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January, 2013
Indian Banking
Industry: Rising Above
the Waves
I. Executive Summary
II. Industry Overview
– Financial Sector in India
– Structure of the Financial Sector in India
– The Organized Sector
– Important Milestones of the Industry
– Who Regulates the Financial Sector?
III. The Indian Banking Industry
– The Rising Sun of the Indian Growth Story
– Current Players in the Banking Industry
– Structure of the Industry
– Financial Products of Banks
– What Michael Porter has to say
– PEST Analysis
– Growth Drivers
– Opportunities
– Innovation
1
Index
– Mobile Banking : A Technological Revolution
– Key Challenges
– The Banking Outlook: 2013 & 2014
– How and where will Foreign Investors make money?
IV. Performance of Indian Banks
– Banking Industry : A Positive Surprise
– The Industry in 2012 : Rising Profitability
– Snapshot of Credit Deployment by the Banks
– Soar Spot in the Banking Industry
– Loan Restructuring : Survival or Edge
– Global Rankings
– Global vs. Indian Banking Industry
– Key Trends
– Industry Snapshot
– Valuation Snapshot of Major Listed Players
– Bankex vs. Sensex
2
Index
3
Index
V. Regulatory Framework
– Macro Economic Factors that Drive Banks
– Monetary Policy Transmission Mechanism
– How Banks are Regulated in the System
– Current Policy Rates
– Major Banking Regulations & their Effects
– Changing Industry Dynamics
– New Banking Amendment Bill
– Regulatory Newsflash
VI. Deals in the Industry
– M&A Deals
– Private Equity Deals
VII. Special Section on Foreign Banks in India
– Efficient Players of the Race
– Overview of Operations in India
– Top Foreign Banks vs. Indian Banks
– Growing Fortunes of Major Foreign Banks
– Foreign Banks : Fresh off the Boat
– Still a Long Road Ahead
4
Index
VIII. Listed Private Banks in India
– Common Stock Comparison
– Listed Players
IX. Listed Public Banks in India
– Common Stock Comparison
– Listed Players
5
Executive Summary (1/2)
The financial system of a country plays an important role in promoting economic growth
not only by channeling savings into investments but also by improving efficiency of
resources
A financial system is a composition of various institutions, markets, regulations, laws
practices, money managers, analysts, transactions and claims & liabilities
The banking industry plays a major role in representing the financial system in India. It
works as an intermediary between individuals, the government, financial institutions and
other stakeholders who directly or indirectly get affected by the industry
During 2011-12, the Indian banking industry faced major concerns in regards to
deteriorating asset quality, with gross non-performing assets (NPAs) of banks registering
a sharp increase in different sectors such as aviation, infrastructure and power
However, in 2012-13 banks have started focusing on lending to more profitable segments such
as retail and small and medium (SMEs), improving risk management policies and effective
monitoring
In the near the future, the Indian banking industry is expected to see consolidation in the
wake of future economic growth, changes in banking regulations and increase in
competition from foreign banks
Technological innovation and especially mobile banking have paved the way for dramatic
growth in the industry in the coming years
6
Executive Summary (2/2)
The growth story of banking during the last decade has been spectacular and beyond the
consistent double digit growth. The key trends were strong regulatory framework, use of
multiple channels and technology, strong customer oriented banking services and a
growing economy
Although the past couple of years have witnessed a slowdown in the face of high domestic
inflation, depreciation of the rupee and the after-math of the crisis in US and Europe, the sector
still performs better in India vs. in many other developing countries in terms of
growth, profitability, capital adequacy and asset quality etc.
2013 promises to be a good year for India. Although a series of challenges like the overall
slow down in the economy impacting credit growth, deteriorating asset quality and rising
NPAs, accompanying financial inclusion and Basel III implementation are all lingering
issues, the sector is well cushioned with factors like a positive demographic
dividend, increasing investment in infrastructure, innovation in technology and most
importantly constructive regulatory policies
`
7
Financial SectorOverview
INDIAN FINANCIAL SECTOR
Despite increasing risks
both in domestic and
global macroeconomic
conditions, the financial
system of India remains
robust. However, the
concern over evolving
global risks and domestic
factors still looms large
““
- RBI
8
Industry Overview
Section II: Financial Sector in India
9
The Financial Sector in India (1/2)
The Financial sector in India acts as the nervous system for the nation’s economy and
for its economic development
It consists of many sub-systems like financial services, banks, financial institutions etc.
The sound performance of the sector at the time of the global financial meltdown, which
isolated the country from the global chaos, has won praise for the Indian financial sector
amongst policy makers and central banks all over the world
As of 2011, the Indian economy ranked 10th in the world at $1.8 trillion of GDP, and its
ranking and size are expected to increase to 8th and $2.3 trillion, respectively, by 2014
according to the latest IMF World Economic Outlook report, given its strong growth profile
and demographic divide
The financial services sector, whose performance is more closely linked to the economy, has
stood as an „Engine of Growth‟ in the last few decades. It was one of the fastest growing
sectors and contributed 7% to India‟s GDP in 2010 up from 5% in 20001
The financial system in India today is enabling not only physical capital formation but
also consumption expenditure. Similarly, it now handles financial flows not only between
individual savers/investors but also between institutional savers/investors
1 Source: Mckinsey & Co., Leveraging the financial services sector as a growth engine for transformation, April 2012
“ A Financial System is, as it were, the stomach of the country, from which all the
other organs take their tone” – The former British Prime Minister William Gladstone
10
The Financial Sector in India (2/2)
The Indian Financial Sector traditionally was largely divided into three main segments :
1. Organized sector: Consisting of banks, insurance companies, stock markets, financial
institutions, NBFC‟s etc
2. Unorganized sector: The players in this sector include village grocery shops, indigenous
bankers, chit fund, money lenders, landlords, traders etc
3. Semi organized sector: Includes microfinance institutions that have been emerging in
India for the last decade and a half or so, mainly consisting of Self-Help Groups (SHGs)
and alike sub –systems
The Indian system that ranks slightly below the median in World Economic Forum
rankings has virtually re-booted since the still ongoing liberalization schemes started
in 1991
The sector makes money available to various by parts of the economy such as
agriculture, industry, infrastructure, services sector,etc. and helps them to grow. It also
helps in transformation of the economy from an agrarian society to a
service/manufacturing driven society
The four pillars of a financial system – laws, technology, creditors’ rights and corporate
governance have all undergone and are still undergoing major transformations in
India. Financial access and inclusion remain key challenges despite serious efforts and
experimentation
11
Structure of The Financial Sector in India
Financial Sector
Financial services Banking Sector
Scheduled Commercial
Banks (SCBs)
Regional Rural Banks
Scheduled Co-operative Banks
• NBFCs (Non Banking financial Companies)
• Capital Markets
• Forex Markets
• Asset Management
• Insurance
• MFIs (Micro finance
Institutions)
Broadly, the financial sector in India can be broken into the following main divisions :
Private Banks
Public Banks
Foreign Banks
The sector has important effects not only on the domestic economy but also on the global
economy, thus it usually is the most heavily regulated sector by government
12
The Organized Financial Sector in India
Source: RBI
Out of the total credit portfolio of Rs. 49 Lakh crores as on 31st March,2011, Banks accounted for
nearly ~85 % of the total credit , NBFCs accounts for around ~15%.
NBFCs-retail, 5%
NBFCs-Infrastructure, 6%
Housing Finance corporations, 4%
Public Banks, 65%
Private Banks, 16%
Foreign Banks, 4%
Scheduled commercial Banks, 85%
The Composition of various institutions in the Organized Industry is:-
13
Important Milestones of the Banking Industry
• Enactment of the RBI Act, 1935
• High levels of deprivation in economy
Government adopted the system of planned
economic development
Complex Interest rates
Establishment of Banking Regulation Act, 1949
14 banks in 1969 and 6 banks in 1980
were nationalized termed as „First
Banking Revolution‟
Rapid branch expansion
Retail lending to risk prone areas at
concessional interest rates
Prior to 1950 / Evolutionary Phase
Foundation Phase / 1948-1968
1968-1984/Expansion Phase
Lack of professionalism and transparency in the
functioning of public sector
Series of policy initiatives taken with the
objectives of consolidation of banks
1985-1990/ Consolidation
1991 Onwards/Reformatory phase
The Economic liberalization of 1990 was
initiated to ensure an efficient, competitive
and mature financial market
RBI gave licenses to new private sector
banks as a part of its liberalization process
Various guidelines (e.g. Basel
rules, FEMA, FERA,LAF) were introduced
Banking Laws( Amendment) Bill, 2011
passed
The Indian Financial system has
expanded and acquired greater
depth after the reforms initiated in
early 1990s
1
2
4
3
5
14
Who regulates the Financial Sector in India?
Securities and
Exchange Board
of India
(SEBI)
• Controls and
assists the
financial sector
of India
• Every year the
finance minister
announces the
budget
• Also acts as a
policy maker and
regulates the financial sector
• Regulator of the
securities market
in India
• Protects the
interest of
investors in
securities
• Also regulates
the development
of the securities
market
Reserve Bank
of India
(RBI)
• Apex financial
institution of
India,
established in
April 1935
• Advises the
central board on
various matters
• Also acts as an
investment
banker to the
government
Ministry of
Finance
(MoF)
Insurance
Regulatory and
Development
Authority (IRDA)
• An Agency of
the
GoI1, based in
Hyderabad
• It works on the
guidelines of
the IRDA2
Act, 1999
• Safeguards
the interest of
the common
man
1GOI: Government of India2IRDA: Insurance regulatory and development authority
15
Industry Overview
Section III: The Indian Banking Industry-Performance of Indian Banks
-Regulatory Framework
16
The Rising Sun of the Indian Growth Story
The Indian banking industry has its foundations in the 18th century, and has had a bumpy
evolutionary growth path since then. The industry in recent times has recognized the
importance of private and foreign players in a competitive scenario and has moved
towards greater liberalization
Indian banks have mobilized around 80% of funding from deposits, thus their ability to win
market share profitably is key to stock returns
In today‟s scenario, Current and saving accounts (CASA) are the bank‟s lifeline for
profitable growth, but during FY2012 high interest rate choked them of such
deposits, slowing expansion to a five-year low of 7% 2
Credit growth of the Scheduled Commercial Banks (SCBs) slowed down to 18.10%1 on
FY2012, which was 22.90%1 in FY2011 on account of the slowdown of the general economy.
It is expected that the credit growth in FY2013 will be in the range of 16-18%2 as there is
increasing demand for working capital loans and refinancing of forex loans by Indian
corporates
The growth of total deposits of the (SCBs) stood at 14.92%1 on FY2012, Vs 18.31%1 in
FY2011. The deposit growth is expected to moderate to 14-17%2 over FY 2013-15 with
stable Net Interest Margins (NIM). NIM of SCBs in FY2012 was 2.90%1 on average
In the present competitive scenario, Private banks are targeting the faster growing retail
loans and also improving the growth rate in fee income by increasing transaction
fees, where as Public Sector Banks are targeting to push for higher recoveries and
upgrades in Non Performing Loans (NPL) and also improving their deposits mix by
reducing the share of bulk deposits
Source: 1 Report on Trend and Progress of Banking in India 2011-122CLSA Research
17
Current Players in the Banking Industry
Indian banks consist mostly of Scheduled commercial bank (SCBs), which includes both
Public Sector Banks, and the Private Sector Banks. In Public Sector Banks, the
government must retain a 51% stake
Old Private sector banks are those banks which were not nationalized at the time of bank
nationalization that took place during 1969 and 1980. Most of the old private-sector banks
are closely held by certain communities and their operations are mostly restricted to the
areas in and around their place of origin. e.g Federal Bank, Dhanalaxmi Bank, ING Vysya
Bank
New private sector banks include those that were established in the past twenty years
such as Yes Bank, Axis bank and existing institutions that were converted into commercial
banks, such as the former development institution ICICI and specialized lenders such as
HDFC
Cooperative banks are small-sized units registered under the Co-operative Societies
Act., that essentially lend to small borrowers and businesses. Eg. Punjab & Maharashtra
Co-op. Bank Ltd., New India Co-op. Bank Ltd
Regional Rural Banks are mainly focused on the agro sector. These banks are in every
corner of the country and extend a helping hand in the growth of the country. Eg. National
Bank for Agriculture and Rural Development (NABARD), Haryana State Cooperative
Apex Bank Limited
Also, under the recently passed The Banking Laws (Amendment) Bill 2011, the
government is likely to give the new banking licenses in the next year or so
18
Structure of the Indian Banking Industry
New Private Sector
Banks(7)
The Structure of Indian Banking IndustryReserve Bank
of India
Rural Cooperative Credit Institution (31)
Public Sector Banks (26)
Regional Rural banks (82)
Foreign Banks (40)
Private Sector Banks (20)
Urban Cooperative Banks (51)
BanksFinancial
Institutions
Scheduled Commercial
Banks (SCBs)(168)
Cooperative Banks(82)
All India Financial
Institutions
State LevelInstitutions
Other Institutions
Old Private Sector
Banks(13) Note: The figures in brackets represent number of respective banks as on 31st March 2012
Source: RBI
19
Financial Products of Banks (1/4)
Retail Banking
Wholesale Banking
Treasury Banking
Loan Products• Auto Loan
• Gold Loan
• House Loan
• Credit cards
• Education Loan
• Loan against Securities
• Retail Banking
Business
Deposit Products• Deposits
• Saving Accounts
• Current Accounts
• Fixed / Recurring
• Corporate Salary A/C
Commercial Banking• Term Loan
• Guarantees
• Bill Collection
• Letter of Credit
• Working Capital
• Forex & Derivatives
• Wholesale Deposits
Transaction Banking• Cash Management
• Custodian Services
• Clearing Bank Services
• Tax Collections
• Banker to Public Issues
Commodities(Inc
Hedging)
Other Products /
Services• NRI services
• POS Terminals
• Private Banking
• Demat Services
• Mutual Fund Sales
• Foreign Exchange
Services
Key Segment• Large Corporates
• Emerging Corporates
• Financial Institutions
• Government/PSUs
• Agriculture
Commodities
Product Segment• Equities
• Derivatives
• Capital Market
• Debt Securities
• Foreign Exchange
Other Financing• Cash Management
• Statutory Reserve
• Financial Decisions
• Asset Liability Management
1
2
3
20
Retail banking is a buzzword in India that focuses
strictly on the consumer market
Most bank have retail portfolios as part of their
total lending portfolio (18.4%1 on average). This
sector has been growing at a high rate of 30 to
35%2 per annum
As per a survey conducted by CLSA, Consumer
credit penetration is only 8% of the GDP in
India, which is expected to rise further quickly
The growth is mainly led by growth in credit card
receivables and other personal loans
Housing loans continued to constitute almost half of
the total retail Portfolio of banks
Source: 1Report on Trend and Progress of Banking in India 2011-12 2 International referred Research Journal, January 2012
Retail Credit/GDP ratio, 2011
Housing Loans, 47.89%
Consumer Durables, 0.31%
Credit Card, 2.59%
Auto Laons, 13.51%
Other Personal Loans, 35.69%
Retail Lending has been a key
profit driver and spectacular
innovation in the banking
sector
Source: CLSA
Retail Portfolio of Banks (Rs 589,900 Crore) 20121
Financial Products of Banks (2/4)Retail Banking 1
21
Wholesale banking provides services to large corporate
bodies, mid-sized companies, international trade, other
banks and financial Institutions
This service contributes 30%1 to India's total banking
revenues, with ROE in the range of 15% to 30%2
From $16 billion in FY 2010, wholesale banking
revenues are expected to rise to a whopping $35 billion
to $40 billion by FY 20152
Besides large corporates, a growing number of
SMEs, which contributed more that 40% of exports &
17% of GDP in 2011, offer huge opportunity for banks3
Investments in infrastructure totaling $240 billion
between 2007 and 2010 have already been made under
India‟s 11th Five-Year Plan. To sustain India‟s economic
growth, the Planning Commission therefore envisages
that $1 trillion (about 10% of GDP) will be spent on
infrastructure during the 12th plan from 2012 to 20172
Infrastructure development, simplified FDI and
globalization in Indian Companies are key drivers of
wholesale banking
Source: Mckinsey & CompanySource: 1 BANCON , 20112Mckinsey Research3Empowering SMEs for global Competitiveness
Financial Products of Banks (3/4)Wholesale Banking
2
5.2 6.4 7.2 7.5 8.4 9.0 9.0 9.9 10.3 10.7Spending as
% of GDP
+15%
Infrastructure Spending
6780 89
102117
138158
180204
231
0
50
100
150
200
250
8 9 10 11 12 13 14 15 16 17($
Bill
ion
)
22
The core function of a treasury is the
measuring, monitoring, and controlling of
interest rate risk (IRR). Typically the department
would employ a variety of standard and
proprietary models to measure this risk
Traditionally, the treasury function in banks was
limited to funds management i.e., maintaining
adequate cash balances to meet the day-to-day
requirements and deploying surplus funds from
operations
The scope of treasury has now expanded
beyond liquidity management and it has now
evolved as a profit centre with its own trading
and investment activity
Treasury activity in a bank depends on its
size, complexity of operations, and risk
profile
Functions
Reserve management and
Investment
Liquidity and Funds management
Assets Liability Management and
term money
Risk Management
Transfer pricing
Derivative products
Arbitrage
Capital Adequacy
Chanalizing and managing other
asset instruments into investment
instruments
Monitoring rating migrations
Minimizing the requirements of
provisioning due to non-performing
investments
Financial Products of Banks (4/4)Treasury Management
3
23
What Michael Porter has to say about Banks
Licensing
Requirements
are very
tough
Product
differentiation
very difficult
NBFCs, Mutu
al
funds, Govern
ment
Securities and
t-bills
increasing
rapidly
Large no. of
banks
Low switching
costs
High fixed
costs
High exit
barriers
Banks have to
meet many
