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Banking and Financial Institutions
Loan growth ~ 21% for FY11 beats expectations…
Credit growth as of March 25th 2011 stood at 21.4% YoY (above RBI
estimate of 20%), while deposit growth lagged behind at just 15.8%.
This led to elevated CD ratio of 75.7%. Higher base effect of Q4FY10
has brought down the credit growth pace from over 23% (till March
11th 2011) to 21% for FY11 end. The full quarter impact of higher
lending rates and subsequent deposit rate hike in Q3FY11 will be felt
in Q4FY11 impacting NIM by 15-20 bps. We expect I-Direct banking
universe to deliver robust 30% YoY growth in NII. Despite factoring
in higher provisioning cost (maintained sequentially), we expect PAT
growth of 31% YoY (2.6% QoQ) for our banking coverage universe.
Higher opex due to staff expenses, technical system based slippages
to remain highlight of the quarter…
Provisions towards gratuity and pension will pressurise cost to
income ratio for most PSBs. Also several banks have still not
switched to system based NPA classification and hence adhering to
RBI guidelines would result in a spike in technical NPA. This may call
for a hike in provisions so as to maintain PCR of 70%. Kingfisher
Airlines loan conversion to equity is expected to result in equity
MTM provision for the 11 consortium Banks, not yet factored in our
estimates.
Company specific view (Banks)
Company
Bank of Baroda Steady global business growth of ~22% YoY to boost NII and PAT by 32% and
24% YoY respectively. Asset quality to remain healthy with GNPA ratio seen at
1.3%.
Bank of India Additions to NPL is expected to slow down and recoveries to step up.
Provisioning cost to remain stable which will result in higher PAT growth YoY.
Higher than expected improvement in asset quality will be a positive for the bank
in near term.
Dena Bank We see NIM of 3%, supported by 48% YoY jump in NII. Loan growth is seen up
23% YoY and asset quality is expected to remain stable, but we have still
maintained higher provisions. Sluggish non interest income growth is a cause for
concern.
IDBI Bank Consolidation continues, resulting in lower business growth of ~7% and PAT
increasing 40% YoY (3% QoQ dip). NII to remain flat QoQ as both interest income
and interest expense absorb the higher lending and deposit rates. We have
estimated higher provisions due to pressure on asset quality.
Indian Overseas
Bank
Yet another strong quarter expected for the bank with strong business growth of
27% YoY (advances surging 33% YoY) and QoQ asset quality improvement.
Stronger recoveries expected this quarter. We expect PAT growth of ~44% QoQ
despite factoring in higher operating expenses and provisions.
Oriental Bank of
Commerce
We expect the bank to expand its business mix lower than the industry with
business growth of 15% YoY. Asset quality continues to be a cause of concern as
incremental slippages cannot be ruled out. PAT to remain flat QoQ due to
increased provision for retirement benefits and higher credit costs.
Punjab National
Bank
NIM to moderate by 5-10 bps due to rising cost of funds. However NII growth is
seen at 34% YoY (4% QoQ) on the back of strong business growth of 23% YoY. We
expect pick-up in recoveries and fee income to offset lower trading income
leading to other income inching up by 4% YoY. Pressure on asset quality to
continue with incremental slippages expected this quarter.
State Bank of
India
SBI is expected to see 10bps contraction in margins to 3.3% resulting in NII
declining 3% sequentially but growing 30% YoY. NPA to remain high, warranting
higher provision. Also teaser loan provision of around Rs.200 crore is built in Q4
estimates.
Syndicate Bank We expect fresh slippages to surface from restructured portfolio. Hence we have
maintained higher provisioning cost which lower PAT growth QoQ and YoY. We
expect GNPA at 2.4% and NNPA at 1% for FY11E.
Union Bank of
India
Provision towards gratuity and pension to weigh on operating expense impacting
PAT growth. We expect NPA to remain high but incremental additions to be
subdued. Business growth to remain in line with industry for FY11E.
Axis Bank NII to strengthen by ~27% YoY on high base of Q4FY10 due to advances growing
by ~26% YoY and high lending rates. CASA ratio to remain stable QoQ at ~42%.
We expect asset quality to stay healthy and estimate a PAT growth of ~29% YoY.
City Union Bank High credit offtake at ~33% YoY and higher yield on advances would boost
interest income. However we expect sequentially lower NII and 5-10 bps
moderation in NIM due to higher cost of funds. Provisioning to remain high this
quarter leading to PAT declining by ~14% QoQ .
