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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf
Banking and Financial Institutions
ƒ Credit growth declines as anticipated, NIM under pressure…
Credit growth momentum dipped to 16% as anticipated and in line with
RBI’s target. Deposit growth was lacklustre at 13.9% YoY as on March 9
while borrowings have climbed as high as 3% of NDTL i.e. | 1,80,000
crore. Also, tight liquidity raised the cost of funds. CD rates have jumped
to 11%+ levels. Consequently, RBI has reduced CRR by 125 bps to
4.75% releasing | 80,000 crore, benefiting NIM. However, lending rate
cuts prior to monetary easing & slower re-pricing of deposits are signals
of banks losing pricing power, thereby keeping NIM under pressure.
ƒ Restructuring momentum persists, incremental GNPA to slow down
Industry GNPA is estimated to have surged 40% to ~| 1.3 trillion till Dec
2012, while restructured assets are expected to jump 50% YoY to ~| 1.5
trillion by FY12E. The pace of NPA addition may ease as higher
recoveries and restructuring may offset fresh slippages. Banks with
exposure to stressed sectors like aviation, agriculture, textile, power and
steel may have to make higher provisioning, thus impacting profitability.
There is a clear demarcation in performance of PSU & private banks.
Considering SBI’s poor performance in Q4FY11, the real picture is
distorted if we include it. Excluding it, NII growth is expected at 10.3%
YoY for PSU banks & 21.1% YoY for private banks. Also, high provisions
to dent profitability of PSU banks with 3.2% YoY PAT de-growth
(excluding SBI) with private banks reporting 24.7% growth.
: Company specific view (Banks)
Banks Remarks
Bank of Baroda Expect NII growth of 11% YoY supported by 21% YoY growth in credit with margins
maintained around 3.1%. PAT growth in Q4FY12E is expected to be slower at 2.3%
YoY owing to sequential provisions still expected to be higher at | 464 crore in Q4 and
higher base of O4FY11
Bank of India NII is expected to remain flat YoY mainly due to slower credit growth of 17% YoY and
~40 bps YoY decline in margins. However, profit may grow at a strong rate of 39%
YoY mainly due to 34% YoY decline in operating expenses. High restructuring on
account of exposure to aviation, infra, iron and steel remains a concern
Dena Bank Exposure to Rajasthan SEB (| 1100 crore) and Air India (| 250 crore) may get
restructured, wherein the NPV hit Dena takes is a concern. Credit growth of 18% YoY
and NIM of 3%+ is expected. Recovery of | 55 crore may support QoQ growth in non
interest income. Profitability is expected to be maintained at 22.2% YoY growth to |
191.8 crore in Q4FY12E
IDBI Bank Asset quality of IDBI has sharply deteriorated with with GNPA surging 66.6% on YTD
basis. We expect this pressure to remain and hence factored 53.8% YoY jump in
provisions to | 433.5 crore. NII is expected to remain sequentially flat with PAT to degrow by 12.2% YoY to | 453.1 crore.
Indian Overseas
Bank
Expect slower credit growth of ~20% YoY (compared to above 30% YoY growth in
Q3) through higher than industry growth. Incremental disbursements were supported
by healthy overseas credit growth. However, expect PAT to decline 64% YoY in
Q4FY12 due to asset quality pressure and higher base of Q4FY11
Oriental Bank of
Commerce
The bank is expected to maintain healthy credit growth at 19% YoY to | 114157.6
crore. NIM is expected around 2.8%. However, high provisions may dampen
profitability. Restructuring of ~| 3000 crore is expected, including | 1530 crore
exposure to Air India. NPV hit on Air India exposure remains the key. We estimate
PAT to de-grow by 4% YoY to | 320.3 crore
Punjab National
Bank
Credit growth of 18% is expected with NIM being flat sequentially. The bank may
witness some gains in equity book after current rally. Exposure to Rajasthan SEB
worth | 1500 crore to get restructured. However, Air India exposure of | 2000 crore
may cause provisions to remain at elevated levels
State Bank of
India
Q4FY12 is expected to be a stronger quarter than Q3FY12 and way ahead of Q4FY11
when profits were meagre | 21 crore. NII growth is expected to remain strong at 41%
YoY while margins were maintained at ~4%. Incremental slippages will be lower.
