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Transcript of IDBI, 1Q FY 2014
7/27/2019 IDBI, 1Q FY 2014
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Please refer to important disclosures at the end of this report 1
Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)
NII 1,475 1,440 2.4 1271 16.1
Pre-prov. profit 1,317 1,594 (17.4) 1132 16.3
PAT 307 554 (44.6) 427 (28.2)
Source: Company, Angel Research
IDBI Bank delivered a weak set of numbers for 1QFY2014, dragged by assetquality challenges. While the NII grew by 16.1% yoy, non-interest income grew by 37.9% yoy, leading to operating income and pre-provisioning profit growth of22.4% and 16.3% yoy, respectively. The bank witnessed sequential asset quality deterioration, as its absolute Gross NPA levels increased by 23.4% sequentially,
on an already large base. The bank increased provisioning by 62.7% yoy, whichresulted in 28.2% yoy earnings de-growth.
NIM declines qoq; Slippages spike to 3.4%: During the quarter, the bank’s loanbook grew at a subdued pace of 7.1% yoy (declined by 8.8% qoq). Goingforward, the Management has guided for advances growth of ~10-12% forFY2014, with primary focus on increasing PSL share in the overall loan book.Savings deposits grew by 25.8% yoy, while current deposits declined by 8.6% yoy.CASA deposits grew by 8.9% yoy, which considering a decline of 4.4% yoy inoverall deposits (due to shedding of bulk deposits), aided a 251bp yoy improvement in CASA ratio to 20.6% (454bp lower sequentially on back of 53.2%qoq de-growth in volatile current deposits). NIMs declined by 7bp qoq to 2.12%,as 37bp qoq decline in cost of funds was more than offset by 63bp sequential fall
in yield on assets. Aided by strong growth in income from the forex/derivativessegment (which more than trebled on a yoy basis), the non-interest income(excluding treasury) grew by 21.1% yoy. The bank faced asset quality pressures,as slippages ballooned to ` 1,685cr, as compared to ` 907cr in 4QFY2013. Ofthe slippages during the quarter, ` 663cr came from 4-5 chunky accounts. Annualized slippage ratio spiked to 3.4%, as against 2.0% in 4QFY2013.Recoveries/upgrades during the quarter came in lower sequentially at ` 174crcompared to ` 486cr in 4QFY2013. PCR (incl. technical write-offs) came off by 286bp qoq to 68.0%. During the quarter, the bank restructured advances worth~ ` 650cr. Going forward, the Management guided that a textile exposure couldslip into NPA category in the next few quarters, while the restructuring pipeline forthe bank stands at ~ ` 500cr.
Outlook and valuation: At the CMP, the bank is trading at a valuation of 0.4x
FY2015E P/ABV, (0.5x adjusting for the SASF). Considering the recent macro-economic developments, the pace of asset quality improvement is likely to bemuch slower than earlier anticipated. Hence, we recommend a Neutral rating onthe stock.
Key financials (standalone)
Y/E March (` cr) FY2012 FY2013 FY2014E FY2015E
NII 4,545 5,373 6,321 7,158
% chg 6.5 18.2 17.6 13.2
Net Profit 2,032 1,882 2,065 2,945
% chg 23.1 -7.4 9.7 42.6
NIM (%) 1.7 1.8 1.9 2.0
EPS (`) 15.9 14.1 15.5 22.1
P/E (x) 4.4 4.9 4.5 3.2
P/ABV (x) # 0.5 0.5 0.5 0.4
RoA (%) 0.7 0.6 0.6 0.8
RoE (%) 13.4 10.2 10.2 13.3
Source: Company, Angel Research; Note: # without adjusting for SASF
NEUTRALCMP ` 70
Target Price -
Investment Period -
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 71.7
MF / Banks / Indian Fls 13.6
FII / NRIs / OCBs 3.8
Indian Public / Others 10.8
