Buy ING Vysya says Motilal Oswal

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ING Vysya Bank (IVB, earlier known as Vysya Bank) is one of India's oldest private sector
banks with operating history of 80 years. As of September 2010, it had branch network of
488 and customer base of 2 million.

Key Investment Arguments:
ING Vysya Bank's PAT grew 9% QoQ and 41% YoY in 2QFY11 to Rs753m, led by NII growth
of 33% YoY and improving core fee income. Key positives are:
1. Improvement in loan growth to 7% QoQ and 24% YoY,
2. 15% QoQ increase in fee income,
3. Core CASA growth of 23% YoY and savings account growth of 36% YoY,
4. GNPA decline of 4% QoQ in absolute terms, and
5. Improvement in coverage ratio to 73% from 59% a quarter ago.



Key highlights of result are:
Loan growth picked up 24% YoY (on a lower base) and 7% QoQ to Rs202b, whereas
deposits grew 16% YoY and 8% QoQ to Rs261b.
GNPA ratio improved QoQ to 2.81% (down 44bp QoQ). PCR improved to 73% in 2QFY11
v/s 59% in 1QFY11. The bank has received an extension from RBI to meet 70% PCR by
March 2011.
Reported NIM improved 6bp QoQ and 25bp YoY to 3.34%. Sequential rise in cost of funds
was offset by higher yield on loans, leading to higher margins. CD ratio remains elevated at
~77%.
Valuation and view:
ING Vysya Bank is a play on increasing return ratios, backed by improvement in core
operating performance and improving balance sheet profile. The stock trades at 11x FY12E
EPS of Rs35 and 1.6x FY12E BV of Rs239. Strong growth coupled with improving return
ratios can potentially re-rate the stock. We reiterate Buy with a target price of Rs475 (2x
FY12E BV)