DCB Business growth momentum to continue sequentially. However we expect NII to
remain flat QoQ as cost of funds push up interest expenses. Declining credit costs
to strengthen bottom-line. We expect a PAT of Rs 8.8 crore (growth of 7% QoQ)
Dhanlaxmi Bank We expect a better show QoQ. Top-line growth supported by higher NII and stable
operating expense to allow higher PAT growth. We see cost to income ratio at
88% for Q4FY11
Source: Company, ICICIdirect.com Research
Company specific view contd. (Banks)
HDFC Bank Consistent core business performance to continue with NII increasing 19% YoY on
the back of 29% credit growth. We expect high CASA of ~50% to cushion NIM
from rising cost of funds. Healthy asset quality to keep a check on credit costs.
We expect a 31% jump in PAT in Q4FY11.
Federal Bank We expect slippages to moderate this quarter, but have maintained higher
provisioning cost. We foresee low business growth this quarter and expect a pick
up in the forthcoming quarters. We see PAT up 27% YoY
Kotak Bank Banking business to show stable performance with 10% YoY NII growth and
margins seeing marginal dip of 10bps. However provisions are expected to remain
high. Broking and investment banking are expected to slow down with sequential
dip in profits. Overall consolidated profits to remain flat sequentially with
standalone bank giving 12% QoQ rise.
South Indian
Bank
Business growth is seen at 26% YoY with advances and deposits surging 29%
YoY and 24% YoY respectively. NII and PAT to remain flat sequentially with
interest expenses growing at 22% QoQ outpacing interest income growth of 14%
QoQ.
Yes Bank A steep rise in wholesale rates and lower CASA proportion would pressurize cost
of funds. Thus NIM is seen down at 2.9% from 3% in Q4FY10. Non interest income
will stay healthy and support 48% YoY PAT jump.
Source: Company, ICICIdirect.com Research
Company specific view (NBFCs)
Company
IDFC Loan growth to remain strong over 40% yoy and margins to stabilize for IDFC as it
has borne the cost pressure in last quarter. In Q4FY10, excessive HR cost
impacted PAT hence Q4FY11E PAT is expected to grow by 41% yoy and flat
sequentially
LIC Housing
Finance
Strength to continue in Q4FY11 with loan growth at 32% yoy and NII jumping 25%
yoy. We believe provisions will come down sequentially from Rs.232 crore (one
time teaser loan provision) to Rs.41 crore. Therefore, PAT to rise 19% yoy to |
253.8 crore.
Reliance Capital Asset management and Consumer finance businesses to add to bottom-line. Life
business is gathering momentum and non-life is expected to report losses, Also
with new Japanese partner going forward, life premium and valuations should rise
and capital gains of stake sale to accrue next year.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Banking and Financial Institutions
Loan growth ~ 21% for FY11 beats expectations…
Credit growth as of March 25th 2011 stood at 21.4% YoY (above RBI
estimate of 20%), while deposit growth lagged behind at just 15.8%.
This led to elevated CD ratio of 75.7%. Higher base effect of Q4FY10
has brought down the credit growth pace from over 23% (till March
11th 2011) to 21% for FY11 end. The full quarter impact of higher
lending rates and subsequent deposit rate hike in Q3FY11 will be felt
in Q4FY11 impacting NIM by 15-20 bps. We expect I-Direct banking
universe to deliver robust 30% YoY growth in NII. Despite factoring
in higher provisioning cost (maintained sequentially), we expect PAT
growth of 31% YoY (2.6% QoQ) for our banking coverage universe.
Higher opex due to staff expenses, technical system based slippages
to remain highlight of the quarter…
Provisions towards gratuity and pension will pressurise cost to
income ratio for most PSBs. Also several banks have still not
switched to system based NPA classification and hence adhering to
RBI guidelines would result in a spike in technical NPA. This may call
for a hike in provisions so as to maintain PCR of 70%. Kingfisher
Airlines loan conversion to equity is expected to result in equity
MTM provision for the 11 consortium Banks, not yet factored in our
estimates.
Company specific view (Banks)
Company
Bank of Baroda Steady global business growth of ~22% YoY to boost NII and PAT by 32% and
24% YoY respectively. Asset quality to remain healthy with GNPA ratio seen at
1.3%.
Bank of India Additions to NPL is expected to slow down and recoveries to step up.
Provisioning cost to remain stable which will result in higher PAT growth YoY.
Higher than expected improvement in asset quality will be a positive for the bank
in near term.
Dena Bank We see NIM of 3%, supported by 48% YoY jump in NII. Loan growth is seen up
23% YoY and asset quality is expected to remain stable, but we have still
maintained higher provisions. Sluggish non interest income growth is a cause for
concern.
IDBI Bank Consolidation continues, resulting in lower business growth of ~7% and PAT
increasing 40% YoY (3% QoQ dip). NII to remain flat QoQ as both interest income
and interest expense absorb the higher lending and deposit rates. We have
estimated higher provisions due to pressure on asset quality.
Indian Overseas
Bank
Yet another strong quarter expected for the bank with strong business growth of
27% YoY (advances surging 33% YoY) and QoQ asset quality improvement.