regulatory
criteria, made
by the RBI
(fairly
complex in
India)
Provides
homogenous
kinds of
services, so
there is high
chance that
customers
switch their
banks
Thre
at o
f n
ew e
ntr
ants
Thre
at o
f n
ew s
ub
stit
ute
s
Co
mp
etit
ive
Riv
alry
Bar
gain
ing
Po
we
r o
f Su
pp
liers
Bar
gain
ing
Po
we
r o
f C
ust
om
ers
High Medium Low
Entry Barriers in the Industry
Indian Banking Industry : Not Attractive, unless differentiated
24
PEST Analysis on the Banking Industry Factors Affecting the Industry
Political Factors
- Monetary Policy
- Regulatory Framework
- Budget & Budget Measures
- Changes in interest rates
Economic Factors
- More savings
- More Capital Formation
- Increase in production of
goods and Services
- Banking Channels
Social Factors
- Increase in population
- Changes in lifestyle
- Easy way of lending money
- Exploring banking facilities in
rural areas
Technological Factors
- Internet Banking
- IT Services & Mobile Banking
- Credit Cards
- Improvement in efficiency
P E
S T
25
PEST Analysis on the Banking Industry Political Factors Affecting the Industry
The Indian banking Industry is mostly dependent on
the monetary policy decided by the RBI
Stricter regulations with respect to capital and
liquidity directly affects the business of banks
Banks need to adjust their interest rates
accordingly, which may or may not favor them
Banks are forced to lend as per the guidelines of
RBI, that includes credit growth in all sectors
Budgetary Measures announced by the
government at the beginning of every financial year
also lay down guidelines to banks to lend or
accept deposits
The government can also increase credit in
particular sectors such as increase in farm
credit, increase in infrastructure credit
etc.(priority lending)
Sometimes the government gives debt waivers to
certain sections of the society that need to be
adhered to by banks as well
Dr. Duvvuri Subbarao, RBI Governor
P. Chidambaram, Finance Minister of India
26
PEST Analysis on the Banking Industry Economic Factors Affecting the Industry
Economic factors in the country also effect the
Banking Industry both favorably or unfavorably
When the economy is in good shape in terms of
high per capita income, good agriculture
harvest and normal inflation, banks have an
edge as people are left with more money to
deposit them with banks
This helps in more capital formation as more
deposits can be realized
Also In the times of economic boom, more and
more FDI is brought into India through banking
channels, that actually improves business for
banks and the economy in general
Economic prosperity encourages lending
business for the banks but in times of recession
banks face tough times to recover their
money, issue fresh credit and NIMs are lower
too
27
PEST Analysis on the Banking Industry Social Factors Affecting the Industry
The Indian banking system has been progressing
rapidly. There are still several untapped rural
markets, despite the large number of banks in India
Many farmers still take loans from moneylenders at
a very high interest rate and small-scale industries
continue to remain important for banks
However changes could be expected in the near
future for the unorganized sector
The growing population of India is a great
opportunity for Indian banks as a lot of people
in the country want to open a bank account
and develop good savings habits
Changing lifestyle of the Indian urban
population who wants easy ways of financing
to their desires
28
PEST Analysis on the Banking Industry Technological Factors Affecting Industry
Indian banking has been consistently working
towards the development of technological
changes and its usage in its operations
With the application of new and improved
technologies banks are expected to reduce
costs, time and provide higher customer
satisfaction
Internet banking or banking via the phone can
be considered a remarkable development in the
banking industry
Mobile banking enables customers to check
their account balance, transfer funds 24x7, bill
payments, booking of bus/flight tickets, recharge
prepaid mobile and do a lot more effortlessly
and securely
Banking through cell phone benefits the banks
too. It cuts down on the cost of in-person
banking and helps reduce headcount at
branches
Technological developments facilitate the flow of
information and data faster leading to faster
appraisal and decision-making as well
29
• Growth in infrastructure, industry, services and agriculture is expected to grow corporate credit in the economy
• Nearly 35% of the Indian population has a median age of 25.5 years which signifies that India will gain from its demographic dividend
High Growth of the Indian Economy
& Favorable
Demographics
• Given that 40% of Indians lack access even to the simplest kind of formalfinancial services, the RBI on July 2011, mandated banks to allocate atleast 25% of the total number of branches proposed to be opened during ayear in unbanked rural centers
• Banks considering FI as a banking opportunity rather than a Regulatoryobligation are likely to see long term profitable growth and a cushionagainst market volatility
Financial Inclusion (FI)
• India not only enjoys a favourable demographic dividend but also has a strong population of High Net worth Individuals (HNWI)
• Given the improved performance of the equity markets in 2012 & increasing affluence beyond urban and metro areas the number of HNWIs is expected to rise further, HNWIS will continue to demand better or more sophisticated service
Private Banking & Wealth
Management
• New channels in banking services such as internet banking, mobile banking have increased productivity and help in acquiring new customers
• As per a survey conducted by PwC, today banks spend 15% of the total expenditure on technology today
Technology Innovation
Growth Drivers of the Banking Industry
30
Opportunities in Banking
Survival of
the fittest-
good for the
opportunist
and bad for
the
rest, choice is
yours
“
“
31
1 Mortgages to cross Rs 40 lakh crores by 2020
The total mortgages in the books of banks have grown from
1.5% to more than 10% of the total bank advances/loans in
the last period of 10 years. The total ratio of outstanding
mortgages, including the Housing Finance Companies to the
GDP is 10%1
As per BCG‟s research, if by 2020, this ratio were to reach
20%, a number similar to that of China, then the mortgage
industry can be expected to grow at an average rate of
over 20% during the next decade. The outstanding
mortgages are expected to cross Rs. 40 lakh crores by
2020
Opportunities in the Banking (1/3)
2 Wealth Management to be a big business
Going forward, wealth is expected to get further concentrated
in the hands of a few. The top band of income distribution is
expected to grow most rapidly over the next decade. By
2020, the top 5% house-holds, predominantly residing in
the metros and Tier I cities, will account for 30% of the total
disposable income. Wealth management services will be an
integral part of the product portfolio for both private as well
as public sector banks.
Source: 1Emkay Research, January, 20122BCG Research
Mortgage Penetration Rate
Source: BCG Research
10
17
20
29
32
39
81
88
104
0 50 100 150
India
Thailand
China
Malasiya
Singapore
Germany
USA
UK
Demark
Mortgage Loans / GDP (%)
32
3 Rapid growth of branches & ATMs
India has a very low penetration rate of branches and
ATMs as compared to some of the other developed and
developing nations
The number of ATMs has doubled in the last three
years, reaching 99,218 ATMs in June 2012. The industry
is expected to continue this growth and reach 200,0001
ATMs by 2016. As such, most of the new ATMs, 50-65 %
will be deployed in tier 2 and 3 cities, while tier 1 cities will
grow at around 20%
Opportunities in the Banking (2/3)
4 Mobile banking to see huge growth
The Internet is widely used by all banking segments around
the world to purchase financial services products
By 2015, it has been estimated that the mobile banking
transaction volume worldwide will reach US$500 billion. It
is estimated mobile banking transactions in India will
exceed 34 crores in 2015, resulting in cost savings of ~Rs
1,100 crore2
Mobile Commerce
Payment of Bills
Transfer, withdraw &
deposit
Purchase of call credits
Mobile Remittances
Key Mobile Banking Services
Source: 1 Celent,The Indian ATM Industry, October 20122 PwC estimates
33
5
Opportunities in the Banking (3/3)
6 New Models to serve the Small & Medium
Enterprises (SME)
As per a survey conducted by FICCI, large customers
are more satisfied as compared to the medium and
small sized ones. Due to higher risk and lower
ticket size, SMEs typically get less attention
Banks are yet to create innovative models to serve
SMEs with sufficient and timely credit at the right price
Banks need to be innovative to meet the
expectations of SME customers
Half of the debt finance for infrastructure today
comes from banks
In order to sustain India‟s economic growth, the
Planning Commission therefore envisages that $1
trillion (about 10% of GDP) will be spent on
infrastructure during the 12th plan from 2012 to
2017
Infrastructure financing to reach over
Rs. 20 trillion on Commercial banks
book by 2020
34
Banking Sector- Banking Beyond Banking
“There‟s only one
savior to the Tsunami
of competition-
InnOvATion”
35
Innovation in the Banking Industry
• These ATMs use the
finger print of the
card holder or eye
retina scan as a PIN
for verification
purpose
• Banks are more
focused to put these
ATMs in rural areas
because biometrics
makes it possible for
the low literacy
population to use
banks
• M-pesa is a
mobile-phone
based money
transfer and micro
financing service,
which allows users
with a national ID
to use their money
easily with a
mobile
• Vodafone is
expected to launch
M-pesa in India, in
association with
ICICI & HDFC
bank
• Plastic
money, cash
cards, credit/debit
cards and polymer
notes will boom as
the e-commerce
space boom in
India and people
get used to the
idea of carrying
less cash
• Many cards have
a micro chip
embedded in them
which makes it a
transit card also
• This technology
will have a deep
impact on the lives
of professionals
who believe in the
life-on-the-go
approach
• A user can have
access to his/her
bank accounts at a
nominal cost and
at a fast speed
from anywhere in
the world
36
Mobile Banking : A Technological Revolution
After the success of online banking, mobile banking is the next revolutionary step which
has attracted huge attention from all over the country
Mobile banking can perform all the banking functions such as money transfer, credit card
payment, bill payment, account updates and other transactions
The banking industry averages about 3 lakh transactions per day through mobile
banking and most big banks have seen 100% growth in mobile banking with more
services likely to be introduced in the near future
The leading banks in the space are ICICI Bank, HDFC and SBI. Some of the other key
players that will join the race in the future include Axis Bank, Syndicate Bank, Canara
Bank and Bank of Baroda
Many customer segments are clearly getting comfortable with using mobile banking. It
is particularly true of the Generation-Y group (18-32-year olds) who are three times
more likely to adopt mobile banking than older users
Overall the growth in mobile banking that has taken place in the country till date, though
at a rapid pace, is yet to reach the critical mass that will enable it to deliver on its
promise of taking banking, including payment services, at a cheaper, secure and
seamless manner to the existing and potential customers
“Banks providing local offers through their mobile banking apps can be a huge value
addition and in the next two years banks are expected to leverage on this trend” –
A Krishna Kumar, Managing Director, Group Executive – National Banking, SBI
37
Key Challenges
• Indian Banks will have to bring in an additional capital of Rs. 5 Lakhs Croreto meet the Basel III norms. The government on its part has to infuse Rs.90,000 crore into the state-run banks to maintain majority shareholdingunder Basel III
• Basel III norms will be implemented in a phased manner starting fromJanuary 2013 (now pushed to April) 2013, to be implemented to the fullestby March 2018
High competition due to a large number of players in the banking industry
and other players such as NBFCs (less regulation)
Such competition in the industry has decreased the market share of the
existing banks
Banks have to incur substantial employee costs as the attrition of the
employees in this sector is very high
Economic slow down and aggressive lending by the banks has turned loans
into non- performing assets
This has impacted the profitability of the banks as they are required to have
higher provisioning amounts
Introduction
of BaselIII
Norms
Intensifying
Competition
Increasing
NPA
Managing
Human
Resources
For commencing a banking business in India, a banking license from the RBI has
to be acquired which has served as a associated protocol and formalities
The last licenses issued were to Kotak Mahindra Bank and Yes Bank in 2003
and 2004 respectively (as Kotak Mahindra Bank was earlier a NBFC)
Licensing
Requirement
38
The Banking Outlook in 2013 & 2014
1 Market capital as on 31st December, 20122As per news articles and DCA research
NBFCs M Cap (Rs. in Crs.)1
PFC Rs. 26,901.74
IDFC 25,933.65
REC 24,182.87
Shriram Trans 17,139.53
L & T Finance 15,274.07
M & M Finance 12,558.90
Reliance Cap 11,785.46
Sundaram Finance 5,690.18
Likely Applicants of New Banking LicensesPaving the way for New Banks
With the Banking laws (Amendment) Bill
cleared on 20th December 2012 in Rajya
Sabha, it is likely that the RBI may issue 3-4
licenses within the next 12 months
NBFCs like PFC, L&T finance, Shriram group
as well as some corporate groups
(Reliance, Tata etc.) have applied for the
banking licenses
New Entrants in the space may result in price
based competition on deposits, loans and
human resources and some M&A among the
small private banks
Target Banks M Cap (Rs. in Crs.)1
Federal Bank Rs. 9,207.49
ING Vysya Bank 8,066.43
Karur Vysya Bank 6,014.43
South Indian Bank 3,632.61
Karnataka Bank 3,155.08
City Union Bank 2,293.68
Lakshmi Vilas Bank 649.62
Dhanlakshmi Bank 567.01
Sparking M&A hopes
Entry of New banks, with the issuance of banking
licenses has sparked the hope for M&A
In order to scale up operations rapidly, smaller
private banks with larger distribution networks
might be the possible targets of the new
banks
The potential targets may be Federal
Bank, Karur Bank, Dhanalaxmi Bank, Lakshmi
Vilas Bank2
M&A Possibilities in small private sector banks
39
Rise in Voting Rights, Rise in Foreign Investments
The proposal of raising voting rights from 1% to
10%1 to private investors in Public Sector
Banks, has paved the way for more investments in
Public Banks by Foreign Institutional Investors
(FIIs), who have been sitting on the sidelines so far
in respect to investing in these banks
Similarly, the proposal to increase voting rights
from 10% to 26%1 for the investors in Private
Banks not only increases FIIs interest but also
gives them better say in the management
decisions
Attraction for Foreign Investors
Sensex Sensation
On 18th Dec 2012, the BSE benchmark closed 111
points higher on continued buying of banking stocks
after the Banking laws (Amendment) Bill was cleared
by the Lok Sabha
The BSE Bankex index had outperformed the market
over the past one month till 18 December 2012, surging
9.99% compared with the Sensex's 5.76% rise
FIIs bought shares worth a net Rs 922.37 crore on the
same day, as per provisional data from the stock
exchanges (BSE,NSE)1 Refer Slide no 63
40
Indian Banking Industry
Section IV: Performance of Indian Banks
41
Banking Industry : A Positive Surprise (1/2) Balance sheet highlights of Banks in India: 2012
As the table above shows, the SCBs as on 31st March 2012, had total assets of Rs 8,299,500
Crores, the bulk of these (~73%) were held by the public sector banks which are dominated by the
State Bank of India and its associated State Banks. The Private sector banks accounted for ~20%
and the foreign banks for ~7%
One of the Key features of the Indian banking sector is the high proportion of government
securities held as investments. This stems from the SLR1 under which banks are required to keep
holdings of high quality liquid assets (notably Indian government bonds are ~21% of their
deposits in India). In addition to this, CRR2 requires them to keep 4.00% of their deposits in cash
with the RBI
Amount in Crores
Particulars Public Bank (%) Private Bank (%) Foreign Bank (%) Total SCB's (%)
Cash & RBI balances Rs. 280,000 5% Rs. 70,600 4% Rs. 23,200 4% Rs. 373,800 5%
Money at call 176,000 3% 36,600 2% 31,200 5% 243,800 3%
Investments 1,504,100 25% 526,000 31% 200,500 34% 2,230,600 27%
-GOI Bonds 1,258,000 21% 347,400 21% 137,600 24% 1,743,000 21%
Loans & Advances 3,878,300 64% 966,400 58% 229,800 39% 5,074,500 61%
Fixed Assets 38,300 1% 13,400 1% 5,000 1% 56,700 1%
Other Assets 161,300 3% 64,900 4% 93,900 16% 320,100 4%
Total Assets Rs. 6,038,000 100% Rs. 1,677,900 100% Rs. 583,600 100% Rs. 8,299,500 100%
Total Deposits Rs. 5,002,000 83% Rs. 1,174,600 70% Rs. 277,100 47% Rs. 6,453,700 78%
-Demand Deposits 384,400 6% 165,900 10% 80,100 14% 630,400 8%
-Savings Deposits 1,214,000 20% 272,900 16% 41,900 7% 1,528,800 18%
-Term Deposits 3,403,600 56% 735,800 44% 155,100 27% 4,294,500 52%
Borrowings 461,800 8% 258,400 15% 119,900 21% 840,100 10%
Other Liabilities 218,600 4% 85,500 5% 92,900 16% 397,000 5%
Capital & Reserve 355,600 6% 159,300 9% 93,700 16% 608,600 7%
Total Liabilities Rs. 6,038,000 100% Rs. 1,677,800 100% Rs. 583,600 100% Rs. 8,299,400 100%
Source: Report on Trend and Progress of Banking in India, RBI
5% of the assets
are held as cash
and bank
balances with the
RBI, 27% are held
in investment
securities, 61% in
the form of
loans, resulting in
a Loan/Deposit
ratio of 79%
1 Statutory Liquidity Ratio2 Cash Reserve Ratio
42
On the other side of the balance sheet, deposits make up 78% of SCB's total
funding, consisting of demand deposits (8%), savings deposits (18%) and term deposits
(52%)
Public sector banks have the strongest deposit funding which accounts for 83% of their
total funding sources; for the Private banks this drops to 70% and for the foreign banks it is
much lower at 47% as they are rely more on borrowings and their own capital
The SCBs have achieved a net Return on Assets (ROA) of 1.08% (1.10% in 2011) and a
Return on Equity (ROE) of 14.60% (14.96% in 2011) for the year ended 31st March 2012
Within this, in 2012 the ROA of the public sector banks was 0.88%, for the private banks
it was 1.53% and for the foreign banks it was 1.76%. But the Public sector banks
achieved a higher ROE of 15.33% vs. 15.25% for the Private banks and 10.79% for the
foreign banks
The gross NPAs to gross advances ratio declined to 3.1% in 2011-12 from 2.5% in 2010-
11, displaying improvement in asset quality of the banking sector
The capital to risk weighted assets ratio under Basel II framework stood at 14.24% in 2011-
12 as against 14.19% in 2010-11, which remained well above the required minimum of 9%
Banking Industry : A Positive Surprise (2/2) Balance sheet highlights of Banks in India: 2012
43
2,476,936.00
2,999,923.90
3,496,720.00
4,297,487.50
5,074,579.30
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2007-08 2008-09 2009-10 2010-11 2011-12
Total Loans
ROA
(%)1.12% 1.13% 1.05% 1.10% 1.08%
NIM
20%
Performance of the
Indian banking sector
during 2011-12 was
influenced by the
slowdown in the
domestic economy.
