ING Vysya Bank - 4QFY12 Results Update - Motilal Oswal

ING VYSYA Bank's 4QFY12 PAT grew 40% YoY to ~INR1.3b (8% above our estimate). Core-operating income came under pressure due to 20bp QoQ drop in margin and moderation in fee-based income growth (up just 8% YoY). However, strong control over opex (10% below est) led to in-line operating profits.

Key highlights:

- Positives: (1) Asset quality improved further with PCR at 90%+, one of the best in the industry; GNPA increased 5% QoQ in absolute terms, (2) Loan grew 9% QoQ and 22% YoY to INR127b, and (c) strong control over opex (5% QoQ and flat YoY).

- Disappointments: (1) NIM down 20bp QoQ to 3.3% led by 30bp+ increase in cost of deposits, and (2) moderate growth in fee-based income (ex-forex) of just 8% YoY (flat QoQ) to INR1.3b.

- Other highlights: (1) CASA deposits grew 15% YoY and 17% QoQ led by strong growth in current deposits (up 25% QoQ and YoY basis). CASA ratio stood at 34.2% (+160bp QoQ). However, adjusted for one-off, CASA ratio stood at 33.4%. (2) The effective rate of tax in 4QFY12 was lower at 22% (estimate: 32.4%). Adjusted for one off (INR145m), tax rate would have been higher at 31%.

Valuation and view: VYSB's RoA improved from -0.3% in FY05 to 0.9% in FY11 and further to 1.1% in FY12. For further improvement in RoA, fall in opex-to-average assets is imperative as there is limited scope for positive surprises in margins and credit costs. We expect VYSB to report ~15% earnings and 1%+ RoA CAGR over FY13-14. However, RoEs are expected to be at around 13-14% due to lower leverage. Continued higher-than-industry growth, better operating leverage and growth in fee-based income would be key re-rating triggers. Buy.

Source : Equity Bulls

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