IDBI Bank's 2QFY11 PAT grew 69% YoY:: Motilal Oswal

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IDBI Bank's 2QFY11 PAT grew 69% YoY and 71% QoQ driven by higher NII growth of 152% YoY and 37% QoQ. IDBI's
core operating performance has been consistently improving. Asset quality during the quarter was strong with GNPA
declining 6.4% QoQ and 34% YoY. PCR including technical write-off stood at 75% Key highlights are:
 NII grew by 152% YoY and 37% QoQ as margins improved substantially by 122bp YoY and 63bp QoQ to 2.27%.
 Loans grew 24% YoY (but declined 4% QoQ); whereas deposits grew 18% YoY.
 Fee income (including forex) grew ~18% YoY to Rs4.4b. Total non-interest income declined 14% YoY due to lower
treasury gains. Trading profits declined from Rs1.7b in 2QFY10 to Rs200m.




 CASA ratio improved 230bp QoQ (up 50bp YoY) to 15.3%. Savings deposits grew 54% YoY and 6% QoQ.
 GNPA in absolute terms decreased 6.4% to Rs24.7b. Improvement in asset quality is a positive surprise considering
the industry trend of higher net additions to GNPAs. PCR (calculated) declined to 37.3% v/s 39.2% in 1QFY11.
Valuation and Veiw: Restructuring of the balance sheet and slower growth augurs well for IDBI Bank. The structural
transformation from DFI to a profitable bank has gained momentum in recent years. We expect the bank to report NII
CAGR of 54% and PAT CAGR of 36% over FY10-12. We expect RoA to improve to 0.7% by FY12 and RoE to 14-15%
despite the recent equity infusion by the government. The stock trades at 1.1x FY12E BV and 7.9x FY12E EPS.
Maintain Neutral.