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IMPRESSIVE PERFORMANCE WITH STRONG SET OF NOS
ING Vysya Bank’s (ING) PAT grew 91% YoY to Rs 913 mn, which was
above our estimates. Improvement in NIMs (3.3% in Q4FY11, up 20 bps
QoQ); strong growth in CASA balances (34.6% in Q4FY11, up 116 bps
QoQ) along with improved asset quality (Gross NPA at 2.3% in Q4FY11,
down 36 bps QoQ) drove this robust operating performance. Decline in
provision expenses (down 96% YoY) provided traction to PAT growth.
Key highlights
NIMs grew 20 bps to 3.3% in Q4FY11 led by yield on advances
improving to 10.69% (up 56 bps QoQ) along with an improvement in
CASA ratio. Cost of deposits rose to 6% (up 56 bps QoQ).
Advances grew 28% YoY to Rs 236 bn buoyed by a 43% YoY rise in
biz banking. CASA ratio improved to 34.6% (up 120 bps QoQ) with
current a/c balance up 25% YoY & savings a/c balance up 23% YoY.
High staff expenses (up 54% YoY) led to 13% QoQ increase in costto-
income (C-I) ratio to 67%. ING has fully provided for: (a) the entire
Gratuity liability (of Rs 207.4 mn), (b) Additional liability of pension
for retired employees (of Rs 287.3 mn), and (c) 1/5th of Pension
costs for existing employees (of Rs 186 mn). Only Pension cost on
existing employees will be repeated going forward.
Asset Quality improved as gross NPAs and Net NPAs declined by 5%
QoQ and 33% QoQ to Rs 5.5 bn and Rs 0.9 bn respectively. Provision
coverage improved further to 83%.
Maintain BUY, with unchanged TP of Rs 434 (29% upside)
ING is expected to witness substantial improvement in C-I ratio as some
of the one-off items will not be repeated, which will help ING achieve
over 1% RoA in FY12E (vs. 0.9% in FY11). Higher-than-mandated PCR
will help in normalizing earnings in bad qtrs. With asset quality issues
behind & with opening of new branches, ING’s focus will be on growth
which will augur well for return ratios. We have revised our earnings
upwards by 7% to factor in improved operational performance. At CMP
of Rs 336, ING is trading at 11xFY12E EPS of Rs 30 & 1.3xFY12E ABV of
Rs 253. We retain our BUY rating with an unchanged TP at Rs 434.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IMPRESSIVE PERFORMANCE WITH STRONG SET OF NOS
ING Vysya Bank’s (ING) PAT grew 91% YoY to Rs 913 mn, which was
above our estimates. Improvement in NIMs (3.3% in Q4FY11, up 20 bps
QoQ); strong growth in CASA balances (34.6% in Q4FY11, up 116 bps
QoQ) along with improved asset quality (Gross NPA at 2.3% in Q4FY11,
down 36 bps QoQ) drove this robust operating performance. Decline in
provision expenses (down 96% YoY) provided traction to PAT growth.
Key highlights
NIMs grew 20 bps to 3.3% in Q4FY11 led by yield on advances
improving to 10.69% (up 56 bps QoQ) along with an improvement in
CASA ratio. Cost of deposits rose to 6% (up 56 bps QoQ).
Advances grew 28% YoY to Rs 236 bn buoyed by a 43% YoY rise in
biz banking. CASA ratio improved to 34.6% (up 120 bps QoQ) with
current a/c balance up 25% YoY & savings a/c balance up 23% YoY.
High staff expenses (up 54% YoY) led to 13% QoQ increase in costto-
income (C-I) ratio to 67%. ING has fully provided for: (a) the entire
Gratuity liability (of Rs 207.4 mn), (b) Additional liability of pension
for retired employees (of Rs 287.3 mn), and (c) 1/5th of Pension
costs for existing employees (of Rs 186 mn). Only Pension cost on
existing employees will be repeated going forward.
Asset Quality improved as gross NPAs and Net NPAs declined by 5%
QoQ and 33% QoQ to Rs 5.5 bn and Rs 0.9 bn respectively. Provision
coverage improved further to 83%.
Maintain BUY, with unchanged TP of Rs 434 (29% upside)
ING is expected to witness substantial improvement in C-I ratio as some
of the one-off items will not be repeated, which will help ING achieve
over 1% RoA in FY12E (vs. 0.9% in FY11). Higher-than-mandated PCR
will help in normalizing earnings in bad qtrs. With asset quality issues
behind & with opening of new branches, ING’s focus will be on growth
which will augur well for return ratios. We have revised our earnings
upwards by 7% to factor in improved operational performance. At CMP
of Rs 336, ING is trading at 11xFY12E EPS of Rs 30 & 1.3xFY12E ABV of
Rs 253. We retain our BUY rating with an unchanged TP at Rs 434.
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