Consequently, balance
sheet expansion of
banks was lower than
the previous year and
profitability indicators
like RoA and NIM
dipped
Cost-to-Income Ratio
Source: Report on Trends and Progress of Banking in India 2011-12
Banking Industry 2012 : Rising Profitability (Rs. In Crores)
2.30%
2.90%
2.17%
2.91% 2.90%
-0.50 1.00 1.50 2.00 2.50 3.00 3.50
2007-08 2008-09 2009-10 2010-11 2011-12
NIM
(%
)
21.00%
19.50% 20.00 %
21.50%
18.50%
17.00
18.00
19.00
20.00
21.00
22.00
2007-08 2008-09 2009-10 2010-11 2011-12
Co
st-t
o-i
nco
me
rat
io (
%)
44
The bulk share of the credit portfolio is concentrated in the “Industry sector” i.e. ~ 31.40 %
of the total non-food credit. A moderate rise of credit share (from 29.8% in 2011 to 31.40% in
2012) has been noticed
The share of Personal Loans is 17.91% of gross bank credit in 2012. A slight decrease has
been noticed in the share of credit in 2012 as compared to 2011(18.69% of credit share) due
to the sluggish growth of the domestic economy
The share of credit to Financial sectors like NBFCs increased to 5.17% in 2012 as against
4.79% in 2011
The credit demand from the corporate sector was primarily driven by working capital
requirements rather than by incremental capital expenditure and infrastructure
Investments. Several projects became unviable due to increasing interest rates and
rising commodity prices which reduced the demand for incremental loans
Agriculture Industry Infrastructure Real Estate Finance Personal* Others**
2011 460,300 1,094,200 526,600 111,800 175,600 685,400 613,400
2012 522,600 1,346,800 619,100 120,500 221,800 768,300 690,700
12.55%
29.84%
14.36%
3.05% 4.79%
18.69% 16.73%12.18%
31.40%
14.43%
2.81%5.17%
17.91% 16.10%
-200,000 400,000 600,000 800,000
1,000,000 1,200,000 1,400,000 1,600,000
Gro
ss B
ank
Cre
dit
Total Non-food Gross Bank Credit
2011:-3,667,300
2012:- 4,289,800
Sectoral Deployment of Gross Bank credit1
Source: 1Report on Trends and Progress of Banking in India 2011-12
* Personal includes credit card, education, housing and advances against fixed deposits
** Other Includes trade, hospitality, computer software and other services
Snapshot of Credit Deployment by the Banks (Rs. In Crores)
45
Soar Spot of the Banking Industry
All those assets which do not generate periodical income are known as Non-Performing
Loans (NPL) or Non–Performing Assets (NPAs). In India the time frame given for
classifying the assets as NPL is 180 days as compared to 45 days to 90 days as per
international norms
In 1997, NPAs were 15.8% of loans for the banking sector, which went down remarkably to
2.4% in 2008. This figure stands at 2.94% of loans in 2012 (3.25% in June 2012). India’s
biggest lender, SBI, is experiencing an NPL level of 4.99% of total loans
After the global financial turmoil in 2007, the RBI issued guidelines on restructuring of
advances by banks by which they were allowed to restructure accounts of viable entities
classified as standard, sub-standard and doubtful
Over the past year, the banks‟ stressed loan book (gross NPL and restructured) grew
57% YoY to 7.7% of loans - NPLs at 2.9% and restructured loans at 4.8%
However, the trends for private and public lenders were highly divergent. While the
Public Sector banks reported 62% growth in stressed loans to 9% of total, private
lenders saw only a 20% increase and the share of stressed loans remains low at 3.2%
Assets quality of Public Sector Banks was more impacted due to relatively high exposure to
the telecom, power and agricultural sectors. On the contrary, relatively lower exposure
towards these stressed sectors along with adequate provisioning led to improvement in
assets quality of Private Banks
Source: RBI
“Public sector banks saw three times faster growth in stressed
loans than in private peers”
46
Loan Restructuring : Survival or Edge (1/2)
Indian banks have seen a significant rise in restructuring of loans
during FY2012 (~30% of the restructuring in the power sector).
The other sectors, that were impacted included
aviation, construction and engineering, steel, textiles, and telecom
infrastructure
As per Crisil, the rating agency, the restructured loan portfolio is
expected to touch Rs. 3.25 lakh crore by 2013 accounting for 3.5%
of the banking sector’s total advances as on March 2013, up from
2.9% as on December 2011. Banks had restructured ~Rs.1.9 lakh
crore of loans till September 2012
The Indian banking system has a total exposure of ~ Rs. 40,000
crores to the ailing aviation sector. SBI alone has an exposure of
Rs.5,000 crores to the aviation industry. According to an RBI
report, nearly three-fourth of the top Banks‟ loans to the aviation
sector are either impaired or restructured. Loans to Kingfisher
Airlines and Air India became buzzwords last year
“When the economy is not faring well, banks cannot have a healthy
balance sheet. Banks do the restructuring of loans to help a
company sail through the tough times on the assumption that the
efforts will succeed. It is not always practical to anticipate whether
the company can survive or not’’
K.R Kamath
Managing Director
Punjab National Bank
“The nature of
restructuring in
2011-12 and 2012-
13 is qualitatively
different from that in
2008-09 and 2009-
10. The loans
restructured in the
earlier phase were
smaller and
represented the
small and medium
enterprise (SME)
accounts, where as
in the current phase
the loans being
restructured are
large corporate
exposures”Ram Raj Pai
President
Crisil
.
Stressed loan ratio: Divergent trends in stressed loans and its composition
Growth and share of Stresses loans
Public sector
banks are
witnessing a
faster rise in
stressed loans
Source: CLSA
Note: Rstd- Restructured
Loan Restructuring : Survival or Edge (2/2)
48
Indian banks are doing better than their emerging Asian counterparts, with 10 of them among
Asia‟s top 30 value creator banks in the past decade. In the next 10 years, banking revenues
in India are likely to climb further from $56 billion in 2010 to $250 billion by
2020, contributing to more than 12% of Asia’s total banking revenue growth1
Consequently, 4 or 5 Indian banks could potentially enter the global top 20 by market
capitalization by 2020
According to a report by the Boston Consulting Group (BCG) India, prepared in
association with Indian Banks‟ Association, India would be the world’s third largest in asset
size by 2025
Indian Banking will be the world’s 3rd largest by 2025
1 Source: BANCON 2012
Global Rankings
49Source: Report By BCG -“Big Five Stars In Productivity, August 2011”
„Indian Banks‟ Profitability leans towards the higher end of the spectrum while its cost-to-
income ratio leans towards the lower end. In addition Bad debts charged to P&L remain
moderate and valuation is sound‟
Indian Banking: Soundness, Health and Balanced Performance
Global vs. Indian Banking Industry
CountryReturn On
EquityCountry
Cost to
Income
Ratio
Country
Price to
Book Value
Ratio
CountryBad Debt to
Assets Ratio
Turkey 19.60% Indonesia 79.30% Indonesia 3.6 Russia 2.4%
Indonesia 17.8% Germany 75% Malaysia 2.3 Indonesia 2.0%
Malaysia 17.4% France 73% Canada 2 Turkey 1.3%
China 16.7% Canada 66% Russia 2 USA 1.2%
India 15.3% USA 65% Thailand 1.9 China 0.9%
Singapore 14.6% Russia 59% India 1.8 Spain 0.7%
Australia 14.0% Thailand 57% China 1.7 South Korea 0.6%
Canada 12.4% Australia 56% Australia 1.6 India 0.6%
South Korea 10.1% Malaysia 55% Turkey 1.5 Singapore 0.5%
Spain 8.2% India 47% Singapore 1.4 Thailand 0.4%
Russia 7.9% South Korea 47% South Korea 0.9 Malaysia 0.4%
Thailand 6.9% Spain 42% USA 0.8 Germany 0.4%
France 4.0% Turkey 42% Spain 0.8 Australia 0.4%
USA 2.7% China 40% France 0.5 Canada 0.3%
Germany -8.0% Singapore 40% Germany 0.3 France 0.2%
Return on Equity (%) Cost: Income ratio (%) Valuation (P-BV) Bad Debt to Assets Ratio
1. Credit take off of the corporate sector slowed down particularly because of down-sized
capital expenditure programs
2. Banks have been focusing on secured lending products (such as mortgage and auto loans)
for retail customers to drive credit off take
3. Policy uncertainty over the micro finance institutions and recent changes to banks credit off
take to non banking
4. Pressure to meet targets under Financial Inclusion also increased the cost of lending and
decreased returns on advances for banks
50
Key Trends in the Industry (1/2)
The moderation in credit growth has been observed from 22.90% on FY2011 to 18.10% in
FY2012. Some key trends are:
Key trends Reasons Impact on Banks
CASA growth slowed High Interest rates and pressure on corporate cash flows
Effect felt by all banks
Competition in savings deposits
Deregulation of Interest rates on saving deposits
Similar private banks gain share, albeit at higher cost
Volatility in margins Mismatch in maturity of assets and liabilities Most banks except HDFC Bank and ICICI
Fee growth slowed Slowdown in investment linked credit demand
ICICI, Axis and SBI
Interest-rate sensitivities Decline in yields on government and corporate bonds
All Public banks, Axis and Yes
Source: CLSA Research
51
In continuation of the moderate results for FY2012, credit growth in Indian banks grew
1.2% as of September 2012 from the start of financial year in April 2012,while deposits
were up by 3.7% according to data released by RBI. Some key trends are:
1. There was slight improvement on retail loans, as banks had cut the lending rates
on vehicle and home loans, so consumption credit went up
2. In the mid quarter review of the monetary policy, RBI cut the CRR by 25 basis points
from 4.75% to 4.5 % (effective the fortnight beginning September 22,2012), to inject
Rs.170 billion into the banking system
3. Big bang reforms announcements such as opening of the retail sector to foreign
chains and hiking diesel prices aimed for reviving economic growth
4. Slow government action as interest rate reduction continues to bring attention to the
banking sector in anticipation of rate reduction and a more hopeful future in 2013
Key Trends in the Industry (2/2)
52
Industry Snapshot (Rs. In Crores)
Total Banking Business in India
Source: RBI
Public Private Foreign
2011 4,372,448.70 1,002,758.80 240,666.80
2012 5,002,013.40 1,174,587.40 277,063.40
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
De
po
sits
Deposits
Public Private Foreign
2011 3,304,432.90 797,544.00 195,510.60
2012 3,878,312.50 966,418.20 229,848.60
-500,000
1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000
Ad
van
ces
Advances
Public Private Foreign
2011 2.77% 3.10% 3.86%
2012 2.76% 3.07% 3.93%
2.77%3.10%
3.86%
2.76%3.07%
3.93%
0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%
Ne
t In
etr
est
Inco
me
Net Interest Income
Public Private Foreign
2011 0.96% 1.43% 1.75%
2012 0.88% 1.53% 1.76%
0.96%
1.43%
1.75%
0.88%
1.53%
1.76%
0.00%0.20%0.40%0.60%0.80%1.00%1.20%1.40%1.60%1.80%2.00%
Re
turn
on
Ass
ets
Return on Assets
53
Valuation Snapshot of Major Listed Banks
Source: Bloomberg Finance, Deutshe Bank, Price as on Dec 20,2012
In 2013 valuations will be driven by easing of the interest rate cycle and better asset
quality outlook
While broad concerns about Basel III and dynamic provisions should continue to
hover, we believe that attractive valuations and likely better recoveries and treasury
gains can allay most concerns
54
Bankex vs. Sensex
Source: Bloomberg,CLSA Research , Jan 2013
About Bankex
Bankex is a cap-weighted free float index that tracks the performance of
the 14 leading banking sector stocks listed on the BSE India Exchange.
The base date is January 1st 2002
55
Indian Banking Industry
Section V: Regulatory Framework
56
Macro Economic Factors That Drive Banks
FY2012 was characterized by many macro headwinds – persistently high inflation
keeping interest rates high, moderation in industrial output, INR
depreciation, worsening balance of payments and ballooning fiscal deficit
However, higher capital standards, stickier liquidity and leverage ratios, a more cautious
approach and deregulation in monetary policies by the RBI played a positive role
In this distressed macroeconomic situation, Indian banks emphasized their concentration
on maintaining balance sheet strength in terms of quality over growth
Source : RBI & Economy survey 2011-12
Fiscal Deficit & Inflation INR/USD
4%3.30%
2.50%
6% 6.50%
4.80% 4.60%
0%
2%
4%
6%
8%
10%
12%
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Fiscal Deficit as % of GDP Inflation
44.6143.59
39.97
50.9545.14
44.65
51.1554.54
0
10
20
30
40
50
60
March 2006
March 2007
March 2008
March 2009
March 2010
March 2011
March 2012
January 2013
57
Monetary Policy Transmission Mechanism
Repo rate hike
Expectations
of Repo rate
Rise in market
interest rates
Lower expected
profitability of the firmsStrong Exchange Rate
More difficult to obtain
credit - Lower investment
Decrease in
consumption
Reduction in
Investment
Exports
down, Imports up
Lower import
prices
Reduction in demand
Lower Inflation
Inflation
Expectation
The credit channel The Interest rate channel The exchange rate channel
58
Regulatory Bodies
Some call it
intervention, some
find it
regulation, but to
cut the
haywire, one needs
to set the rules and
become a Watch
Dog
“
“
59
How Banks are Regulated in the System?
Reserve Bank of IndiaInsurance
Regulatory and
Development
Authority
Security
Exchange Board
of India
Financial Institutions
Scheduled Banks
Cooperative Banks
Public
Private
Foreign
Housing
Finance
Non-
Banking
Finance
Development
FinanceInsurance
Mutual
Funds etc.
Banking Non-Banking
`
-Regulatory bodies
60
Current Policy Rates
Policy Rates
Bank Rates
Repo Rate
Reverse Repo Rate
MSF Rate
9.00%
7.75%
6.75%
9.00%
Reserves Rates
CRR
SLR
4.00%
23.00%
Lending / Deposit Rates
Base Rate
Deposit Rate
9.75% -
10.50%
8.50%-9.00%
Although the critical rates have reduced
since the global economic crisis of 2008,
the RBI is still maintaining a tight
monetary policy in order to curb inflation
and attain stability along with superior
economic growth
Current Rates1
Marginal Standing Facility (MSF) Rate is the rate at which banks can borrow overnight from RBI.
This was introduced in the monetary policy of RBI for the year 2011-12.
Indian Interest Rates
0.00
5.00
10.00
15.00
20.00
25.00
30.00
Ap
r. 0
9
No
v.0
9
13
Feb
. 10
27
Feb
. 20
10
Mar
. 10
20
Ap
r. 1
0
24
Ap
r. 1
0
2 J
ul.
10
27
Ju
l.10
16
Sep
. 10
2 N
ov.
