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ING Vysya Bank
3QFY11 – Improving business growth and asset quality
ING Vysya’s profit grew 37% yoy, led by modest growth of 12.1%
yoy in net interest income and a strong 28% yoy growth in noninterest
income. We maintain Buy on the stock as we expect
RoE and RoA to expand to 17.3% and 1% respectively by FY13e,
as business scales up and margin and productivity improve.
Business growth on upswing. ING Vysya’s advances grew 25%
yoy, faster than the system, mainly in business banking. Deposits
growth at 17.8% yoy is gaining momentum. Reported margin
contracted 32bps yoy to 3.1%, despite improvement of 80bps yoy
in share of CASA to 33% due to change in funding mix.
Higher fees, lower productivity. While fee income improved
27% yoy, treasury income grew 33.3% yoy. The bank’s cost-toincome
rose a sharp 305bps to 61.4%, accounting for employee
provisioning for pension and higher gratuity.
Improving asset quality, adequate capital. Gross NPAs
reduced 3.3% qoq. NPA provisioning saw a sharp jump of
366bps qoq to 76.4% for the quarter. Capital adequacy, excluding
current fiscal profit, is sufficient at 12.7% and likely to protect the
bank against additional credit defaults.
Valuation. At our target price of `445/share, the stock would
trade at 1.9x FY12e and 1.7x FY13e PABV
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
ING Vysya Bank
3QFY11 – Improving business growth and asset quality
ING Vysya’s profit grew 37% yoy, led by modest growth of 12.1%
yoy in net interest income and a strong 28% yoy growth in noninterest
income. We maintain Buy on the stock as we expect
RoE and RoA to expand to 17.3% and 1% respectively by FY13e,
as business scales up and margin and productivity improve.
Business growth on upswing. ING Vysya’s advances grew 25%
yoy, faster than the system, mainly in business banking. Deposits
growth at 17.8% yoy is gaining momentum. Reported margin
contracted 32bps yoy to 3.1%, despite improvement of 80bps yoy
in share of CASA to 33% due to change in funding mix.
Higher fees, lower productivity. While fee income improved
27% yoy, treasury income grew 33.3% yoy. The bank’s cost-toincome
rose a sharp 305bps to 61.4%, accounting for employee
provisioning for pension and higher gratuity.
Improving asset quality, adequate capital. Gross NPAs
reduced 3.3% qoq. NPA provisioning saw a sharp jump of
366bps qoq to 76.4% for the quarter. Capital adequacy, excluding
current fiscal profit, is sufficient at 12.7% and likely to protect the
bank against additional credit defaults.
Valuation. At our target price of `445/share, the stock would
trade at 1.9x FY12e and 1.7x FY13e PABV
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