Wednesday, May 2, 2012


ING Vysya Bank reported a PAT of `1273.9 mn up 40% yoy and 7% qoq. Bottom-line stood in line with our expectations. NII came off by 1.4% qoq due to a 20 bps sequential deterioration in the NIM which was largely seasonal in nature. Provisions increased sequentially despite asset quality improvement as the bank used one off tax deductions to shore up its coverage ratio.

NIM compresses by 20 bps sequentially
ING Vysya Bank reported a NIM of 3.3% for Q4FY12, which was a sequential NIM compression of 20 bps. The NIM deterioration was largely seasonal in nature on account of priority sector lending and subscription to RIDF bonds which led to a 9 bps qoq decline in the yield on advances. In FY13, the NIM is likely to be in line with that of the previous year.

Strong loan book growth led by PSL lending
Advances grew by 22% yoy and 9.3% qoq. Sequential loan book growth was led by the agricultural and rural banking business which grew by 18% yoy on account of priority sector lending. On a yoy basis loan book growth was led by the business banking division. Going ahead the loan book will continue to grow ahead of the industry.

Non-interest grows on the back of growth in forex and core fee income growth
Non-interest income increased by 15.4% yoy and 15.8% qoq. The increase in other income was on account of a strong growth in forex and core fee income.

Asset quality improves sequentially
The asset quality of the bank improved sequentially with %GNPAs coming off by 8 bps qoq though up 4.6% qoq on an absolute basis. Slippages came of sequentially and stood at `600 mn or a slippage rate of 0.9%. The bank used the onetime tax benefits that accrued to it during the quarter to shore up its provision coverage ratio. Hence provisions increased by 69% qoq which led to a 569 bps improvement in the PCR to 90.7%. Due to higher provisions, NNPAs came off by 35% qoq and %NNPAs came off by 12 bps sequentially to 0.2%. The bank has managed to maintain its asset quality despite strong growth in its SME portfolio.

Restructured book at 1.4% of advances
The banks restructured book stood at 1.4% of advances which stood largely in line with that of the previous quarter.

Valuation and view
At the CMP of `355 the bank trades at 1.3x its FY13E ABV and 1.1x its FY14E ABV. At these valuations the bank trades below its long term one year forward P/ABV multiple. The bank is a strong re-rating candidate given its sound asset quality and improving cost to income ratios which will lead to an improvement in return ratios going ahead.