10
18
Dec
. 10
25
Jan
. 11
17
Mar
. 11
3 M
ay. 1
1
9 M
ay. 1
1
16
Ju
n.1
1
26
Ju
n. 1
1
16
Sep
. 11
25
Oct
. 11
24
Jan
. 12
17
Ap
r. 1
2
Repo Rate Reverse Repo CRR SLR MSF
Repo Rate, Reverse Repo, CRR, SLR & MSF
1 Source: As per the RBI website and news in Economic Times as on 29th Jan 2013
61
Major Banking Regulations & their Effects
Banking diversification and introduction of new
generation banks
Operational autonomy, say a bank satisfies the CAR
then it gets freedom in opening branches, upgrading
counters, liberal lending options etc
Plugging in foreign investors’ money directly into the
Indian financial market
FDI limit for a foreign banks is 74% of the total paid-up
capital of the bank
An umbrella of rules and regulations to define the roadmap
for banks under its three pillars:
- Pillar 1: Capital requirements: Minimum regulatory capital
requirement based on risk weighted assets
- Pillar 2: Supervisory review process: Framework to deal
with risks that banks face from time to time
- Pillar 3: Market discipline: Increasing disclosures by
banks to bring more transparency
Reduction in CRR, SLR and deregulation of interest
rates
Introduction of capital to risk weighted assets ratio and
fixed prudential norms will bring reduction in non
performing assets and increase capital position of banks
These reforms will
require Indian banks to
raise around
Rs.6,00,000 crores by
2020, for which the Fin
Min has advised banks
to push into mergers
and consolidations
These strategic changes
will leave more loanable
funds with banks and
help them widen their
credit network
FDI will bring better risk
management
capability, sound
technology and higher
growth prospects
These reforms will give
banks greater strength
to fight competition and
help them stand out in the
market
BASEL III Norms-------------------------------------------------- --------------------------------
Foreign Direct Investment-------------------------------------- -------------------------------
Government Initiatives------------------------------------------ --------------------------------
Other Reforms------------------------------------------------------ -------------------------------
BASEL III Norms
Foreign Direct
Investment(FDI)
Government
Initiatives
Other
Reforms
Indian Banking
Sector
Basel III norms: A comprehensive set of reform
measures, developed by the Basel Committee on
banking supervision and regulation
Government Initiatives: The two regulatory bodies, RBI and SEBI
are taking every step possible to strengthen the economy by
safeguarding the banking sector
Foreign Direct Investment: With the approval of
FDI, foreign banks can set up their branches in India, which
provides a world class banking experience and creates
healthy competition
Other Reforms: Deregulating interest
rates, bank diversification and new generation
banks are some other effective changes towards
a more positive direction
`
Changing Industry Dynamics by New Rules
62
63
New Banking Amendment Bill
On December 20, 2012, the Parliament passed the much-awaited Banking Laws
(Amendment) Bill, 2011. This is expected to pave the way for issuance of new banking
licenses and consolidation in the sector
The key provisions are:
Empower RBI to :-
Issue new banking licenses
Supersede the Board of Directors of a banking company and appointment of an administrator till alternate
arrangements are made
Collect information and inspect associate enterprises of banking Companies
Levy Penal interest on banks that do not maintain minimum amount of CRAR
Raise the ceiling of Voting Rights :-
From 1% to 10% for shareholders of Public Banks
From 10% to 26 % for shareholders of Private Banks
Levy Penal interest on banks that do not maintain minimum amount of CRAR
Establish “Depositor Education and Awareness Fund” which will take over deposit accounts that have
not been claimed for 10 years
Allow Public banks to :-
Hold more than Rs.3,000 crores of authorized capital
Issue two additional instruments (rights issue and bonus shares)
64
Regulatory Newsflash
RBI cut Repo rate, CRR by 25 basis points
The RBI cut its key repo rate by 25 basis points to 7.75% on 29th January 2013, and also
unexpectedly reduced the CRR by 25 basis points to 4.00%
RBI harmonises the definition of Infrastructure lending
The RBI had planned to align the definition of the infrastructure-sector for banks (as
indicated in October 2012 Monetary Policy). As a result, a few new sectors have been included
in this domain. These include: Urban Public Transport, Fertilizers (capital expenditure
only), 3-star+hotels in small towns, Cold-chains and other Agri-produce businesses
RBI’s gold loan regulation for NBFC
In October 2012 as part of its Monetary Policy, the government had asked banks not to
finance purchase of gold for speculative or trading purposes, except for genuine working
capital requirements, in order to control the sharp rise in the price of gold
RBI establishes supervisory college for SBI and ICICI Bank
In order to cope with the supervisory issues revolving around SBI and ICICI Bank, the RBI
has established a supervisory college for these banks. This was decided as these two
banks have immense exposure to the overseas operations
Government to recapitalize Public Sector Banks
The government has approved the first tranche of Rs.12,000 Crores fund infusion in Public
Sector Banks to enhance their capital base
65
Indian Banking Industry
Section VI: Deals in the Banking
Industry in India
66
Banking SectorRecent Deals (M&A)
Source: VCCEdge, DCA Research
Announced
DateTarget Acquirer
Stake(%)
Value($US mn)
December
2011
Barclays Bank Plc, Performing
Credit Card Portfolio
Standard Chartered
Bank India
100 36.00
April
2011Tamilnad Mercantile Bank Ltd. Standard Chartered
Bank India
4.64 NA
November
2010
Enam Securities Direct Pvt.
Ltd.
Axis Bank Ltd. NA 439.79
August
2010
Bank of Rajasthan Ltd. ICICI bank Ltd. 100 658.65
July
2010
Kotak Mahindra Bank Ltd Sumitomo Mitsui
Banking Corporation
4.50 294.00
February
2008Centurioun Bank of Punjab HDFC Bank 100 2200.00
Announced
DateInvestor Investee
Stake(%)
Value($US mn)
January
2013
Ratnakar Bank Ltd. Aditya Birla PE, Norwest venture
capital partners and Fearing
Capital
NA 54.00
April
2012
Karur Vysya Bank Ltd. Olympus Capital Holdings Asia4.80 38.47
March
2012
Karur Vysya Bank Ltd. ChrysCapital V LLC3.90 31.23
February
2011
IndusInd Bank Ltd. General Atlantic Pvt. Ltd.0.60 14.57
February
2011
Ratnakar Bank Ltd. Beacon India Private Equity
Fund, Housing Development
Finance Corp. Ltd., Norwest
Venture Partners, India Evolving
Fund , Samara Capital
Partners,Cartica Capital LLC,
Gaja Capital Fund
NA 163.00
March
2010
Dhanlaxmi Bank Ltd. Arcstone Capital LLC 5.00 9.30
67
Banking SectorRecent Deals (PE)
Source: VCCEdge, DCA Research
Indian Banking Industry
Section VII: Special Section on
Foreign Banks in India
69
Efficient Players of the Race
Today ~40 foreign banks, providing banking services in India, generate a significantly
higher revenue relative to Indian banks operating abroad in terms of fee-based income
Foreign banks in India account for roughly 5% of the banking industry’s assets and
there has not been any change in their market share over the years. The main reason
for this is RBI’s reluctance to allow large global players to enter in full scale
Foreign banks are permitted to establish presence in India by way of:
i. Setting up a Wholly Owned Subsidiary (WOS) or conversion of existing branches in
WOS
ii. Opening a Branch
iii. A subsidiary with an aggregate foreign investment up to a maximum of 74% in a
private bank
Major foreign players are operating in India by establishing their branches, as it is the
easiest way to establish their business in India. They have to deal with far less
regulations under the Companies Act, auditing standards and are at ease for winding
up
These banks (Citibank, HSBC, Standard Chartered) mainly carter to
investors, businesses and wealthy consumers in metro and tier I cities
Though there have been mistakes (both Citi and HSBC bank had ill-advised forays into
consumer finance) in their home country, the Indian arms of these firms are among their
best businesses
Overview of Operations in India
Foreign Banks have brought the latest technology and latest banking practices to India.
They have helped make the Indian Banking System more competitive and efficient
On a consolidated basis, the total branches of foreign banks in India as on 1st April 2012
stood at 3231, of which the major braches are held by Citibank, HSBC, Standard
Chartered Bank and The Royal Bank of Scotland
India is committed to allowing foreign banks to open 12 branches in a year, but the RBI
may go beyond the World Trade Organizations (WTO) commitments of 12 branch
licenses, if the foreign banks open offices in unbanked/under-banked areas2
The RBI, in a discussion paper, suggested that foreign banks should be incentivized to
operate in India as wholly-owned subsidiaries, as against the current system of having
a presence through a branch network. According to the RBI, this would clearly separate
assets and liabilities of the foreign banks vis-a-vis the Indian operations and would provide
more effective control in a banking crisis
At present, the five major foreign banks including Standard
Chartered, HSBC, Citibank, RBS and Deutsche, account for over 70 percent of the total
asset size of overseas lenders in the country
News Update on 17th December 2012:
“RBI is very soon, I believe, going to announce a very progressive policy for
permitting opening of more foreign banks...” Commerce Secretary S R Rao
Source : 1RBI2As per Zee News article on 22nd August , 2012
70
Top Foreign Banks vs. Indian Banks
Citibank, with Rs.90,270 crore in assets, is the largest foreign bank in India, overtaking
StanChart (Rs.82,894 crore). Citibank‟s assets have risen from Rs.70,996 crore mainly
because of an increase in investments from Rs.30,399 crore in 2010-11 to Rs.43,167 crore in
2011-12
In terms of advances alone, StanChart, with Rs.55,570 crore worth of advances, is still the
largest foreign bank in India ahead of Citibank, which had a loan book of Rs.47,103 crore
in 2011-12 71
Growing Fortunes of Major Foreign Banks
The Indian arms of three major Banks are among
their best businesses and they punch much above
their weight, with only 0.3% of the Indian Banking
Industry’s branches and perhaps 5% all loans, but a
meaty 11% profits
All cater mainly to investors, businesses and
wealthy consumers in cities; they have combined
pre-tax profits of $2.2 billion
Source : Article in The Livemint news pblication
As foreign banks have grown their business in India, the
same trend could be seen on the side of employee
strength, which has also grown several fold
Most importantly the rising number of employees has not
reduced employee efficiency, as a majority of foreign banks
were able to show higher profit per employee over the
years (still a long way to go though)
72
Foreign Banks : Fresh off the Boat
It is just not Credit Suisse that has, of late, seen merit in launching commercial banking in
India. As many as 10 foreign banks from countries as diverse as Australia, China, South
Africa, South Korea, Switzerland and Russia have entered India in the last three years
Foreign banks are also looking to tap into the opportunities arising from greater trade
flows. Take the case of the Toronto-based Bank of Nova Scotia, which has five branches
in the country today. Its India CEO Sanjeev Mittal says trade between India and Canada is
set to triple to $15 billion (Rs 82,500 crore) in three years
Foreign banks are also preparing for the Internationalization of Indian business, as Indian
companies go global they need banking support and it is not possible to be present all over
the world
“The Indian banking sector is well regulated and offers considerable access to foreign
banks," says Kalpana Morparia India CEO of J.P. Morgan
73
Still a Long Road Ahead
Foreign Banks see a larger role for themselves in the near
future in India as growing the local economy will require a
massive amount of capital and state-run banks will not be
able to meet that demand. Foreign banks will be well
placed to bridge this gap
But India's attraction also comes with its set of challenges.
Banking is still licensed and so is branch expansion
Foreign banks are not allowed to acquire local banks. This
explains why, despite decades of presence, they account for
just 323 branches of the total 81,240 bank branches in the
country
The new priority sector norms issued in July 2012 are also
discomforting. Foreign banks with more than 20 branches
will now have to give 40 per cent of their loans to priority
sectors such as agriculture. The current limit is 32 per
cent, which limits their presence
We are bullish on the government further relaxing its norms to
facilitate the entry and growth of foreign banks in India which
will improve the quality of service, provide more
comprehensive and better priced services as well as pave the
way for consolidation in the Industry
"If the Indian economy grows at five per cent, the financial services sector will typically grow three
times faster, at about 15 per cent“- Sanjiv Bhasin, the India CEO at the Singapore-based DBS Bank74
75
Major Players in the Industry
Its better to
know all the
players in the
field before
they snatch
your piece of
the cake
“
“
76
Major Players in the Industry
OBC
Federal
Allahabad
UBI
Yes
Canara
Indusind
Bank of India
Axis
Bank of Baroda
Punjab National
Kotak Mahindra
SBI
ICICI
HDFC
Major Banks in India Market Cap (in Thousand Crores)
These are the small
banks in terms of
market capitalization
These are the mid-
sized banks
consisting of 3 public
banks and 2 private
banks
These are the
growing banks that
consist of 2 public
banks and 2 private
banks
These are the
premium old
generation banks
consisting of 2 private
and 1 public bank
The share price has been taken as on 30th September 2012
77
Banking Industry
Section VIII: Listed Private Banks in India
78
Common Stock ComparisonPrivate Banks in India (Rs. in Crores)
