ING Vysya Bank::TP: INR670 Buy :: Motilal oswal

ING VYSYA Bank's 3QFY13 PAT grew 36% YoY to INR1.6b (12% above est. of
INR1.45b). Strong margin performance (+16bp QoQ to 3.6%) and decline in NPAs
(GNPA at 1.8% and NNPA at 0.05%) led to highest ever quarterly RoA of ~1.3%.
Key highlights:
 NII came in at INR4b (+9% QoQ and 25% YoY), 7% above estimate led by 16bp
QoQ (3.61%) improvement in NIM - a positive surprise. While yield on loans
declined 10bp QoQ cost of deposits declined 21bp QoQ to 7.1% and led to
margin expansion.
 Non-interest income was 8% below estimate at INR1.9b. This was led by
muted fee income (ex-forex) performance (declined 6% YoY).
 Slippages for 3QFY13 were contained (annualized slippage ratio of 0.25%)
and GNPA in absolute terms declined marginally QoQ. NNPA is now at just
0.05% as bank increased its PCR to 97% v/s 93% in 2QFY13.
 Other highlight: (1) Reported loan growth stood at 5% QoQ and 20% YoY,
(2) SA deposit declined 1.6% QoQ and was up just 4% YoY and (3) Core CASA
ratio declined ~110bp QoQ to 31.7%.
Valuation and view: Continuous positive surprise on asset quality and margin is
leading to earnings upgrade. In 9MFY13 while PPP estimates have remained
largely unchanged, lower credit cost has led to earnings upgrade of 16% for FY13
and 9% for FY14. VYSB's RoAs improved from -0.3% in FY05 to 0.9% in FY11 and
expected to improve further to 1.2% in FY13. Continued higher than industry
growth, impeccable asset quality performance, demonstration of operating
leverage and improvement in fee income will drive valuations. Maintain Buy.

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