Accumulate ING Vysya Bank - Target Price Rs. 600 - Dolat Capital

- ING Vysya Bank has been one of the best performing financial sector stock over the past year driven by the sustained improvement in asset quality, NIM and productivity. Cost/ income ratio which was amongst the highest in industry showed a downtrend over the past two years and also aided in improving the return ratios.

- We believe that the bank will continue to deliver best in class asset quality with one of the lowest delinquency ratio in the industry. The bank retains its focus to grow its business loan, working capital loans and mortgage loans where the stress is less, avoiding sectors and project finance loans where the stress could be high.

- The proportion of staff under IBA pact has now come down to 35% as against 55% earlier and should aid the bank in formulating more dynamic policies relating to staff retention and productivity. After a subdued pace of branch expansion during FY12 and FY13, the management is now targeting a more aggressive branch expansion. We are now building in a less aggressive downward trend in cost/ income ratio over the next two years.

- While overall we remain positive on the stock with target price of Rs. 600 based on PBR of 1.8x on our FY14E BVPS forecasts, higher than expected pressure on NIM and cost/ income are the key risk to our call.

Source : Equity Bulls

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