Note: Market data as on 31st September 2012 and B/V or shareholder‟s equity and Net Income figures are based on 31st March 2012 (Financial Year closing)
Source: Company Financial Statements as on 31st March 2012 and Research Reports
FY12 FY 13E FY12 FY 13E FY12 FY 13E FY12 FY 13E
1 HDFC Bank 28.74x 22.04x 4.96x 4.23x 18.69% 20.72% 1.68% 1.81%
2 ICICI Bank 18.86 15.56 2.02 1.83 11.20% 12.34% 1.47% 1.55%
3 Axis Bank 11.43 10.51 2.13 1.77 20.29% 18.38% 1.61% 1.49%
4 Kotak Mahindra 26.28 23.96 3.73 3.24 15.36% 14.49% 2.21% 2.02%
5 Indusind Bank 20.70 16.10 3.50 2.18 18.27% 16.68% 1.55% 1.59%
6 Yes Bank 13.93 11.24 2.91 1.87 23.07% 20.24% 1.47% 1.46%
7 Federal Bank 9.82 9.23 1.34 1.18 14.37% 13.60% 1.39% 1.26%
Average 18.54x 15.52x 2.94x 2.33x 17.32% 16.64% 1.63% 1.60%
Median 18.86 15.56 2.91 1.87 18.27% 16.68% 1.55% 1.55%
Minimum 9.82 9.23 1.34 1.18 11.20% 12.34% 1.39% 1.26%
Maximum 28.74 23.96 4.96 4.23 23.07% 20.72% 2.21% 2.02%
P/E (x) P/BV (x)BanksS.No ROE(%) ROA (%)
FY12 FY 13E FY12 FY 13E
1 HDFC Bank Rs. 148,479.97 Rs. 29,924.40 Rs. 35,110.70 Rs. 5,167.09 Rs. 6,737.70
2 ICICI Bank 121,903.85 60,405.24 66,560.50 6,465.30 7,835.50
3 Axis Bank 48,495.64 22,808.50 27,381.50 4,242.20 4,613.60
4 Kotak Mahindra 48,158.89 12,901.00 14,843.90 1,832.23 2,010.20
5 Indusind Bank 16,612.07 4,742.00 7,627.10 802.60 1,031.50
6 Yes Bank 13,610.56 4,676.60 7,294.60 977.10 1,211.40
7 Federal Bank 7,624.44 5,706.33 6,444.00 776.80 826.40
Market CapBanksS.NoB/V or Shareholder's equity Net income
79
Profiles of the Major Players
Listed Players
80
Headquarters: Mumbai, India
Year of Incorporation: 1977
Base interest rate: 10%
No. of branches: Over 2,500
No. of ATMs: Over 10,300
Market Cap (Rs in Crs.): 148,479.97
2012 P/BV : 4.96x
52 week High / Low : 705.5/458.25
Business Overview
HDFC Bank Ltd was established as a part
of the liberalization of the Indian Banking
Industry
HDFC Bank merged with Times Bank
Limited (a private sector bank promoted by
Bennett, Coleman & Co. / Times
Group), becoming one of the first banks in
the New Generation Private Sector Banks
to have gone through a such merger
HDFC Bank trades at book value of 4.5
times and is probably the most expensive
bank in comparison to global giants such as
Bank of America and French lender BNP
Paribas1
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman: Mr. Deepak Parekh
Vice chairman: Mr. Keshub Mahindra
Executive Director:Mr. V. Srinivasa
Rangan
Managing Director: Mr. Renu Sud Karnad
HDFC BankCompany Profile
“To my mind, the
winning strategy for
banks in India is „Basic
Banking Model‟ – what
is otherwise known as
„boring banking‟ ”
- Mr. Deepak ParekhNote: 52 week High / Low is taken as on 14th January 2013
Source: 1 News in Economic times dated 1st August 2012
81
HDFC BankFinancial Summary (Rs. In Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 16,314.02 Rs. 16,232.74 Rs. 20,043.33 Rs. 27,605.56 19.16% Rs. 16,532.07
% Growth -0.50% 23.47% 37.73%
Interest Expense 8,903.37 7,797.60 9,425.15 15,106.12 9,316.33
% Growth -12.42% 20.87% 60.27%
Net Interest Income 7,410.65 8,435.14 10,618.18 12,499.44 19.04% 7,215.74
% Growth 13.82% 25.88% 17.72%
Non Interest Income 3,439.74 4,212.84 4,585.05 5,452.39 16.60% 2,874.61
% Growth 22.48% 8.84% 18.92%
Non-Interest Expense 5,649.27 6,080.83 7,310.91 8,803.48 4,938.10
Net Income 2,248.99 3,003.65 3,992.49 5,247.02 32.63% 2,977.37
% Growth 33.56% 32.92% 31.42%
% Margin 11.39% 14.69% 16.21% 15.87% 15.34%
Balance Sheet
Loans Rs. 99,027.37 Rs. 126,162.74 Rs. 160,831.42 Rs. 198,837.53 26.16% Rs. 231,648.61
% Growth 27.40% 27.48% 23.63%
Deposits 142,644.80 167,297.78 208,287.21 246,539.58 20.01% 274,130.04
% Growth 17.28% 24.50% 18.37%
Equity 15,094.53 21,618.81 25,586.05 30,210.75 26.02% 33,345.00
% Growth 43.22% 18.35% 18.08%
Investments 58,715.15 58,508.28 70,276.67 96,795.11 91,733.77
% Growth -0.35% 20.11% 37.73%
Ratios
NIM % 4.33% 4.21% 4.14% 4.02%
Cost to Income 51.70% 49.40% 47.90% 48.40%
Return on Assets % 1.42% 3.00% 1.61% 1.61%
Return on Equity % 16.89% 16.80% 16.50% 18.40%
Loan Deposit Ratio 69.42% 75.41% 77.22% 80.65%
Capital Adequacy Ratio 15.10% 17.40% 16.20% 16.50%
82
HDFC BankFinancial Summary (Rs. In Crores)
2009 2010 2011 2012
Deposits 142,645 167,298 208,287 246,540
Loans 99,027 126,163 160,831 198,838
Deposits (y-o-y) 17.28% 24.50% 18.37%
Loans (y-o-y) 27.40% 27.48% 23.63%
0%
5%
10%
15%
20%
25%
30%
-
50,000
100,000
150,000
200,000
250,000
300,000
Y-o
-Y
De
po
sits
& L
oan
s
Deposit & LoanDeposit & LoanDeposit & LoanDeposits & Loans
2009 2010 2011 2012
PAT 2,249 3,004 3,992 5,247
ROE (%) 16.89% 16.80% 16.50% 18.40%
ROA(%) 1.42% 3.00% 1.61% 1.61%
0%2%4%6%8%10%12%14%16%18%20%
-
1,000
2,000
3,000
4,000
5,000
6,000 R
oA
& R
oE
PA
T
P
A
T
,
R
O
E
&
R
O
A
PAT, ROE & ROA
2009 2010 2011 2012
NII 7,411 8,435 10,618 12,499
NIM 4.33% 4.21% 4.14% 4.02%
3.85%3.90%3.95%4.00%4.05%4.10%4.15%4.20%4.25%4.30%4.35%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
NIM
NII
NII & NIM
2009 2010 2011 2012
Loans 99,027 126,163 160,831 198,838
% of Net NPL to Loans
0.63% 0.31% 0.19% 0.18%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
10,000 30,000 50,000 70,000 90,000
110,000 130,000 150,000 170,000 190,000 210,000
% o
f N
PL
to
Lo
ans
Loan
s
Loans & % of net NPL to Loans
Key Management
83
Headquarters: Vadodra, India
Year of Incorporation: 1994
Base interest rate: 9.75%
No. of branches: Over 2,880
No. of ATMs: Over 10,000
Market Cap (Rs in Crs.): 121,903.85
2012 P/BV : 2.02x
52 week High / Low : 1,192/762
Business Overview
ICICI Bank (Industrial Credit and
Investment Corporation of India) was
originally promoted in 1994 by ICICI
Ltd., an Indian financial institution
ICICI acquired Bank of Rajasthan through
a share swap in a non-cash deal that
valued the bank of Rajasthan at about
Rs.3,000 crores on 2010. This merger
added over 450 branches of ICICI to the
network
The bank is currently in talks with
Vodafone to bring a concept of e- money
into play
Company Information
MD & CEO: Ms. Chanda Kocchar
MD & CFO: Mr. N.S. Kannan
Executive Director: Mr. K. Ramkumar
Executive Director: Mr. Rajiv Sabharwal
ICICI BankCompany Profile
Market Data (30-Sep-2012)
“The strategy of
focusing on
profitability, growth
and risk management
for fiscal 2012 resulted
in better than the
expected results”- Ms. Chanda Kocchar
Note: 52 week High / Low is taken as on 14th January 2013
84
ICICI BankFinancial Summary (Rs. in Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 36,250.71 Rs. 30,153.71 Rs. 30,081.40 Rs. 37,994.86 1.58% Rs. 19,571.98
% Growth -16.82% -0.24% 26.31%
Interest Expense 26,487.25 20,729.19 19,342.57 25,013.24 13,007.81
% Growth -21.74% -6.69% 29.32%
Net Interest Income 9,763.45 9,424.52 10,738.84 12,981.61 9.96% 6,564.17
% Growth -3.47% 13.95% 20.88%
Non Interest Income 27,902.37 29,446.07 31,513.30 28,663.42 0.90% 3,922.89
% Growth 5.53% 7.02% -9.04%
Non-Interest Expense 28,185.79 27,733.24 31,302.45 29,552.05 4,344.43
Net Income 3,379.42 4,843.41 6,318.19 7,937.63 32.93% 3,771.16
% Growth 43.32% 30.45% 25.63%
% Margin 5.27% 8.13% 10.26% 11.91% 16.05%
Balance Sheet
Loans Rs. 266,130.47 Rs. 225,778.13 Rs. 256,019.31 Rs. 292,125.42 3.16% Rs. 275,075.63
% Growth -15.16% 13.39% 14.10%
Deposits 261,855.75 241,572.30 259,106.00 281,950.47 2.50% 281,438.20
% Growth -7.75% 7.26% 8.82%
Equity 46,777.53 51,296.50 55,302.50 61,276.50 9.42% 64,462.14
% Growth 9.66% 7.81% 10.80%
Investments 119,493.05 134,850.53 150,826.24 182,046.72 157,913.96
% Growth 12.85% 11.85% 20.70%
Ratios
NIM % 2.26% 2.14% 2.21% 2.35%
Cost to Income 43.40% 37.00% 41.95% 42.91%
Return on Assets % 0.70% 1.00% 1.24% 1.40%
Return on Equity % 7.23% 9.66% 11.57% 11.10%
Loan Deposit Ratio 91.44% 90.04% 87.81% 92.23%
Capital Adequacy Ratio 15.50% 19.40% 19.50% 18.50%
85
ICICI BankFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 261,856 241,572 259,106 281,950
Loans 266,130 225,778 256,019 292,125
Deposits (y-o-y) -7.75% 7.26% 8.82%
Loans (y-o-y) -15.16% 13.39% 14.10%
-20%-15%-10%-5%0%5%10%15%20%
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 3,379 4,843 6,318 7,938
ROE (%) 7.23% 9.66% 11.57% 11.10%
ROA(%) 0.70% 1.00% 1.24% 1.40%
0%
2%
4%
6%
8%
10%
12%
14%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000 R
OE
& R
OA
PA
T
PAT, ROE & ROA
2009 2010 2011 2012
NII 9,763 9,425 10,739 12,982
NIM 2.26% 2.14% 2.21% 2.35%
2.00%
2.05%
2.10%
2.15%
2.20%
2.25%
2.30%
2.35%
2.40%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 266,130 225,778 256,019 292,125
% of Net NPL to Loans
1.96% 1.87% 0.94% 0.62%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
10,000
60,000
110,000
160,000
210,000
260,000
310,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
86
Headquarters: Ahmedabad, India
Year of Incorporation: 1994
Base interest rate: 10%
No. of branches: Over 1,600
No. of ATMs: Over 10,000
Market Cap (Rs in Crs.): 48,495.64
2012 P/BV : 2.13x
52 week High / Low : 1,396.50/893.10
Business Overview
Axis Bank (Formerly UTI Bank), was
promoted Jointly by The Administrator
of the Specified Undertaking of the Unit
trust of India (UTI-I), LIC, General
Insurance Corporation Ltd. and four other
Public Sector Unit Insurance
companies
It acquired Enam Securities’ Investment
Banking Business for Rs. 2,067 Crore
giving 3.3 Crore shares of Axis to Enam‟s
Shareholders in 2010
The loan growth of Axis bank is largely
driven by drawdown of existing loans
and demand for working capital
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman: Mr. Adarsh Kishore
MD & CEO: Ms. Shikha Sharma
Director Mr. Rama Bijapurkar
Director: Mr. S. B. Mathur
Axis BankCompany Profile
“I want to make
Axis Bank India‟s
JPMorgan ”
- Ms. Shikha SharmaNote: 52 week High / Low is taken as on 14th January 2013
87
Axis BankFinancial Summary (Rs. in Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 10,829.11 Rs. 11,639.10 Rs. 15,154.86 Rs. 21,994.90 26.64% Rs. 13,170.09
% Growth 7.48% 30.21% 45.13%
Interest Expense 7,148.92 6,632.60 8,588.61 13,969.18 8,663.30
% Growth -7.22% 29.49% 62.65%
Net Interest Income 3,680.19 5,006.50 6,566.25 8,025.72 29.68% 4,506.79
% Growth 36.04% 31.15% 22.23%
Non Interest Income 2,915.93 3,964.20 4,671.45 5,487.19 23.46% 2,928.57
% Growth 35.95% 17.84% 17.46%
Non-Interest Expense 2,873.80 3,762.50 4,865.24 6,098.63 3,293.44
Net Income 1,812.93 2,478.10 3,339.91 4,219.78 32.53% 2,277.06
% Growth 36.69% 34.78% 26.34%
% Margin 13.19% 15.88% 16.85% 15.35% 14.14%
Balance Sheet
Loans Rs. 81,556.77 Rs. 104,341.00 Rs. 142,407.83 Rs. 169,759.54 27.68% Rs. 172,131.57
% Growth 27.94% 36.48% 19.21%
Deposits 117,357.66 141,278.70 189,166.43 219,987.68 23.30% 235,619.09
% Growth 20.38% 33.90% 16.29%
Equity 10,195.71 15,989.20 18,894.61 22,681.71 30.54% 30,096.04
% Growth 56.82% 18.17% 20.04%
Investments 39,431.80 51,451.60 71,743.30 92,877.17 99,690.94
% Growth 30.48% 39.44% 29.46%
Ratios
NIM % 2.68% 2.95% 2.88% 2.94%
Cost to Income 43.42% 41.45% 42.69% 44.70%
Return on Assets % 1.41% 1.51% 1.58% 1.60%
Return on Equity % 19.13% 18.93% 19.15% 20.30%
Loan Deposit Ratio 69.49% 73.85% 75.28% 77.17%
Capital Adequacy Ratio 13.69% 15.80% 12.65% 13.66%
88
Axis BankFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 117,358 141,279 189,166 219,988
Loans 81,557 104,341 142,408 169,760
Deposits (y-o-y) 20.38% 33.90% 16.29%
Loans (y-o-y) 27.94% 36.48% 19.21%
0%5%10%15%20%25%30%35%40%
-
50,000
100,000
150,000
200,000
250,000
Y-o
-Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 1,813 2,478 3,340 4,220
ROE (%) 19.13% 18.93% 19.15% 20.30%
ROA(%) 1.41% 1.51% 1.58% 1.60%
0%
5%
10%
15%
20%
25%
-500
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
RO
A &
RO
E
PA
T
PAT, ROE & ROA
2009 2010 2011 2012
NII 3,680 5,007 6,566 8,026
NIM 2.68% 2.95% 2.88% 2.94%
2.50%2.55%2.60%2.65%2.70%2.75%2.80%2.85%2.90%2.95%3.00%
-1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
NIM
NII
NII& NIMDeposits & Loans
2009 2010 2011 2012
Loans 81,557 104,341 142,408 169,760
% of Net NPL to Loans
0.40% 0.40% 0.29% 0.27%
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
0.35%
0.40%
0.45%
10,000
30,000
50,000
70,000
90,000
110,000
130,000
150,000
170,000
190,000
% o
f N
PL
to L
oan
s
Loan
s
Loan & Provision NPLLoans & % of net NPL to Loans
89
Headquarters: Mumbai, India
Year of Incorporation: 2003
Base interest rate: 9.75%
No. of branches: Over 400
No. of ATMs: Over 100
Market Cap (Rs in Crs.): 48,158.89
2012 P/BV : 3.73x
52 week High / Low : 677/456.10
Business Overview
The Kotak Mahindra group has long been
one of India's most reputed financial
organizations. In 2003, Kotak Mahindra
Finance Ltd, the group's flagship company
started its banking business
The bank offers personal finance solutions
of every kind from savings accounts to
credit cards, distribution of mutual funds to
life insurance products
The bank implemented technology driven
cash management services to help its
customers to simplify and optimize their cash
flows and liquidity with efficient working
capital cycles
Market Data (30-Sep-2012)
Key Management
Company Information
Vice chairman & MD: Mr. Uday S Kotak
Joint Managing Director: Mr. C Jayram
Joint Managing Director: Mr. Dipak Gupta
Kotak Mahindra BankCompany Profile
-Mr. Uday KotakNote: 52 week High / Low is taken as on 14th January 2013
“The most
important
challenges in the
Indian banking
sector are the
ability to define and
price risk”
90
Kotak Mahindra BankFinancial Summary (Rs. in Crores)
Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 4,366.56 Rs. 4,601.16 Rs. 6,141.44 Rs. 8,470.42 24.72% Rs. 5,079.61
% Growth 5.37% 33.48% 37.92%
Interest Expense 1,992.39 1,772.86 2,634.55 4,541.96 2,818.30
% Growth -11.02% 48.60% 72.40%
Net Interest Income 2,374.17 2,828.30 3,506.89 3,928.46 18.28% 2,261.31
% Growth 19.13% 23.99% 12.02%
Non Interest Income 2,851.70 5,452.14 4,887.84 4,543.40 16.80% 2,287.78
% Growth 91.19% -10.35% -7.05%
Net Income 652.39 1,307.00 1,566.74 1,832.24 41.09% 945.65
% Growth 100.34% 19.87% 16.95%
% Margin 9.04% 13.00% 14.21% 14.08% 12.84%
Balance Sheet
Loans Rs. 22,497.62 Rs. 29,724.00 Rs. 41,241.95 Rs. 53,143.61 33.18% Rs. 61,254.81
% Growth 32.12% 38.75% 28.86%