Abs. (%) 3m 1yr 3yr
Sensex 6.0 16.6 12.4
IDBI Bank (19.0) (25.5) (43.1)
Banking
Market Cap ( ` cr) 9,309
Beta 1.2
52 Week High / Low 118/66
Avg. Daily Volume 237,831
Face Value ( ` ) 10
BSE Sensex 20,150
Nifty 6,029
Reuters Code IDBI.BO
IDBI@IN
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808
Sourabh Taparia
022 – 3935 7800 Ext: 6872
Harshal Patkar
022 – 3935 7800 Ext: 6847
IDBI Bank
Performance Highlights
1QFY2014 Result Update | Banking
July 19, 2013
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 2
Exhibit 1: 1QFY2014 performance (standalone)
Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy) FY2013 FY2012 % chg (yoy)
Interest earned 6,728 6,397 5.2 6,270 7.3 25,064 23,370 7.3
- on Advances / Bills 5,097 4,940 3.2 4,926 3.5 19,549 17,969 8.8- on investments 1,585 1,377 15.1 1,327 19.5 5,335 5,291 0.8
- on balance with RBI & others 39 63 (39.2) 15 153.4 156 46 237.5
- on others 8 16 (53.2) 1 443.0 24 64 (62.7)
Interest Expended 5,253 4,957 6.0 4,999 5.1 19,691 18,825 4.6
Net Interest Income 1,475 1,440 2.4 1,271 16.1 5,373 4,545 18.2
Other income 717 1,147 (37.5) 520 37.9 3,220 2,110 52.6
Other income excl. treasury 574 1,004 (42.8) 473 21.4 2,789 1,953 42.8
- Fee income 381 805 (52.7) 368 3.5 2,237 1,509 48.2
- Treasury income 143 143 - 47 204.3 431 157 174.5
- Recoveries from w-off acc. 11 116 (90.5) 34 (67.6) 237 141 68.1
- Others 182 83 119.6 71 156.3 315 303 3.7
Operating income 2,192 2,587 (15.3) 1,791 22.4 8,593 6,655 29.1
Operating expenses 875 993 (11.8) 659 32.9 3,134 2,607 20.2
- Employee expenses 490 534 (8.2) 316 54.9 1,569 1,187 32.2
- Other Opex 385 459 (16.1) 342 12.6 1,565 1,420 10.2
Pre-provision Profit 1,317 1,594 (17.4) 1,132 16.3 5,458 4,048 34.9
Provisions & Contingencies 830 869 (4.5) 510 62.7 2,836 1,418 100.0
- Provisions for NPAs 740 669 10.6 382 93.8 2,127 965 120.5
- Provisions for Investments 10 86 (88.0) 38 (73.0) 145 196 (26.2)
- Other Provisions 79 114 (30.8) 90 (12.0) 565 257 119.5
PBT 487 725 (32.8) 622 (21.7) 2,622 2,630 (0.3)
Provision for Tax 180 171 5.5 195 (7.6) 740 598 23.7
PAT 307 554 (44.6) 427 (28.2) 1,882 2,032 (7.4)
Effective Tax Rate (%) 37.0 23.5 1344bp 31.3 564bp 28.2 22.7 547bp
Source: Company, Angel Research
Exhibit 2: Actual vs. Angel estimates
Particulars (` cr) Actual Estimates Variation (%)
NII 1,475 1,481 (0.4)
Non-Interest Income 717 639 12.2
Operating Income 2,192 2,120 3.4
Operating Expenses 875 807 8.5
Pre-Prov. Profit 1,317 1,313 0.3
Provisions & Cont. 830 506 63.8
PBT 487 806 (39.6)
Prov. for Taxes 180 258 (30.3)
PAT 307 548 (44.0)
Source: Company, Angel Research
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 3
Exhibit 3: 1QFY2014 performance (standalone)
Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)
Balance sheet
Advances ( ` cr) 178,945 196,306 (8.8) 167,138 7.1Deposits ( ` cr) 183,277 227,116 (19.3) 191,747 (4.4)
Credit-to-Deposit Ratio (%) 97.6 86.4 1120bp 87.2 1047bp
Current deposits ( ` cr) 15,565 33,289 (53.2) 17,037 (8.6)
Saving deposits ( ` cr) 22,145 23,760 (6.8) 17,606 25.8
CASA deposits ( ` cr) 37,710 57,049 (33.9) 34,643 8.9
CASA ratio (%) 20.6 25.1 (454)bp 18.1 251bp
CAR (%) 13.4 13.1 22bp 14.4 (101)bp
Tier 1 CAR (%) 7.8 7.7 15bp 8.2 (41)bps
Profitability Ratios (%)
Cost of funds 8.0 8.4 (37)bp 8.4 (43)bp
Yield on assets 10.0 10.6 (63)bp 10.0 (6)bp
Return on Earning Assets 10.2 10.9 (65)bp 10.3 (6)bp
Cost of Liabilities 7.0 7.0 6bp 7.4 (36)bp
Reported NIM 2.1 2.2 (7)bp 2.1 3bp
Cost-to-income ratio 39.9 38.4 156bp 36.8 316bp