However, restructured assets will surge
Syndicate Bank We expect profit to witness healthy YoY growth of 24% (though slower than ~30%
growth in the last three quarters) mainly due to 29% YoY rise expected in NII as NIM
is expected to increase ~40 bps YoY in Q4FY12 to 3.5%. We expect provisions to
decline sequentially though a rise in restructured assets remains a concern
Union Bank of
India
We expect credit growth to be slightly above industry growth at 16.6% YoY. Asset
quality pressure is expected to subside with GNPA expected to be ~3% from 3.3% in
Q3FY12. PAT may decline by 32% YoY on account of slower NII growth of 5% YoY as
NIM is expected to decline ~10 bps sequentially to 3.2%
Axis Bank NII expected to grow at 25% YoY driven by 23% YoY rise in advances and stable
margins YoY. PAT may grow at a healthy rate of 22% YoY with provisions expected to
decline ~20% sequentially
City Union Bank NII is expected to surge to new highs at | 138 crore in Q4FY12E, with 15.9% YoY and
12.4% QoQ growth. Textile exposure of ~11% remains a concern. CUB is expected to
continue delivering strong return ratios at 1.5% RoA and 24% RoE
DCB Business growth is expected to remain subdued at 13.6% YoY to | 11229 crore. Asset
quality is consistently improving with GNPA not rising beyond | 260 crore. Besides,
higher retail exposure will keep NPA provisioning under check. DCB will continue to
avail zero tax benefit, which will support 39.9% YoY PAT growth
HDFC Bank We expect NII to grow at a healthy rate of 16% YoY in Q4FY12 on the back of credit
growth of 22% YoY to | 1943 billion and stable sequential NIM of ~4.1%. PAT may
grow slower than 30% YoY to |1429 crore (rising 28% YoY)
Source: Company, ICICIdirect.com Research
: Company specific view contd. (Banks)
Federal Bank We expect credit growth to be in line with the industry at 16% YoY. Exposure to
Rajasthan SEB (| 480 crore) and Air India (| 300 crore) may get restructured. KFA
has been taken to NPA in Q4FY12. NIM is expected to decline ~10bps to 3.8%. we
expect healthy PAT growth of 18.0% for Q4FY12
Kotak Bank We expect standalone credit growth to remain strong at 37% YoY. NIM may dip
marginally due to higher savings rate and cost of funds but NII growth is still robust at
20% YoY. Banking will continue its stable performance. Other subsidiaries may remain
subdued except insurance in Q4
South Indian
Bank
We expect an overall steady performance with 31.9% YoY PAT growth to | 107.8
crore. Healthy pace of credit growth will continue at 28.9% YoY to | 26801 crore. It
has adequate capital with Tier I ratio of 9.6% without including 9MFY12 profit
Yes Bank We expect healthy 30% YoY growth in PAT to | 265 crore on the back of 14% YoY
decline in provisions and margins maintained at 2.8%. Credit growth will be below
historic average at 15% as the bank increases its investment position. The bank's
pristine asset quality is expected to continue
Source: Company, ICICIdirect.com Research
Exhibit 12: Company specific view (NBFCs)
NBFC
IDFC Post strong credit growth in Q3, IDFC is on track to achieve over 21% growth for
FY12. Spreads will remain stable around 2.3% to 2.4%. NPA additions remain under
control leading to provisions at | 100 crore and PAT of | 380 crore
LIC Housing
Finance
Expect NII to decline by 5% YoY on account of ~100 bps YoY fall in margins to 2.4%
in Q4. Asset quality is expected to remain stable QoQ. PAT is estimated to decline
6.7% YoY and 4% QoQ to | 294 crore
Reliance Capital Profits will be higher as onetime gain of ~ | 500 crore from the life insurance stake
sale will get reflected in Q4FY12. GI will continue losses close to | 170 crore in FY12
impacting overall profitability. AMC and consumer finance will report a stable
performance. We expect profits to sequentially jump 7x to | 445 crore
HDFC Ltd We expect credit growth to remain healthy at 19% YoY. NIM may dip by ~15 bps
leading to NII growth of 14% YoY. Asset quality is expected to remain stable
sequentially. We expect PAT to remain flat YoY to | 1153 crore
Source: Company, ICICIdirect.com Research
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