Deposits 13,822.78 21,819.18 27,312.98 36,460.73 38.17% 43,864.52
% Growth 57.85% 25.18% 33.49%
Equity 6,522.54 7,910.94 10,962.94 12,901.05 25.53% 13,942.72
% Growth 21.29% 38.58% 17.68%
Investments 13,313.03 19,484.78 26,048.99 31,658.43 33,058.02
% Growth 46.36% 33.69% 21.53%
Ratios
NIM % 5.80% 5.80% 5.20% 4.80%
Cost to Income 66.80% 47.80% 54.00% 53.00%
Return on Assets % 1.60% 2.70% 2.40% 2.20%
Return on Equity % 10.50% 18.20% 16.40% 15.40%
Loan Deposit Ratio 100.38% 94.61% 94.27% 100.90%
Capital Adequacy Ratio 22.50% 19.30% 19.50% 17.50%
91
Kotak Mahindra BankFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 13,823 21,819 27,313 36,461
Loans 22,498 29,724 41,242 53,144
Deposits (y-o-y) 57.85% 25.18% 33.49%
Loans (y-o-y) 32.12% 38.75% 28.86%
0%
10%
20%
30%
40%
50%
60%
70%
-
10,000
20,000
30,000
40,000
50,000
60,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 652 1,307 1,567 1,832
ROE (%) 10.50% 18.20% 16.40% 15.40%
ROA(%) 1.60% 2.70% 2.40% 2.20%
0%2%4%6%8%10%12%14%16%18%20%
-200 400 600 800
1,000 1,200 1,400 1,600 1,800 2,000
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 2,374 2,828 3,507 3,928
NIM 5.80% 5.80% 5.20% 4.80%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
-500
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 22,498 29,724 41,242 53,144
% net NPL to Loans
1.20% 1.10% 0.40% 0.50%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
92
Headquarters: Mumbai, India
Year of Incorporation: 1994
Base interest rate: 10.75%
No. of branches: Over 440
No. of ATMs: Over 750
Market Cap (Rs in Crs.): 16,612.07
2012 P/BV : 3.50x
52 week High / Low : 444.90/270.50
Business Overview
Indusind Bank caters to the needs of both
consumer and corporate customers. It
has a robust technology platform
supporting multi-channel delivery
capabilities. The Bank was incorporated by
Mr. Srichand Hinduja of the Hinduja
group
The bank acquired Deutsche Bank’s
credit card business in April 2011, and
marked its presence in the high yield
segment. The bank also plans to foray in
the used commercial vehicle financing
and loans against property business
IndusInd Bank has 441 branches, and
796 ATMs spread across 303 geographic
locations across the country as on
September 30, 2012
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman: Mr. R. Seshasayee
Managing Director: Mr. Romesh Sobti
Managing Director: Mr. Ajay Hinduja
Indusind BankCompany Profile
Note: 52 week High / Low is taken as on 14th January 2013
93
Indusind BankFinancial Summary (Rs. in Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 2,309.47 Rs. 2,706.99 Rs. 3,589.36 Rs. 5,359.19 32.39% Rs. 3,359.97
% Growth 17.21% 32.60% 49.31%
Interest Expense 1,850.44 1,820.58 2,212.86 3,654.95 2,366.14
% Growth -1.61% 21.55% 65.17%
Net Interest Income 459.03 886.42 1,376.49 1,704.24 54.84% 993.83
% Growth 93.11% 55.29% 23.81%
Non Interest Income 456.25 553.48 713.66 1,011.78 30.41% 629.27
% Growth 21.31% 28.94% 41.77%
Non-Interest Expense 547.03 736.00 1,008.48 1,343.00 809.25
Net Income 148.34 350.31 577.33 802.61 75.56% 480.51
% Growth 136.15% 64.81% 39.02%
% Margin 5.36% 10.74% 13.42% 12.60% 12.05%
Balance Sheet
Loans Rs. 15,770.64 Rs. 20,550.59 Rs. 26,165.65 Rs. 35,063.95 30.52% 39,427.19
% Growth 30.31% 27.32% 34.01%
Deposits 22,110.25 26,710.17 34,365.37 42,361.55 24.20% 47,764.54
% Growth 20.80% 28.66% 23.27%
Equity 1,664.39 2,397.23 4,050.21 4,741.71 41.76% 5,242.50
% Growth 44.03% 68.95% 17.07%
Investments 8,083.41 10,401.84 13,550.81 14,571.95 15,609.35
% Growth 28.68% 30.27% 7.54%
Ratios
NIM % 1.83% 2.68% 3.26% 3.24%
Cost to Income 59.77% 51.12% 48.25% 52.30%
Return on Assets % 0.58% 1.11% 1.43% 1.57%
Return on Equity % 9.84% 16.18% 17.91% 18.26%
Loan Deposit Ratio 71.33% 76.94% 76.14% 82.77%
Capital Adequacy Ratio 15.33% 15.89% 13.85%
94
Indusind BankFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 22,110 26,710 34,365 42,362
Loans 15,771 20,551 26,166 35,064
Deposits (y-o-y) 20.80% 28.66% 23.27%
Loans (y-o-y) 30.31% 27.32% 34.01%
0%5%10%15%20%25%30%35%40%
-5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 148 350 577 803
ROE (%) 9.84% 16.18% 17.91% 18.26%
ROA(%) 0.58% 1.11% 1.43% 1.57%
0%2%4%6%8%10%12%14%16%18%20%
-
100
200
300
400
500
600
700
800
900
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 459 886 1,376 1,704
NIM 1.83% 2.68% 3.26% 3.24%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
-200 400 600 800
1,000 1,200 1,400 1,600 1,800
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 15,771 20,551 26,166 35,064
% net NPL to Loans 1.14% 0.50% 0.28% 0.27%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
10,000
15,000
20,000
25,000
30,000
35,000
40,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans]
95
Headquarters: Mumbai, India
Year of Incorporation: 2004
Base interest rate: 10.50%
No. of branches: Over 380
No. of ATMs: Over 650
Market Cap (Rs in Crs.): 13,610.56
2012 P/BV : 2.91x
52 week High / Low : 516.80/273.80
Business Overview
YES bank is the youngest Greenfield and
the only license awarded by the RBI in the
last 16 years
The bank was started by Mr. Ashok Kapur,/
Dr. Rana Kapoor (55%), the Dutch
financial services firm Rabobank (20%)
and private equity players (25%)
The bank was ranked as India's fastest
growing bank at the Bloomberg-UTV
Financial Leadership Awards 2011
The bank announced its entry into the credit
card segment under a tie-up with
American express in December 2012, to
offer credit cards for the high value customer
segment
Market Data (30-Sep-2012)
Key Management
Company Information
MD & CEO: Dr. Rana Kapoor
Independent Director: Mr. Arun K Mago
Independent Director: Ms. Radha Singh
YES BankCompany Profile
-Dr. Rana KapoorNote: 52 week High / Low is taken as on 14th January 2013
„” The India story
may have slowed
down, but banking
continues to be
grossly
underpenetrated”
96
YES BankFinancial Summary (Rs. in Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 2,001.43 Rs. 2,369.71 Rs. 4,041.75 Rs. 6,307.36 46.61% Rs. 3,872.71
% Growth 18.40% 70.56% 56.06%
Interest Expense 1,492.14 1,581.76 2,794.82 4,691.72 2,876.36
% Growth 6.01% 76.69% 67.87%
Net Interest Income 509.30 787.95 1,246.93 1,615.64 46.93% 996.35
% Growth 54.71% 58.25% 29.57%
Non Interest Income 436.90 575.53 623.27 857.12 25.19% 564.86
% Growth 31.73% 8.29% 37.52%
Non-Interest Expense 418.55 500.15 679.81 932.53 616.86
Net Income 303.84 477.74 727.14 977.00 47.60% 596.22
% Growth 57.23% 52.20% 34.36%
% Margin 12.46% 16.22% 15.59% 13.64% 13.44%
Balance Sheet
Loans Rs. 12,403.09 Rs. 22,193.12 Rs. 34,363.64 Rs. 37,988.64 45.22% Rs. 42,019.25
% Growth 78.93% 54.84% 10.55%
Deposits 16,169.42 26,798.57 45,938.93 49,151.71 44.86% 52,290.81
% Growth 65.74% 71.42% 6.99%
Equity 1,624.22 3,089.55 3,794.08 4,676.64 42.26% 5,313.49
% Growth 90.22% 22.80% 23.26%
Investments 7,117.02 10,209.94 19,000.06 28,641.61 31,754.98
% Growth 43.46% 86.09% 50.74%
Ratios
NIM % 2.45% 2.29% 2.30% 2.52%
Cost to Income 44.20% 36.70% 36.30% 37.70%
Return on Assets % 1.52% 1.61% 1.52% 1.47%
Return on Equity % 20.65% 20.27% 21.13% 23.07%
Loan Deposit Ratio 76.71% 82.81% 74.80% 77.29%
Capital Adequacy Ratio 16.60% 20.60% 16.50% 17.90%
97
YES BankFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 16,169 26,799 45,939 49,152
Loans 12,403 22,193 34,364 37,989
Deposits (y-o-y) 65.74% 71.42% 6.99%
Loans (y-o-y) 78.93% 54.84% 10.55%
0%10%20%30%40%50%60%70%80%90%
-
10,000
20,000
30,000
40,000
50,000
60,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 304 478 727 977
ROE (%) 20.65% 20.27% 21.13% 23.07%
ROA(%) 1.52% 1.61% 1.52% 1.47%
0%
5%
10%
15%
20%
25%
-
200
400
600
800
1,000
1,200 R
OE
& R
OAP
AT
PAT, ROE & ROA
2009 2010 2011 2012
NII 509 788 1,247 1,616
NIM 2.45% 2.29% 2.30% 2.52%
2.15%
2.20%
2.25%
2.30%
2.35%
2.40%
2.45%
2.50%
2.55%
-200 400 600 800
1,000 1,200 1,400 1,600 1,800
NIMN
II
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 12,403 22,193 34,364 37,989
% net NPL to Loans
0.33% 0.06% 0.03% 0.05%
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
0.35%
10,000
15,000
20,000
25,000
30,000
35,000
40,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
98
Headquarters: Kerala, India
Year of Incorporation: 1947
Base interest rate: 10.45%
No. of branches: Over 1,000
No. of ATMs: Over 800
Market Cap (Rs in Crs.): 7,624.44
2012 P/BV : 1.34x
52 week High / Low : 571.00/355.10
Business Overview
Federal bank (formerly know as
Travancore Federal Bank Ltd.) is one of
the oldest Kerala based mid sized
bank, with dominance in the state of
Kerala. It generates ~45% of its
business from Kerala alone, which
accounts for 60% of its total branch
network
In 2006, Ganesh Bank was amalgamated
with the Bank and the 32 branches of the
erstwhile Ganesh Bank of Kurundwad
Ltd. were successfully integrated into
bank's network
Market Data (30-Sep-2012)
Key Management
Company Information
MD & CEO: Mr. Shyam Srinivasan
Director: Mr. P C John
Director: Mr. Suresh Kumar
The Federal BankCompany Profile
- Mr. Shyam SrinivasanNote: 52 week High / Low is taken as on 14th January 2013
“Improved risk
management
practices have kept
the bank‟s NPAs
under check”
99
The Federal BankFinancial Summary (Rs. in Crores)
Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 3,315.38 Rs. 3,673.24 Rs. 4,052.03 Rs. 5,581.72 18.96% Rs. 3,062.34
% Growth 10.79% 10.31% 37.75%
Interest Expense 1,999.24 2,261.77 2,304.49 3,606.67 2,064.79
% Growth 13.13% 1.89% 56.51%
Net Interest Income 1,316.14 1,411.47 1,747.54 1,975.05 14.49% 997.55
% Growth 7.24% 23.81% 13.02%
Non Interest Income 516.02 532.55 518.33 532.20 1.03% 263.74
% Growth 3.20% -2.67% 2.68%
Non-Interest Expense 600.82 703.32 868.54 1,008.06 565.14
Net Income 472.01 439.67 556.47 753.73 16.88% 405.45
% Growth -6.85% 26.57% 35.45%
% Margin 12.32% 10.45% 12.18% 12.33% 12.19%
Balance Sheet
Loans Rs. 22,391.88 Rs. 26,950.11 Rs. 31,957.81 Rs. 37,945.85 19.22% Rs. 36,299.18
% Growth 20.36% 18.58% 18.74%
Deposits 32,192.31 36,049.29 42,988.45 48,934.73 14.98% 49,518.07
% Growth 11.98% 19.25% 13.83%
Equity 4,290.41 4,630.10 5,017.70 5,592.29 9.24% 6,111.79
% Growth 7.92% 8.37% 11.45%
Investments 12,073.51 12,981.88 14,407.91 17,102.02 18,550.22
% Growth 7.52% 10.98% 18.70%
Ratios
NIM % 3.59% 3.34% 3.54% 3.44%
Cost to Income 31.21% 34.86% 36.94% 39.40%
Return on Assets % 1.32% 1.07% 1.17% 1.35%
Return on Equity % 11.50% 9.86% 11.54% 14.21%
Loan Deposit Ratio 69.56% 74.76% 74.34% 77.54%
Capital Adequacy Ratio 20.14% 17.27% 15.39% 13.83%
The Federal BankFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 32,192 36,049 42,988 48,935
Loans 22,392 26,950 31,958 37,946
Deposits (y-o-y) 11.98% 19.25% 13.83%
Loans (y-o-y) 20.36% 18.58% 18.74%
0%
5%
10%
15%
20%
25%
-
10,000
20,000
30,000
40,000
50,000
60,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 472 440 556 754
ROE (%) 11.50% 9.86% 11.54% 14.21%
ROA(%) 1.32% 1.07% 1.17% 1.35%
0%
2%
4%
6%
8%
10%
12%
14%
16%
-
100
200
300
400
500
600
700
800
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 1,316 1,411 1,748 1,975
NIM 3.59% 3.34% 3.54% 3.44%
3.20%3.25%3.30%3.35%3.40%3.45%3.50%3.55%3.60%3.65%
-
500
1,000
1,500
2,000
2,500
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 22,392 26,950 31,958 37,946
% net NPL to Loans
0.30% 0.48% 0.60% 0.53%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
10,000
15,000
20,000
25,000
30,000
35,000
40,000
% o
f N
PL
to L
oan
s
Loan
s
Loan & Provision NPLLoans & % of net NPL to Loans
100
Banking Industry
Section IX: Listed Public Banks in India
Common Stock ComparisonPublic Banks in India (Rs. in Crores)
Note: Market data as on 31st September 2012 and B/V or shareholder‟s equity and Net Income figures are based on 31st March 2012 (Financial Year closing)
Source: Company Financial Statements as on 31st March 2012 and Research Reports
102
FY12 FY 13E FY12 FY 13E
1 State Bank of India Rs. 150,173.12 Rs. 106,230.01 Rs. 116,869.50 Rs. 15,343.10 Rs. 16,488.50
2 Bank Of Baroda 32,830.26 27,476.90 31,001.60 5,007.00 4,344.90
3 Punjab National Bank 28,480.83 27,817.10 31,509.60 4,884.20 4,667.60
4 Canara Bank 19,099.95 22,690.00 25,358.20 3,282.70 3,312.90
5 Bank of India 17,810.14 20,961.80 23,227.10 2,677.50 2,797.80
6 Union Bank of India 11,432.15 14,522.10 16,164.10 1,787.20 2,157.40
7 Oriental Bank of Commerce 8,799.52 11,942.50 13,085.10 1,141.60 1,481.70
8 Allahbad Bank 7,327.88 10,869.53 11,700.00 1,867.00 1,513.00
S.No Banks
B/V or Shareholder's equity Net income
Market Cap
FY12 FY 13E FY12 FY 13E FY12 FY 13E FY12 FY 13E
1 State Bank of India 9.79x 9.11x 1.41x 1.28x 16.18% 14.78% 0.88% 0.86%
2 Bank Of Baroda 6.56 7.56 1.19 1.06 20.66% 14.86% 1.24% 0.90%
3 Punjab National Bank 5.83 6.10 1.02 0.90 19.80% 15.74% 1.17% 0.95%
4 Canara Bank 5.82 5.77 0.84 0.75 15.36% 13.79% 0.92% 0.84%
5 Bank of India 6.65 6.37 0.85 0.77 13.06% 12.66% 0.73% 0.67%
6 Union Bank of India 6.40 5.30 0.79 0.71 13.10% 14.06% 0.72% 0.77%
7 Oriental Bank of Commerce 7.71 5.94 0.74 0.67 9.91% 11.84% 0.67% 0.78%
8 Allahbad Bank 3.92 4.84 0.67 0.63 19.27% 13.41% 1.12% 0.79%
Average 6.58x 6.37x 0.94x 0.85x 15.92% 13.89% 0.93% 0.82%
Median 6.48 6.02 0.85 0.76 15.77% 13.93% 0.90% 0.82%
Minimum 3.92 4.84 0.67 0.63 9.91% 11.84% 0.67% 0.67%
Maximum 9.79 9.11 1.41 1.28 20.66% 15.74% 1.24% 0.95%
S.No Banks
ROE(%) ROA (%)P/E (x) P/BV (x)
Profiles of the Major Players
Listed Players
104
Headquarters: Mumbai, India
Year of Incorporation: 1806
Base interest rate: 9.75%
No. of branches: Over 14,000
No. of ATMs: Over 10,000
Market Cap (Rs in Crs.): 150,173.12
2012 P/BV : 1.41x
52 week High / Low : 2,551.70/1,748.40
Business Overview
State Bank of India (SBI) is the India‟s
oldest and largest bank by
revenue, assets and market
capitalization
SBI has launched various cost-effective
channels, such as SBI Tiny Card
(biometrically enabled card), Kiosk
banking (internet enabled kiosk/computer
with biometric validation) and cell phone
messaging channel
The bank also has more than 170
branches in ~30 foreign
countries, including multiple locations in
the US, Canada, and Nigeria
Market Data ( 30-Sep-2012)
Key Management
Company Information
MD & CEO: Mr. Pratip Chaudhari
Managing Director:Mr. Hemant G.
