Anand Rathi; ING Vysya Bank 2QFY11 – Improving business growth and asset quality

Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


ING Vysya Bank
2QFY11 – Improving business growth and asset quality
 Net profit up 40.8%. Healthy growth in net interest income
(32.9% yoy) and non-interest income (27.5% yoy) aided net profit
growth. We expect RoE and RoA to expand to 17.3% and 1%
respectively by FY13 as business scales up and margins and
productivity improve.
 Business growth scaling up, margin expansion. ING Vysya
Bank’s advances grew 23.5% yoy, faster than the system, mainly in
business banking. Deposits at 16% yoy, although slower than
advances growth, are gaining momentum. Reported margins
improved 25bps yoy to 3.34%, led by rising CASA share of 35.9%
compared with 32.7% in 2QFY10.
 Higher fees and treasury income. Fee income improved 18.1%
yoy, while treasury income grew a sharp 162.5% yoy. The bank’s
cost-to-income rose 70bps to 58.8% on account of employee
provisioning for pension and higher gratuity.
 Improving asset quality. Gross NPAs reduced 4.2% qoq. The
bank utilised higher treasury gains to boost NPA provisioning,
which substantially improved to 72.8% in 2QFY11 from 38.4% in
2QFY10. Higher provisioning is likely to protect the bank against
additional credit defaults.
 Valuation. At our target price of `445, the stock would trade at
1.9x FY12e and 1.7x FY13e ABV.