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ING VYSYA BANK
OUTPERFORMER (RS291, MCAP: RS35BN / US$777BN)
• Loan growth to sustain: ING Vysya expects to expand its loan book at slightly higher levels than the industry average
in FY11 (~25%). The loan book grew by 6% qoq and 23% yoy in the Q3FY11, driven by traction in the business banking
segment (up 10% qoq), which comprises 28% of the total outstanding book. Growth would be supported by expansion
in CASA deposits, driven by: i) expanding network coverage; and ii) differentiated product offerings. Mortgages form
the bulk of the retail book (~85%), while personal loans remain small at only ~4% of retail book as of December 2010.
The CV book also remains small at 6% of outstanding retail credit.
• Branch rollout to aid CASA accretion: ING Vysya intends to maintain a healthy flow of CASA deposits to fortify its
liability base. The bank holds ~40 more licenses and intends to roll these out by Q1FY12 (~20 in Q4FY11 and the rest in
Q1FY12). Currently, ~73% of the bank’s network is located in South India. The management is focusing on improving
productivity at its existing distribution and scaling up its presence in the North and West India. It added 23 new
branches YTD in FY11.
• Robust fee income growth ahead: The management expects non-interest income to track balance sheet growth.
Wealth management and forex fees are likely to be the primary drivers of growth in the segment.
• Asset quality remains healthy: Gross slippages were under control at Rs340m in Q3FY11 (annualized 0.7% of
opening loans), significantly lower than Rs1.5bn in H1FY11. Consequently, gross NPAs declined by Rs196m to 2.66%
from 2.91% in Q2FY11. Despite lower provisions, net NPAs declined to 0.64% from 0.81% in Q2FY11. Provision
coverage ratio increased to 76.4% from 73% in Q2FY11. The bank reached the regulatory coverage ratio in Q2FY11,
which should keep provision expenses low in the near term.
• RoA expansion ahead: The management expects provisions to significantly reduce in FY12, which, along with
buoyant fee income, is expected to be the biggest contributor of profitability. ING expects to scale up RoA to ~1% in
FY12. Reduction in the cost-to-income ratio is expected to drive RoA expansion in the medium term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ING VYSYA BANK
OUTPERFORMER (RS291, MCAP: RS35BN / US$777BN)
• Loan growth to sustain: ING Vysya expects to expand its loan book at slightly higher levels than the industry average
in FY11 (~25%). The loan book grew by 6% qoq and 23% yoy in the Q3FY11, driven by traction in the business banking
segment (up 10% qoq), which comprises 28% of the total outstanding book. Growth would be supported by expansion
in CASA deposits, driven by: i) expanding network coverage; and ii) differentiated product offerings. Mortgages form
the bulk of the retail book (~85%), while personal loans remain small at only ~4% of retail book as of December 2010.
The CV book also remains small at 6% of outstanding retail credit.
• Branch rollout to aid CASA accretion: ING Vysya intends to maintain a healthy flow of CASA deposits to fortify its
liability base. The bank holds ~40 more licenses and intends to roll these out by Q1FY12 (~20 in Q4FY11 and the rest in
Q1FY12). Currently, ~73% of the bank’s network is located in South India. The management is focusing on improving
productivity at its existing distribution and scaling up its presence in the North and West India. It added 23 new
branches YTD in FY11.
• Robust fee income growth ahead: The management expects non-interest income to track balance sheet growth.
Wealth management and forex fees are likely to be the primary drivers of growth in the segment.
• Asset quality remains healthy: Gross slippages were under control at Rs340m in Q3FY11 (annualized 0.7% of
opening loans), significantly lower than Rs1.5bn in H1FY11. Consequently, gross NPAs declined by Rs196m to 2.66%
from 2.91% in Q2FY11. Despite lower provisions, net NPAs declined to 0.64% from 0.81% in Q2FY11. Provision
coverage ratio increased to 76.4% from 73% in Q2FY11. The bank reached the regulatory coverage ratio in Q2FY11,
which should keep provision expenses low in the near term.
• RoA expansion ahead: The management expects provisions to significantly reduce in FY12, which, along with
buoyant fee income, is expected to be the biggest contributor of profitability. ING expects to scale up RoA to ~1% in
FY12. Reduction in the cost-to-income ratio is expected to drive RoA expansion in the medium term.
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