Contractor
Managing Director: Mr. Diwakar Gupta
Managing Director: Mr. A. Krishna Kumar
State Bank of IndiaCompany Profile
- Mr. Pratip Chaudhari Note: 52 week High / Low is taken as on 14th January 2013
“The objective of the lending
rate cut is to improve demand
for assets which in our view
could have a positive cascading
effect on related industries”
105
State Bank of IndiaCompany Profile : SBI Bank
The State Bank Group includes a network of eight banking subsidiaries and several non-
banking subsidiaries
The Eight Banking subsidiaries are as follows:
– State Bank of Bikaner and Jaipur (SBBJ)
– State Bank of Hyderabad (SBH)
– State Bank of India (SBI)
– State Bank of Indore (SBIR)
– State Bank of Mysore (SBM)
– State Bank of Patiala (SBP)
– State Bank of Saurashtra (SBS)
– State Bank of Travancore (SBT)
Subsidiaries of SBI
Banking segments of SBI
Treasury
Includes investment
portfolio and trading
in foreign exchange
contracts and
derivative contracts
Corporate/Wholesale
Comprises of lending
activities of
Corporate Accounts
Group, Mid
Corporate Accounts
Group and Stressed
Assets Management
Group
Retail
Comprises of
branches in National
Banking Group, which
includes personal
banking
activities, including
lending activities to
corporate customers
Other Services
NRI Services
ATM Services
Demat Services
E-Pay/E Rail
Broking Services
106
State Bank of IndiaFinancial Summary (Rs. in Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 91,667.01 Rs. 100,080.73 Rs. 113,636.44 Rs. 147,197.38 17.10% Rs. 82,275.40
% Growth 9.18% 13.54% 29.53%
Interest Expense 62,626.46 66,637.51 68,086.40 89,319.55 51,806.11
% Growth 6.40% 2.17% 31.19%
Net Interest Income 29,040.55 33,443.22 45,550.04 57,877.83 25.84% 30,469.29
% Growth 15.16% 36.20% 27.06%
Non Interest Income 21,426.08 33,771.10 34,207.48 29,835.44 11.67% 14,424.77
% Growth 57.62% 1.29% -12.78%
Non-Interest Expense 26,571.72 42,415.39 46,518.01 46,856.03 24,301.08
Net Income 10,955.29 11,733.83 10,684.95 15,343.09 11.88% 9,450.01
% Growth 7.52% -6.94% 42.87%
% Margin 9.69% 8.77% 7.23% 8.67% 9.77%
Balance Sheet
Loans Rs. 750,362.39 Rs. 869,501.64 Rs. 1,006,401.55 Rs. 1,163,670.21 15.75% 1,231,129.25
% Growth 15.88% 15.74% 15.63%
Deposits 1,011,988.33 1,116,464.57 1,255,562.48 1,414,689.40 11.81% 1,522,606.90
% Growth 10.32% 12.46% 12.67%
Equity 72,390.39 83,135.58 83,471.25 106,230.01 13.64% 116,426.35
% Growth 14.84% 0.40% 27.27%
Investments 372,231.45 412,749.26 419,066.45 460,949.14 534,487.86
% Growth 10.89% 1.53% 9.99%
Ratios
NIM % 2.13% 2.24% 2.95% 3.40%
Cost to Income 46.62% 52.59% 47.60% 45.23%
Return on Assets % 0.96% 0.87% 0.72% 0.92%
Return on Equity % 16.21% 14.98% 12.98% 16.27%
Loan Deposit Ratio 74.15% 77.88% 80.16% 82.26%
Capital Adequacy Ratio 14.25% 13.39% 11.98% 13.86%
107
State Bank of IndiaFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 1,011,988 1,116,465 1,255,562 1,414,689
Loans 750,362 869,502 1,006,402 1,163,670
Deposits (y-o-y) 10.32% 12.46% 12.67%
Loans (y-o-y) 15.88% 15.74% 15.63%
0%2%4%6%8%10%12%14%16%18%
-200,000 400,000 600,000 800,000
1,000,000 1,200,000 1,400,000 1,600,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 10,955 11,734 10,685 15,343
ROE (%) 16.21% 14.98% 12.98% 16.27%
ROA(%) 0.96% 0.87% 0.72% 0.92%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 29,041 33,443 45,550 57,878
NIM 2.13% 2.24% 2.95% 3.40%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
NIMN
II
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 750,362 869,502 1,006,402 1,163,670
% net NPL to Loans 1.79% 1.72% 1.63% 1.82%
1.50%
1.55%
1.60%
1.65%
1.70%
1.75%
1.80%
1.85%
10,000
210,000
410,000
610,000
810,000
1,010,000
1,210,000
1,410,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
108
Headquarters: Baroda, India
Year of Incorporation: 1908
Base interest rate: 10.50%
No. of branches: Over 4,000
No. of ATMs: Over 1,800
Market Cap (Rs in Crs.): 32,830.26
2012 P/BV : 1.19x
52 week High / Low : 899/605.55
Business Overview
Bank of Baroda is a 103 year old State-
owned Bank with a good mix of modern &
contemporary personality, offering banking
products and services to large
industrial, SME, retail & agricultural
customers across the country
The Bank has developed an Integrated
Global Treasury Solution in its major
territories such as the UK, UAE, Bahamas
Bahrain, Honkong, Singapore, Belgium,
USA and India to reduce the cost of
operations and improve funds
management
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman & MD: Mr. M. D. Mallya
Executive Director: Mr. S. K. Jain
Executive Director: Mr. P. Srinivas
Executive Director: Mr. Ranjan Dhawan
Bank of BarodaCompany Profile
- Mr. M. D. Mallya Note: 52 week High / Low is taken as on 14th January 2013
“The Indian
banking industry
has always been
resilient in facing
challenges”
109
Bank of BarodaFinancial Summary (Rs. in Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 15,547.56 Rs. 17,234.82 Rs. 22,513.31 Rs. 30,488.49 25.17% Rs. 17,280.16
% Growth 10.85% 30.63% 35.42%
Interest Expense 10,167.35 11,023.34 13,349.60 19,724.34 11,619.79
% Growth 8.42% 21.10% 47.75%
Net Interest Income 5,380.21 6,211.48 9,163.71 10,764.15 26.01% 5,660.37
% Growth 15.45% 47.53% 17.46%
Non Interest Income 2,909.02 2,965.30 3,287.10 4,100.42 12.12% 1,599.11
% Growth 1.93% 10.85% 24.74%
Non-Interest Expense 3,712.36 3,938.96 4,815.87 5,402.42 2,623.72
Net Income 2,384.08 3,179.30 4,433.71 5,248.57 30.09% 2,440.25
% Growth 33.36% 39.46% 18.38%
% Margin 12.92% 15.74% 17.18% 15.17% 12.93%
Balance Sheet
Loans Rs. 145,559.50 Rs. 177,711.90 Rs. 232,085.11 Rs. 292,077.14 26.13% 292,180.92
% Growth 22.09% 30.60% 25.85% .
Deposits 196,608.44 245,951.15 311,603.25 392,615.95 25.93% 408,149.50
% Growth 25.10% 26.69% 26.00%
Equity 13,324.70 15,714.59 21,826.57 28,516.30 28.87% 29,793.89
% Growth 17.94% 38.89% 30.65%
Investments 53,626.58 63,163.27 74,154.42 86,697.00 101,430.13
% Growth 17.78% 17.40% 16.91%
Ratios
NIM % 2.56% 2.44% 2.81% 2.68%
Cost to Income 45.38% 43.57% 39.87% 37.55%
Return on Assets % 1.15% 1.24% 1.37% 1.28%
Return on Equity % 19.34% 21.91% 23.64% 20.87%
Loan Deposit Ratio 74.04% 72.25% 74.48% 74.39%
Capital Adequacy Ratio 14.05% 14.36% 14.52% 14.67%
110
Bank of BarodaFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 196,608 245,951 311,603 392,616
Loans 145,559 177,712 232,085 292,077
Deposits (y-o-y) 25.10% 26.69% 26.00%
Loans (y-o-y) 22.09% 30.60% 25.85%
0%
5%
10%
15%
20%
25%
30%
35%
-50,000
100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 2,384 3,179 4,434 5,249
ROE (%) 19.34% 21.91% 23.64% 20.87%
ROA(%) 1.15% 1.24% 1.37% 1.28%
0%
5%
10%
15%
20%
25%
-
1,000
2,000
3,000
4,000
5,000
6,000
RO
E &
RO
A
PA
T
PAT, ROE & ROA
2009 2010 2011 2012
NII 5,380 6,211 9,164 10,764
NIM 2.56% 2.44% 2.81% 2.68%
2.20%
2.30%
2.40%
2.50%
2.60%
2.70%
2.80%
2.90%
-
2,000
4,000
6,000
8,000
10,000
12,000
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 145,559 177,712 232,085 292,077
% net NPL to Loans 0.31% 0.34% 0.35% 0.54%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
10,000
60,000
110,000
160,000
210,000
260,000
310,000
% o
f N
PL
to L
oan
s
Loan
s
Loan & Provision NPLLoans & % of net NPL to Loans
111
Headquarters: New Delhi, India
Year of Incorporation: 1895
Base interest rate: 10.50%
No. of branches: Over 5,900
No. of ATMs: Over 6,000
Market Cap (Rs in Crs.): 28,480.83
2012 P/BV : 1.02x
52 week High / Low : 1,091.05/659.20
Business Overview
Punjab National Bank (PNB) is the
largest nationalised Bank in the country
in terms of its branch network, total
business, advances, operating profit
and low cost CASA deposits
Apart from offering banking
products, the bank has also taken up
Wealth Management Services such as
credit card / debit card; bullion
business; life/non-life insurance
PNB Prerna and PNB Pragati are two
corporate social responsibility
initiatives undertaken by the bank
Market Data ( 30-Sep-2012)
Key Management
Company Information
Chairman & MD: Mr. K. R. Kamath
Executive Director: Mr. Rakesh Sethi
Executive Director:Mr. Usha A
Subramanian
Executive Director: Mr. S. R. Bansal
Punjab National BankCompany Profile
- Mr. K. R. Kamath Note: 52 week High / Low is taken as on 14th January 2013
“The status of the
banking sector in 2013
will depend on how the
economy behaves
over the next one
year”
Punjab National BankFinancial Summary (Rs. in Crores)
112
Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 19,578.71 Rs. 21,937.57 Rs. 27,551.24 Rs. 37,447.31 24.13% Rs. 20,966.08
% Growth 12.05% 25.59% 35.92%
Interest Expense 12,576.36 13,230.01 15,506.68 23,741.40 13,621.57
% Growth 5.20% 17.21% 53.10%
Net Interest Income 7,002.35 8,707.56 12,044.56 13,705.91 25.09% 7,344.51
% Growth 24.35% 38.32% 13.79%
Non Interest Income 3,057.08 3,498.17 3,655.36 4,239.51 11.52% 2,071.38
% Growth 14.43% 4.49% 15.98%
Non-Interest Expense 4,179.23 4,725.82 6,368.62 7,044.23 4,042.14
Net Income 3,200.10 3,988.48 4,596.64 5,052.49 16.44% 2,311.25
% Growth 24.64% 15.25% 9.92%
% Margin 14.14% 15.68% 14.73% 12.12% 10.03%
Balance Sheet
Loans Rs. 158,453.42 Rs. 191,110.85 Rs. 247,746.58 Rs. 301,346.52 23.90% 294,746.52
% Growth 20.61% 29.64% 21.63%
Deposits 210,659.17 251,457.66 316,231.93 384,408.22 22.20% 400,747.49
% Growth 19.37% 25.76% 21.56%
Equity 15,560.22 18,702.74 22,614.66 29,203.84 23.35% 30,117.99
% Growth 20.20% 20.92% 29.14%
Investments 65,391.68 79,253.88 96,911.28 125,746.34 128,980.06
% Growth 21.20% 22.28% 29.75%
Ratios
NIM % 2.91% 3.02% 3.27% 3.08%
Cost to Income 42.50% 39.39% 41.27% 39.75%
Return on Assets % 1.40% 1.43% 1.33% 1.18%
Return on Equity % 22.14% 23.03% 21.97% 19.27%
Loan Deposit Ratio 75.22% 76.00% 78.34% 78.39%
Capital Adequacy Ratio 14.03% 14.82% 13.01% 13.12%
Punjab National BankFinancial Summary (Rs. in Crores)
113
2009 2010 2011 2012
Deposits 210,659 251,458 316,232 384,408
Loans 158,453 191,111 247,747 301,347
Deposits (y-o-y) 19.37% 25.76% 21.56%
Loans (y-o-y) 20.61% 29.64% 21.63%
0%
5%
10%
15%
20%
25%
30%
35%
-50,000
100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 3,200 3,988 4,597 5,052
ROE (%) 22.14% 23.03% 21.97% 19.27%
ROA(%) 1.40% 1.43% 1.33% 1.18%
0%
5%
10%
15%
20%
25%
-
1,000
2,000
3,000
4,000
5,000
6,000
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 7,002 8,708 12,045 13,706
NIM 2.91% 3.02% 3.27% 3.08%
2.70%
2.80%
2.90%
3.00%
3.10%
3.20%
3.30%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 158,453 191,111 247,747 301,347
% net NPL to Loans 0.17% 0.53% 0.85% 1.52%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
10,000
60,000
110,000
160,000
210,000
260,000
310,000
360,000
% o
f N
PL
to L
oan
s
Loan
s
Loan & Provision NPLLoans & % of net NPL to Loans
114
Headquarters: Bangalore, India
Year of Incorporation: 1906
Base interest rate: 10.50%
No. of branches: Over 3,600
No. of ATMs: Over 3,100
Market Cap (Rs in Crs.): 19,099.95
2012 P/BV : 0.84x
52 week High / Low : 566.00/306.25
Business Overview
Over the years, Canara Bank has been
scaling up its market position to emerge as
a major 'Financial Conglomerate' with as
many as nine subsidiaries/sponsored
institutions/joint ventures in India and
abroad
Besides commercial banking, the Bank has
also carved a distinctive mark in various
corporate social responsibilities
areas, namely, serving national
priorities, promoting rural development and
enhancing rural self-employment through
several training institutes
It is the first bank to introduce Centralized
Solution for Service Units
(CSSU), developed in-house adopting the
latest technology in the IT Industry
Market Data ( 30-Sep-2012)
Key Management
Company Information
Chairman &
Managing Director:Mr. R. K . Dubey
Executive Director: Ms Archana S. Bhargava
Executive Director: Mr. Ashok Kumar Gupta
Canara BankCompany Profile
Note: 52 week High / Low is taken as on 17h January 2013
Canara BankFinancial Summary (Rs. in Crores)
115
Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 17,128.56 Rs. 18,755.84 Rs. 23,000.89 Rs. 30,815.64 21.62% Rs. 17,068.40
% Growth 9.50% 22.63% 33.98%
Interest Expense 12,417.96 13,080.80 15,238.92 23,159.47 13,268.06
% Growth 5.34% 16.50% 51.98%
Net Interest Income 4,710.60 5,675.04 7,761.97 7,656.17 17.57% 3,800.34
% Growth 20.47% 36.77% -1.36%
Non Interest Income 2,352.96 2,932.05 2,833.26 3,104.51 9.68% 1,300.68
% Growth 24.61% -3.37% 9.57%
Non-Interest Expense 3,212.06 3,651.42 4,550.30 4,760.02 2,425.16
Net Income 2,042.00 2,999.71 4,034.18 3,341.69 17.84% 1,436.00
% Growth 48.85% 36.70% -16.29%
% Margin 10.48% 13.83% 15.62% 9.85% 7.82%
Balance Sheet
Loans Rs. 138,360.53 Rs. 169,463.86 Rs. 211,448.51 Rs. 232,728.74 18.93% 215,751.01
% Growth 22.48% 24.77% 10.06%
Deposits 186,756.47 234,517.78 293,257.91 326,894.04 20.52% 336,761.62
% Growth 25.57% 25.05% 11.47%
Equity 12,581.11 15,022.38 20,402.16 23,043.40 22.35% 24,130.28
% Growth 19.40% 35.81% 12.95%
Investments 58,425.40 71,120.48 86,499.41 106,496.62 121,255.34
% Growth 21.73% 21.62% 23.12%
Ratios
NIM % 2.78% 2.21% 2.42% 2.14%
Cost to Income 43.61% 40.73% 42.05% 44.02%
Return on Assets % 1.06% 1.30% 1.42% 0.95%
Return on Equity % 22.61% 26.76% 29.47% 18.75%
Loan Deposit Ratio 74.09% 72.26% 72.10% 71.19%
Capital Adequacy Ratio 14.10% 13.43% 15.38% 13.76%
Canara BankFinancial Summary (Rs. in Crores)
116
2009 2010 2011 2012
Deposits 186,756 234,518 293,258 326,894
Loans 138,361 169,464 211,449 232,729
Deposits (y-o-y) 25.57% 25.05% 11.47%
Loans (y-o-y) 22.48% 24.77% 10.06%
0%
5%
10%
15%
20%
25%
30%
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 2,042 3,000 4,034 3,342
ROE (%) 22.61% 26.76% 29.47% 18.75%
ROA(%) 1.06% 1.30% 1.42% 0.95%
0%
5%
10%
15%
20%
25%
30%
35%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
RO
E &
RO
A
PA
T
PAT, ROE & ROA
2009 2010 2011 2012
NIM 4,711 5,675 7,762 7,656
NIM Margin 2.78% 2.21% 2.42% 2.14%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
-1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 138,361 169,464 211,449 232,729
% net NPL to Loans 1.09% 1.06% 1.10% 1.46%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
10,000
60,000
110,000
160,000
210,000
260,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
Headquarters: Mumbai, India
Year of Incorporation: 1906
Base interest rate: 10.50%
No. of branches: Over 4,000
No. of ATMs: Over 3,000
Market Cap (Rs in Crs.): 17,810.14
2012 P/BV : 0.85x
52 week High / Low : 408/253.30
Business Overview
Bank of India was founded on 7th
September, 1906 by a group of eminent
businessmen from Mumbai. The Bank
was under private ownership and control
till July 1969, after which it was
nationalized along with 13 other banks
The Bank has a sizable presence
abroad, with a network of 29 branches
(including five representative office) at
key banking and financial centres such
as London, New
York, Paris, Tokyo, Hong-Kong and
Singapore. International business
accounts for around 17.82% of the Bank's
total business
The bank is always looking forward to
being more consumer centric and
reaching out especially in the rural belts
of the country
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman & MD: Mr. V. R. Iyer
Executive Director: Mr. N. Seshadri
Executive Director: Mr. M. S. Raghvan
Executive Director: Mr. B. B. Sharma
Bank of IndiaCompany Profile
Note: 52 week High / Low is taken as on 14th January 2013
117
Bank of IndiaFinancial Summary (Rs. in Crores)
118
Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 16,416.51 Rs. 17,996.25 Rs. 21,858.43 Rs. 28,610.95 20.34% Rs. 15,714.63
% Growth 9.62% 21.46% 30.89%
Interest Expense 10,880.09 12,163.27 13,980.93 20,216.30 11,475.12
% Growth 11.79% 14.94% 44.60%
Net Interest Income 5,536.42 5,832.98 7,877.50 8,394.65 14.88% 4,239.51
% Growth 5.36% 35.05% 6.56%
Non Interest Income 3,151.00 2,600.66 2,641.83 3,319.24 1.75% 1,734.95
% Growth -17.47% 1.58% 25.64%
Net Income 3,087.54 1,787.15 2,542.42 2,724.85 -4.08% 1,189.30
% Growth -42.12% 42.26% 7.18%
% Margin 15.78% 8.68% 10.38% 8.53% 6.82%
Balance Sheet
Loans Rs. 143,322.61 Rs. 169,031.01 Rs. 213,708.36 Rs. 249,733.44 20.33% 256,147.90
% Growth 17.94% 26.43% 16.86%
Deposits 190,176.67 230,408.21 299,559.40 319,412.53 18.87% 332,694.67
% Growth 21.15% 30.01% 6.63%
Equity 13,656.55 14,445.03 17,636.08 21,414.00 16.18% 22,348.44
% Growth 5.77% 22.09% 21.42%
Investments 52,871.81 68,112.69 86,676.59 88,056.87 90,146.98
% Growth 28.83% 27.25% 1.59%
Ratios
NIM % 2.70% 2.31% 2.44% 2.38%
Cost to Income 36.18% 43.81% 48.49% 42.47%
Return on Assets % 1.52% 0.71% 0.81% 0.74%
Return on Equity % 25.22% 12.51% 15.70% 13.96%
Loan Deposit Ratio 75.36% 73.36% 71.34% 78.19%
Capital Adequacy Ratio 13.10% 12.94% 12.17% 11.95%
Bank of IndiaFinancial Summary (Rs. in Crores)
119
2009 2010 2011 2012
Deposits 190,177 230,408 299,559 319,413
Loans 143,323 169,031 213,708 249,733
Deposits (y-o-y) 21.15% 30.01% 6.63%
Loans (y-o-y) 17.94% 26.43% 16.86%
0%
5%
10%
15%
20%
25%
30%
35%
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 3,088 1,787 2,542 2,725
ROE (%) 25.22% 12.51% 15.70% 13.96%
ROA(%) 1.52% 0.71% 0.81% 0.74%
0%
5%
10%
15%
20%
25%
30%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 5,536 5,833 7,878 8,395
NIM 2.70% 2.31% 2.44% 2.38%
2.10%
2.20%
2.30%
2.40%
2.50%
2.60%
2.70%
2.80%
-1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
NIMNII
NII & NIM
2009 2010 2011 2012
Loans 143,323 169,031 213,708 249,733
% net NPL to Loans 0.44% 1.31% 0.91% 1.47%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
10,000
60,000
110,000
160,000
210,000
260,000
310,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
Deposits & Loans
120
Headquarter: Mumbai, India
Year of Incorporation: 1919
Base interest rate: 10.50%
No. of branches: Over 2,800
No. of ATMs: Over 2,500
Market Cap (Rs in Crs.): 11,432.15
2012 P/BV : 0.79x
52 week High / Low : 288/150.50
Business Overview
Union Bank of India is a heritage
institution. Its head office building in
Mumbai was inaugurated by Mahatma
Gandhi himself
It distributes Life Insurance products
under a corporate agency tie-up with
Star Union Dia-ichi (SUD) Life
Insurance Co. Ltd.
