ING Vysya Bank - 2QFY13 Results Update - Motilal Oswal

ING VYSYA Bank's (VYSB) 2QFY13 PAT grew 30% YoY and 15% QoQ to INR1.5b (14% above est of INR1.3b). Strong margin performance (+16bp QoQ to 3.45%) and decline in NPAs led to the highest-ever quarterly RoA of ~1.3%. Key highlights:

- Reported loan growth stood at 3% QoQ and 21% YoY. During the quarter, a large telecom account (AAA rated globally) of INR11b got repaid, adjusted for which loan growth would have been 25% YoY.

- Core CASA ratio improved ~80bp QoQ to 32.8%. SA deposit growth was moderate at 6% YoY (+3% QoQ).

- Non-interest income was 9% below estimate at INR1.7b. Muted fee income growth (+5% YoY and flat QoQ) and reversal of income of INR219m on derivatives contract (client-based), which was adjusted against the non-interest income, led to lower-than-expected performance.

- Slippages for 2QFY13 were contained at INR350m (annualized slippage ratio of 0.6%). GNPAs in absolute terms declined marginally QoQ and credit cost stood at just 16bp.

Valuation and view: We upgrade the earnings estimates by 6%+ for FY13/14 to factor the healthy asset quality trends. Bank's earnings remain high leveraged to asset quality as credit cost is at the bottom, margins are near to peak and operating leverage would be gradual. Continued higher-than-industry growth, impeccable asset quality performance, demonstration of operating leverage and improvement in fee income shall be key re-rating triggers.

Source : Equity Bulls

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