ING Vysya Bank - A strong quarter; Improvement priced in - Sunidhi

ING Vysya Bank reported a PAT of Rs.1502.1 mn, up 30% yoy and 15% qoq. Results stood above estimates of Rs.1360 mn due to lower than expected provisioning.

NIM improves sequentially

Net Interest Income came in at Rs.3.7 bn witnessing a healthy growth of 22% yoy and 7.4% qoq due to strong loan book growth (21% yoy) and margin improvement qoq. The Bank reported a NIM of 3.5% for Q2FY13, which was a sequential NIM improvement of 16 bps on account of the 22 bps improvement in the yield on investments coupled with a 7 bps qoq improvement in the cost of funds.

Strong loan book growth led by agri & rural banking

Advances grew by 19% yoy and 3% qoq led by Agri and rural banking business which grew at 24% yoy even though one large account repayment during the quarter of Rs.11bn. The banks consumer banking business has been showing muted growth, however it is likely to pick up going ahead on the back of traction in mortgages and personal loans.

CASA deteriorates sequentially

The bank reported a deposit growth of 18% yoy and 1% qoq. CASA deposits came off by 0.7% qoq which led to a sequential deterioration in the CASA ratio to 32.8% from 33.3% in Q1FY13.

Non-interest income impacted by one offs

Non-interest income grew by a muted 4% yoy as it was impacted by a one off expense of Rs.219 mn on account of mark to market receivable from a client in a derivative contract. Adjusting for this one off expense non-interest income growth would have been strong at 17.4% yoy.

Slippages come off sequentially

The asset quality of the bank was largely stable sequentially with % GNPAs at 1.9% and %NNPAs at 0.1%. Slippages stood at ~ Rs.350 mn or a slippage rate of 0.5%. Provisions came off by 76% qoq. Despite the decline in provisions the provision coverage ratio improved sequentially to 93%.

No additions to restructured book

The banks restructured book stood at ~1.4% of advances which was largely in line with that of the previous quarter. There were no new accounts restructured during the quarter.

Maintain Hold with a revised price target of Rs.460

We have revised our estimates upwards to factor in the banks higher than expected H1FY13 performance. At the CMP of Rs.447, the bank trades at 1.6x its FY13E ABV and 1.4x its FY14E ABV. We maintain our Hold rating on the stock while revising our target price upwards to Rs.460 (1.4x its FY14E ABV from 1.3x earlier).

Source : Equity Bulls

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