Asset quality
Gross NPAs ( ` cr) 7,959 6,450 23.4 5,496 44.8
Gross NPAs (%) 4.3 3.2 112bp 3.2 110bp
Net NPAs ( ` cr) 3,872 3,100 24.9 3,478 11.3
Net NPAs (%) 2.2 1.6 58bp 2.1 9bp
Provision Coverage Ratio (%) 68.0 70.8 (286)bp 65.5 247bp
Slippage ratio (%) 3.4 2.0 143bp 2.3 113bp
Loan loss prov. to avg. assets (%) 1.0 0.9 7bp 0.5 43bp
Source: Company, Angel Research
Balance Sheet growth remains moderate during the quarter
The bank’s Balance Sheet grew at a moderate pace during the quarter. Its loan
book grew at a subdued pace of 7.1% yoy (declined sequentially by 8.8%);
deposits witnessed a decline of 4.4% yoy and 19.3% qoq. Going forward, the
Management has guided for an advances growth of ~10-12% for FY2014, with
primary focus on increasing the share of PSL in the overall loan book (PSL
achievement at the end of 1QFY2014 stands at around 20%).
During the quarter, the bank witnessed strong traction in savings deposits, with a
growth of 25.8% yoy (down by 6.8% qoq), while volatile current deposits declined
by 8.6% yoy (the decline was much sharper sequentially with de-growth of 53.2%).
CASA deposits grew by 8.9% yoy, which considering a decline of 4.4% yoy in
overall deposits (due to shedding of bulk deposits), aided a 251bp yoy
improvement in CASA ratio to 20.6% (which came sequentially lower by 454bp on
back of 53.2% qoq de-growth in volatile current deposits). About two years back
(September 2010), the bank had waived off all transaction and service-related
charges on all current and saving bank accounts to attain higher growth in CASA
deposits. As a result, the bank has increased the number of saving accounts by a
robust ~15% (to ~72.5lakh) over the past one year.
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 4
Exhibit 4: Balance sheet growth remains moderate
Source: Company, Angel Research
Exhibit 5: CASA deposit improve sequentially
Source: Company, Angel Research
NIM declines sequentially
During 1QFY2013, margins for the bank declined by 7bp qoq to 2.12%, as the
37bp qoq decline in cost of funds was more than offset by 63bp sequential fall in
yield on assets. The Cost of Funds for the bank declined by 37bp sequentially to
8.0%, primarily driven by re-pricing of bulk deposits at a lower rate, decline in
proportion of bulk deposits (more than 300bp fall on a yoy basis to 47% as of
1QFY2014) and capital raising done in 4QFY2013. Yield on assets for the bank
also declined by 63bp sequentially to 9.97%, dragged primarily by asset quality
challenges.
Exhibit 6: Yield on Assets declines 63bp sequentially...
Source: Company, Angel Research
Exhibit 7: ...hence NIM declines 7bp qoq
Source: Company, Angel Research
Healthy growth in non-interest income (excl. treasury) aided by
strong performance in Forex and Derivatives income
During 1QFY2014, the bank reported a healthy performance on the non-interest
(excluding treasury) front, with a growth of 21.1% yoy to ` 573cr. Although, the
income from the commission, exchange and brokerage (CEB) stream grew at a
muted pace of 3.5% yoy, a strong growth in income in the Forex/derivatives
segment which more than trebled on a yoy basis, aided the overall growth in non-
interest income (excluding treasury performance). Recoveries from written-off
accounts came in at ` 11cr as compared to ` 34cr in 1QFY2013. Income from
treasury almost trebled at ` 143cr during the quarter as against ` 47cr in
1QFY2013. Overall, the bank reported a 37.7% yoy growth in its other income.
