retain constructive view on IVB expecting elevated RoA delivery and improvement in RoE over FY12-15. With the stock having run-up substantially since our initiation report dated September 17, 2012, incremental valuation re-rating would likely be more gradual. We revised our 9-month target price upwards to Rs651. IVB remains our preferred mid-cap banking pick.
Result table
(Rs mn) Q3 FY13 Q2 FY13 % qoq Q3 FY12 % yoy
Total Interest Income 12,389 11,976 3.4 9,915 24.9
Interest expended (8,359) (8,288) 0.9 (6,679) 25.2
Net Interest Income 4,029 3,688 9.3 3,236 24.5
Other income 1,866 1,689 10.5 1,699 9.8
Total Income 5,895 5,377 9.6 4,935 19.5
Operating expenses (3,263) (3,100) 5.2 (2,822) 15.6
Provisions (246) (64) 285.6 (334) (26.4)
PBT 2,387 2,213 7.9 1,779 34.2
Tax (764) (710) 7.5 (584) 30.8
Reported PAT 1,623 1,502 8.1 1,195 35.8
EPS 42.4 39.7 6.7 31.9 32.9
Key  Ratios Q3 FY13 Q2 FY13 chg qoq Q3 FY12 chg yoy
NIM (%) 3.6 3.5 0.2 3.5 0.1
Yield on Advances (%) 11.8 11.9 (0.1) 11.7 0.1
Cost of Deposits (%) 7.1 7.3 (0.2) 6.9 0.1
CASA (%) 31.7 32.8 (1.1) 32.6 (0.9)
C/D (x) 0.84 0.83 0.01 0.83 0.01
Non-interest income (%) 31.7 31.4 0.2 34.4 (2.8)
Cost to Income (%) 55.3 57.7 (2.3) 57.2 (1.8)
Provisions/Income (%) 1.7 0.5 1.3 2.9 (1.2)
BV (Rs) 287.4 276.6 10.8 254.9 32.5
RoE (%) 14.7 14.2 0.5 12.3 2.4
RoA (%) 1.3 1.3 0.0 1.1 0.2
CAR (%) 12.5 13.0 (0.6) 14.1 (1.6)
Gross NPA (%) 1.8 1.9 (0.1) 2.0 (0.2)
Net NPA (%) 0.1 0.1 (0.1) 0.3 (0.3)
Source: Company, India Infoline Research
Financial Summary
Y/e 31 Mar (Rs m) FY12<

OPEN A DEMAT ACCOUNT & Get FREE Benefits worth 10,000

FREE Benefits worth 10,000



The average score for Prestige Estates Projects Limited stands at 4 against 6, three months back.

Prestige Estates Projects Limited is engaged in the business of real estate development. The Company’s principal products/services include Development and construction



Open ZERO Brokerage Demat Account

  • 0

    Delivery Brokerage for Lifetime

  • 20

    Per order for Intraday, F&O, Currency & Commodity