In order to enter the Mutual Fund
Product space in a meaningful
way, Union Bank of India has tied up with
KBC, Belgium to set up a joint venture for
Mutual Fund Products -- Union KBC
Asset Management Company Ltd
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman & MD: Mr. D Sarkar
Executive Director:Mr. Suresh Kumar
Jain
Executive Director: Mr. S. S. Mundra
Executive Director: Mr. B. M. Sharma
Union Bank of IndiaCompany Profile
- Mr. D Sarkar Note: 52 week High / Low is taken as on 14th January 2013
“The restructuring of loans will
continue and it may be the
only way forward for reviving
some troubled units.
However, Corporates should
not take undue advantage of
the mechanism”
121
Union Bank of IndiaFinancial Summary (Rs. in Crores)Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 11,889.38 Rs. 13,302.68 Rs. 16,460.94 Rs. 21,152.48 21.17% Rs. 12,179.73
% Growth 11.89% 23.74% 28.50%
Interest Expense 8,075.81 9,110.27 10,234.31 14,229.73 8,507.82
% Growth 12.81% 12.34% 39.04%
Net Interest Income 3,813.57 4,192.41 6,226.63 6,922.75 21.99% 3,671.91
% Growth 9.93% 48.52% 11.18%
Non Interest Income 1,482.55 1,974.74 2,039.72 2,316.31 16.04% 1,037.03
% Growth 33.20% 3.29% 13.56%
Non-Interest Expense 2,214.11 2,507.85 3,838.15 4,012.28 2,169.23
Net Income 1,726.55 2,074.92 2,205.16 1,759.74 0.64% 1,066.15
% Growth 20.18% 6.28% -20.20%
% Margin 12.91% 13.58% 11.92% 7.50% 8.07%
Balance Sheet
Loans Rs. 96,534.23 Rs. 119,315.30 Rs. 150,993.22 Rs. 177,882.09 22.60% 172,901.14
% Growth 23.60% 26.55% 17.81%
Deposits 138,702.83 170,039.74 202,400.01 222,776.52 17.11% 226,094.92
% Growth 22.59% 19.03% 10.07%
Equity 8,740.36 10,423.78 12,821.44 14,667.69 18.83% 15,680.17
% Growth 19.26% 23.00% 14.40%
Investments 42,996.96 54,403.53 58,913.15 63,103.81 71,885.22
% Growth 26.53% 8.29% 7.11%
Ratios
NIM % 2.57% 2.25% 2.74% 2.74%
Cost to Income 41.81% 40.66% 47.85% 43.15%
Return on Assets % 1.21% 1.17% 1.02% 0.70%
Return on Equity % 21.46% 21.65% 18.84% 12.66%
Loan Deposit Ratio 69.60% 70.17% 74.60% 79.85%
Capital Adequacy Ratio 13.27% 12.51% 12.95% 11.85%
122
Union Bank of IndiaFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Loans 96,534 119,315 150,993 177,882
% net NPL to Loans
0.34% 0.81% 1.19% 1.70%
0.00%0.20%0.40%0.60%0.80%1.00%1.20%1.40%1.60%1.80%
10,000 30,000 50,000 70,000 90,000
110,000 130,000 150,000 170,000 190,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
2009 2010 2011 2012
Deposits 138,703 170,040 202,400 222,777
Loans 96,534 119,315 150,993 177,882
Deposits (y-o-y) 22.59% 19.03% 10.07%
Loans (y-o-y) 23.60% 26.55% 17.81%
0%
5%
10%
15%
20%
25%
30%
-
50,000
100,000
150,000
200,000
250,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 1,727 2,075 2,205 1,760
ROE (%) 21.46% 21.65% 18.84% 12.66%
ROA(%) 1.21% 1.17% 1.02% 0.70%
0%
5%
10%
15%
20%
25%
-
500
1,000
1,500
2,000
2,500
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 3,814 4,192 6,227 6,923
NIM 2.57% 2.25% 2.74% 2.74%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
NIMNII
NII & NIM Deposits & Loans
123
Headquarters: New Delhi, India
Year of Incorporation: 1945
Base interest rate: 10.65%
No. of branches: Over 1,900
No. of ATMs: Over 1,300
Market Cap (Rs in Crs.): 8,799.52
2012 P/BV : 0.74x
52 week High / Low : 368.30/200
Business Overview
Oriental Bank of Commerce started under
its founding father, Late Rai Bahadur Lala
Sohan Lal, the first Chairman of the
Bank
The Bank has been constantly
undertaking new initiatives in
Information Technology with an increased
focus on customer service and setting up of
alternate new delivery channels
The bank has also introduced the
OBCmpay, a mobile banking portal and
OBC e-shoppe for purchasing products
online
It has put in place the required IT
Infrastructure for implementation of the
"Speed clearing" project of the RBI
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman & MD: Mr. S. L. Bansal
Executive Director: Mr. V. Kannan
Executive Director: Mr. Bhupinder Nayyar
Executive Director: Ms. S. C. Sinha
Oriental Bank of CommerceCompany Profile
Note: 52 week High / Low is taken as on 14th January 2013
124
Oriental Bank of CommerceFinancial Summary (Rs. in Crores)
Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 8,856.47 Rs. 10,257.13 Rs. 12,087.81 Rs. 15,814.88 21.32% Rs. 8,701.74
% Growth 15.82% 17.85% 30.83%
Interest Expense 6,859.97 7,349.69 7,910.26 11,599.09 6,418.79
% Growth 7.14% 7.63% 46.63%
Net Interest Income 1,996.50 2,907.44 4,177.55 4,215.79 28.29% 2,282.95
% Growth 45.63% 43.68% 0.92%
Non Interest Income 1,071.32 1,200.04 960.07 1,240.25 5.00% 815.20
% Growth 12.02% -20.00% 29.18%
Non-Interest Expense 1,397.84 1,685.98 1,892.48 2,315.46 1,280.37
Net Income 890.42 1,134.68 1,502.87 1,141.56 8.63% 693.61
% Growth 27.43% 32.45% -24.04%
% Margin 8.97% 9.90% 11.52% 6.69% 7.29%
Balance Sheet
Loans Rs. 68,500.38 Rs. 83,489.31 Rs. 95,908.23 Rs. 111,977.72 17.80% Rs. 117,821.35
% Growth 21.88% 14.87% 16.76%
Deposits 98,368.85 120,257.59 139,054.26 155,694.29 16.54% 164,174.49
% Growth 22.25% 15.63% 11.97%
Equity 7,403.45 8,237.95 11,097.15 11,942.50 17.28% 11,928.31
% Growth 11.27% 34.71% 7.62%
Investments 28,488.95 35,785.32 49,545.41 52,101.33 55,298.77
% Growth 25.61% 38.45% 5.16%
Ratios
NIM % 1.92% 2.28% 2.70% 2.44%
Return on Assets % 0.88% 0.91% 1.01% 0.67%
Return on Equity % 13.51% 14.51% 15.55% 9.91%
Loan Deposit Ratio 69.64% 69.43% 68.97% 71.92%
Capital Adequacy Ratio 12.98% 12.54% 14.23% 12.69%
125
Oriental Bank of CommerceFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 98,369 120,258 139,054 155,694
Loans 68,500 83,489 95,908 111,978
Deposits (y-o-y) 22.25% 15.63% 11.97%
Loans (y-o-y) 21.88% 14.87% 16.76%
0%
5%
10%
15%
20%
25%
-20,000 40,000 60,000 80,000
100,000 120,000 140,000 160,000 180,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 890 1,135 1,503 1,142
ROE (%) 13.51% 14.51% 15.55% 9.91%
ROA(%) 0.88% 0.91% 1.01% 0.67%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-
200
400
600
800
1,000
1,200
1,400
1,600
RO
E &
RO
A
PA
T
PAT, ROA & ROE
2009 2010 2011 2012
NII 1,997 2,907 4,178 4,216
NIM 1.92% 2.28% 2.70% 2.44%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
-500
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 68,500 83,489 95,908 111,978
% net NPL to Loans
0.65% 0.87% 0.98% 2.21%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
10,000
30,000
50,000
70,000
90,000
110,000
130,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
126
Headquarters: Kolkata, India
Year of Incorporation: 1865
Base interest rate: 10.50%
No. of branches: Over 2,500
No. of ATM‟s: Over 1,800
Market Cap (Rs in Crs.): 7,327.88
2012 P/BV : 0.67x
52 week High / Low : 211.30/115.40
Business Overview
The Oldest Joint Stock Bank of the
Country, Allahabad Bank was founded
on April 24, 1865 by a group of
Europeans at Allahabad
The bank instituted AllBank Finance
Ltd., a wholly owned subsidiary for
Merchant Banking in 1951
In 2006, the bank transcended beyond
the national boundary, opening
Representative office at
Shenzhen, China, following that in
2007, it opened its first overseas branch
in Hong-kong
It has signed a Memorandum of
Understanding with the Chamber of
Indian Micro, Small and Medium
Enterprises (CIMSME) to shore up its
priority sector lending
Market Data (30-Sep-2012)
Key Management
Company Information
Chairman & MD: Ms. S. A. Panse
Executive Director: Mr. T. R. Chawla
Executive Director: Mr. Arun Tiwary
Nominee Director:Mr. Shashank
Saksena(GOI)
Allahabad BankCompany Profile
Note: 52 week High / Low is taken as on 14th January 2013
127
Allahabad BankFinancial Summary (Rs. in Crores)
Statement of Profit and Loss
Particulars 2009 2010 2011 2012 CAGR 2013(6M)
Interest Income Rs. 7,364.81 Rs. 8,377.18 Rs. 11,024.62 Rs. 15,527.67 28.23% Rs. 8,738.67
% Growth 13.75% 31.60% 40.85%
Interest Expense 5,205.87 5,718.16 6,992.85 10,359.97 6,258.50
% Growth 9.84% 22.29% 48.15%
Net Interest Income 2,158.94 2,659.02 4,031.77 5,167.70 33.77% 2,480.17
% Growth 23.16% 51.63% 28.17%
Non Interest Income 1,163.70 1,567.71 1,375.14 1,305.16 3.90% 611.69
% Growth 34.72% -12.28% -5.09%
Net Income 790.47 1,228.46 1,440.51 1,864.34 33.11% 906.14
% Growth 55.41% 17.26% 29.42%
% Margin 9.27% 12.35% 11.62% 11.08% 9.69%
Balance Sheet
Loans Rs. 58,801.80 Rs. 71,608.15 Rs. 93,627.87 Rs. 111,145.94 23.64% Rs. 110,847.37
% Growth 21.78% 30.75% 18.71%
Deposits 84,966.53 106,050.74 131,882.16 159,583.87 23.38% 161,957.03
% Growth 24.81% 24.36% 21.00%
Equity 6,036.82 6,963.97 8,722.65 10,718.86 21.09% 11,261.31
% Growth 15.36% 25.25% 22.89%
Investments 29,825.34 38,637.57 43,492.21 54,524.21 57,959.69
% Growth 29.55% 12.56% 25.37%
Ratios
NIM % 2.30% 2.26% 2.78% 2.96%
Cost to Income 42.40% 38.83% 43.36% 41.65%
Return on Assets % 0.87% 1.12% 1.05% 1.11%
Return on Equity % 13.84% 18.90% 18.37% 19.18%
Loan Deposit Ratio 69.21% 67.52% 70.99% 69.65%
Capital Adequacy Ratio 13.11% 13.62% 12.96% 12.83%
128
Allahabad BankFinancial Summary (Rs. in Crores)
2009 2010 2011 2012
Deposits 84,967 106,051 131,882 159,584
Loans 58,802 71,608 93,628 111,146
Deposits (y-o-y) 24.81% 24.36% 21.00%
Loans (y-o-y) 21.78% 30.75% 18.71%
0%
5%
10%
15%
20%
25%
30%
35%
-20,000 40,000 60,000 80,000
100,000 120,000 140,000 160,000 180,000
Y-O
Y
De
po
sits
& L
oan
s
2009 2010 2011 2012
PAT 790 1,228 1,441 1,864
ROE (%) 13.84% 18.90% 18.37% 19.18%
ROA(%) 0.87% 1.12% 1.05% 1.11%
0%
5%
10%
15%
20%
25%
-200 400 600 800
1,000 1,200 1,400 1,600 1,800 2,000
RO
E &
RO
A
PA
T
PAT, ROE & ROA
2009 2010 2011 2012
NII 2,158 2,659 4,031 5,167
NIM 2.30% 2.26% 2.78% 2.96%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
-
1,000
2,000
3,000
4,000
5,000
6,000
NIMNII
NII & NIM Deposits & Loans
2009 2010 2011 2012
Loans 58,802 71,608 93,628 111,146
% net NPL to Loans
0.72% 0.66% 0.79% 0.98%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
10,000
30,000
50,000
70,000
90,000
110,000
130,000
% o
f N
PL
to L
oan
s
Loan
s
Loans & % of net NPL to Loans
129
Dinodia Capital Advisors
Dinodia Capital Advisors
Corporate Profile
Dinodia Capital Advisors is a Financial Consulting firm
based in New Delhi, India. It assists clients across all
industries grow, both organically and inorganically. The
firm helps clients Raise Capital. Execute Merger &
Acquisition opportunities. Restructure, Transform and
Turnaround businesses. Resolve challenging problems.
Take advantage of financial and strategic opportunities.
Balance investor expectations. DELIVER VALUE
130
Dinodia Capital Advisors Service Offerings
Dinodia Capital Advisors Advises Clients on :
Mergers and AcquisitionsWe help in conducting a robust scan
of the market and selecting the most
suitable buyer or seller
Capital RaisingWe advice clients on their capital
needs and find them the right
partner who brings more than just
capital
RestructuringWe advise on business
restructurings to help achieve
financial, strategic and operational
efficiency
India Entry StrategyWe help set up and incubate
businesses in India, acting as a
trusted advisors to facilitate the
India entry strategy
Organizational
TransformationWe work with companies to put
systems, processes and
people in place to help take
advantage of both organic and
inorganic synergies
TurnaroundsWe work closely with companies to
help devise and implement a
turnaround strategy by plugging the
deficiencies of
management, technology, capital or
partnerships
Dinodia Capital Advisors Private Limited C-37, Connaught Place , New-Delhi 110001, Website - www.dinodiacapital.com
Tel No: +91 11 2341 7692, 2341 5272, Fax No: +91 11 4151 3666
Email: [email protected]
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