7 . 8
6 . 7
9 . 4
8 . 4
7 . 1
8 . 8
3 . 2
5 . 4
7 . 9
( 4 . 4
)
87.2
92.4 91.686.4
97.6
70.0
75.0
80.0
85.0
90.0
95.0100.0
105.0
(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
8.0
10.0
12.0
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
Adv. yoy chg (%) Dep. yoy chg (%) CDR (%, RHS)
1 8 . 1
2 1 . 9
2 2 . 3
2 5 . 1
2 0 . 6
13.7
18.019.3
12.5
8.9
-
15.0
30.0
-
5.0
10.0
15.0
20.0
25.0
30.0
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
CASA ratio (%) CASA yoy growth (%, RHS)
10.0310.37
10.8210.60
9.97
6.5
7.5
8.5
9.5
10.5
11.5
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
(%)
2.092.05
2.30
2.192.12
1.50
1.75
2.00
2.25
2.50
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
(%)
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 5
Exhibit 8: Healthy core other inc. gr. aided by strong forex income
Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)
CEB 381 805 (52.7) 368 3.5
Treasury 143 143 - 47 204.3Forex 152 58 162.1 45 237.8
Recoveries 11 116 (90.5) 34 (67.6)
Others 29 26 11.5 26 11.5
Other income 716 1,148 (37.6) 520 37.7
Other inc excl. treasury 573 1,005 (43.0) 473 21.1
Source: Company, Angel Research
Asset quality faces pressure; Slippages spiked to 3.4% in
1QFY2014
On the asset quality front, the bank faced pressure as slippages for the quarterballooned to ` 1,685cr, as compared to ` 907cr in 4QFY2013 and ` 1,043cr
witnessed in 1QFY2013. Of the slippages during the quarter, ` 663cr came from
4-5 chunky accounts, the highest of which was ` 300cr coming from a textile sector
account. The Annualized slippage ratio spiked to 3.4%, as compared to 2.0% in
4QFY2013 and 2.3% in 1QFY2013. Recoveries/upgrades during the quarter
came in lower at ` 174cr compared to ` 486cr in 4QFY2013 and ` 93cr in
1QFY2013. On an absolute basis, Gross and Net NPA levels increased by
23.4% and 24.9% qoq, respectively. The PCR (including technical write-offs)
for the bank came off by 286bp qoq to 68.0%.
During the quarter, the bank restructured advances worth ~ ` 650cr. As of1QFY2014, the restructured book of the bank stood at ` 14,251cr, out of
which ` 11,987cr are standard restructured advances. Going forward, the
Management guided that a textile exposure could slip into NPA category in the
next few quarters, while the restructuring pipeline for the bank stands at
around ` 500cr.
Exhibit 9: NPA ratios increase sharply qoq...
Source: Company, Angel Research
Exhibit 10: ...as slippages spiked to 3.4% in 1QFY2014
Source: Company, Angel Research
3 . 2
3 . 5
3 . 7
3 . 2
4 . 3
2 . 1
2 . 0
1 . 9
1 . 6
2 . 2
65.5 65.8 69.2
70.8
68.0
40.0
50.0
60.0
70.0
80.0
-
0.5
1.0
1.5
2.0
2.5
3.0
3.54.0
4.5
5.0
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
Gross NPAs (%) Net NPAs (%) PCR (%, RHS)
2.3 1.4 1.6 2.0 3.4
0.5
0.4
1.2
0.9 1.0
-
0.2
0.4
0.6
0.8
1.0
1.2
1.4
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
Slippages (%) Credit cost (%, RHS)
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 6
Exhibit 11: Steady network expansion continues
Source: Company, Angel Research
Exhibit 12: Cost ratios trends
Source: Company, Angel Research
Merger with Stock Holding Corporation of India (SHCIL) on hold IDBI Bank had sought approval from the finance ministry to merge SHCIL (one of
the largest custodians of securities and a leading depository participant) with itself.
SHCIL’s current major shareholding includes IDBI (19% holding), IFCI (34%), GIC
(17%) and LIC (15%). As per media reports, the finance ministry is of the view that
IDBI Bank does not have enough capital/retained earnings to effect the merger on
its own and the ministry isn’t comfortable with the share swap arrangement (that
the bank had proposed) as that would effectively result in a dilution of Government
shareholding. Meanwhile, IFCI (which has the largest shareholding in SHCIL) is
also learnt to have opposed the merger.
If at all the merger gets through, it is likely to be a share swap deal, which would
be based on valuation of both. SHCIL is an unlisted company, but in the past one
year there was a stake sale in the company (by ICICI Bank to IFCI), which was
priced at ` 818 per share, thereby valuing the company at 3.8x FY2012 BV. IDBI
bank currently trades at 0.4x FY2015 ABV. If the swap ratio is priced using the last
reported/traded valuations mentioned above, it would significantly dilute the book
and earnings for the existing shareholders.