Stronger recoveries expected this quarter. We expect PAT growth of ~44% QoQ
despite factoring in higher operating expenses and provisions.
Oriental Bank of
Commerce
We expect the bank to expand its business mix lower than the industry with
business growth of 15% YoY. Asset quality continues to be a cause of concern as
incremental slippages cannot be ruled out. PAT to remain flat QoQ due to
increased provision for retirement benefits and higher credit costs.
Punjab National
Bank
NIM to moderate by 5-10 bps due to rising cost of funds. However NII growth is
seen at 34% YoY (4% QoQ) on the back of strong business growth of 23% YoY. We
expect pick-up in recoveries and fee income to offset lower trading income
leading to other income inching up by 4% YoY. Pressure on asset quality to
continue with incremental slippages expected this quarter.
State Bank of
India
SBI is expected to see 10bps contraction in margins to 3.3% resulting in NII
declining 3% sequentially but growing 30% YoY. NPA to remain high, warranting
higher provision. Also teaser loan provision of around Rs.200 crore is built in Q4
estimates.
Syndicate Bank We expect fresh slippages to surface from restructured portfolio. Hence we have
maintained higher provisioning cost which lower PAT growth QoQ and YoY. We
expect GNPA at 2.4% and NNPA at 1% for FY11E.
Union Bank of
India
Provision towards gratuity and pension to weigh on operating expense impacting
PAT growth. We expect NPA to remain high but incremental additions to be
subdued. Business growth to remain in line with industry for FY11E.
Axis Bank NII to strengthen by ~27% YoY on high base of Q4FY10 due to advances growing
by ~26% YoY and high lending rates. CASA ratio to remain stable QoQ at ~42%.
We expect asset quality to stay healthy and estimate a PAT growth of ~29% YoY.
City Union Bank High credit offtake at ~33% YoY and higher yield on advances would boost
interest income. However we expect sequentially lower NII and 5-10 bps
moderation in NIM due to higher cost of funds. Provisioning to remain high this
quarter leading to PAT declining by ~14% QoQ .
DCB Business growth momentum to continue sequentially. However we expect NII to
remain flat QoQ as cost of funds push up interest expenses. Declining credit costs
to strengthen bottom-line. We expect a PAT of Rs 8.8 crore (growth of 7% QoQ)
Dhanlaxmi Bank We expect a better show QoQ. Top-line growth supported by higher NII and stable
operating expense to allow higher PAT growth. We see cost to income ratio at
88% for Q4FY11
Source: Company, ICICIdirect.com Research
Company specific view contd. (Banks)
HDFC Bank Consistent core business performance to continue with NII increasing 19% YoY on
the back of 29% credit growth. We expect high CASA of ~50% to cushion NIM
from rising cost of funds. Healthy asset quality to keep a check on credit costs.
We expect a 31% jump in PAT in Q4FY11.
Federal Bank We expect slippages to moderate this quarter, but have maintained higher
provisioning cost. We foresee low business growth this quarter and expect a pick
up in the forthcoming quarters. We see PAT up 27% YoY
Kotak Bank Banking business to show stable performance with 10% YoY NII growth and
margins seeing marginal dip of 10bps. However provisions are expected to remain
high. Broking and investment banking are expected to slow down with sequential
dip in profits. Overall consolidated profits to remain flat sequentially with
standalone bank giving 12% QoQ rise.
South Indian
Bank
Business growth is seen at 26% YoY with advances and deposits surging 29%
YoY and 24% YoY respectively. NII and PAT to remain flat sequentially with
interest expenses growing at 22% QoQ outpacing interest income growth of 14%
QoQ.
Yes Bank A steep rise in wholesale rates and lower CASA proportion would pressurize cost
of funds. Thus NIM is seen down at 2.9% from 3% in Q4FY10. Non interest income
will stay healthy and support 48% YoY PAT jump.
Source: Company, ICICIdirect.com Research
Company specific view (NBFCs)
Company
IDFC Loan growth to remain strong over 40% yoy and margins to stabilize for IDFC as it
has borne the cost pressure in last quarter. In Q4FY10, excessive HR cost
impacted PAT hence Q4FY11E PAT is expected to grow by 41% yoy and flat
sequentially
LIC Housing
Finance
Strength to continue in Q4FY11 with loan growth at 32% yoy and NII jumping 25%
yoy. We believe provisions will come down sequentially from Rs.232 crore (one
time teaser loan provision) to Rs.41 crore. Therefore, PAT to rise 19% yoy to |
253.8 crore.
Reliance Capital Asset management and Consumer finance businesses to add to bottom-line. Life
business is gathering momentum and non-life is expected to report losses, Also
with new Japanese partner going forward, life premium and valuations should rise
and capital gains of stake sale to accrue next year.
Source: Company, ICICIdirect.com Research
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