The merger will augment the branch network of the bank by 23% with an addition
of 227 branches (assuming RBI sanctions conversion of SHCIL branches into
bank’s branches). The retail client base would increase by 10%, with an addition of~8lakh customers, to whom the bank can cross sell. However, the extent of benefit
that the bank can reap out of higher branches/customers cannot be ascertained
(considering lack of clarity regarding the profile of these branches/customers).
Investment Arguments
Strong branch expansion and relatively healthy fee income
IDBI Bank enjoys the advantage of a modern, 100% CBS branch network, which is
growing organically at a much faster rate than other PSU banks (17–18% CAGR
post the FY2007 UWB acquisition). While the present 1,111 branches are
predominantly urban-concentrated (~66%), the bank intends to increase its
presence in semi-urban areas going forward. Steady branch expansion plans of
9 8 2
9 9 8
1 , 0
1 9
1 , 0
7 7
1 , 1
1 1
1,581 1,591 1,597
1,702
1,799
1,400
1,500
1,600
1,700
1,800
1,900
900
950
1,000
1,050
1,100
1,150
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
Branches ATMs (RHS)
0.9 1.1 1.1 1.3 1.1
36.8
38.9
32.038.4
39.9
10.0
20.0
30.0
40.0
-
0.3
0.6
0.9
1.2
1.5
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
Opex to average assets (%, RHS) CIR (% , RHS)(%)
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 7
the Management, in our view, should continue to increase the contribution of retail
deposits in the bank’s funding mix and drive strong CASA market share gains. The
bank’s CASA deposits posted a 31.5% CAGR over FY2007–13, and we have
factored in a 15.7% CAGR over FY2013-15E.Relative to other PSU banks, on account of the bank’s strong corporate
relationships and government mandates, the bank’s fee income at 0.9% is also
reasonably healthy (though going forward, in light of the bank’s move to waive off
charges for retail depositors to attract CASA deposits as well as slower balance
sheet growth and consistent with Management’s guidance, we expect the bank’s
fee income as a proportion of average assets to moderate to 0.8%).
RoA enjoying structural tailwinds, but cyclical headwinds
Historically, IDBI Bank has witnessed the lowest NIM in the industry, majorly on
account of high cost of funding due to the liability mix heavily skewed towards bulkdeposits. Also, since the bank relied heavily on corporate lending to increase its
loan book, yields on assets on an average have been lower than peers. In wake of
lower NIMs, the bank has indicated a strategy of lower advances growth (~10-
12% for FY2014) than the system to concentrate on the increasing percentage of
low-cost CASA deposits and to consciously shift focus from large corporate lending
to retail and MSME lending to bring in higher-yielding loans.
SASF – A burden on the bank’s books
Due to the erstwhile DFI structure being challenged by a number of asset-quality
issues, IDBI Bank at the time of the merger had to set up a stressed assetstabilization fund (SASF) to quarantine defaulted assets. The transfer value of the
SASF was ~ ` 9,000cr, through which the bank has witnessed only ~ ` 3,800cr
worth of cash recoveries (as of FY2012). The possibility of an entire recovery seems
implausible and would lead to full provisioning expenses towards the amount that
remains unrecoverable. The SASF with an outstanding value of ~ ` 5,200cr also
remains a burden on the bank’s investment books due to its special nature of zero
interest securities. Accordingly, we have adjusted 75% of the value of the SASF
against the bank’s net worth to arrive at ABV estimates for valuing the bank.
At the same time, the bank has material stakes in several financial institutions,
including NSE, CARE, NSDL and ARCIL, apart from subsidiaries such as IDBIFederal Life, and the market value of all these investments is estimated to be about
` 2,000cr more than the bank’s investment cost (about ` 15/share, post 25%
holding company discount). Monetization of these investments could partially help
in compensating the decline in the bank’s net worth on account of legacy NPAs,
providing an upside to our estimates.
Outlook and valuation
The bank has been among the fastest-growing banks in terms of CASA deposits
over the past few years (CAGR of ~32% over FY2007-13) even when compared to
private banks and now has a market share of 2.5% (as of FY2013).
At the CMP, the bank is trading at a valuation of 0.4x FY2015E P/ABV, (0.5x
adjusting for the SASF). Considering the recent macro-economic developments, the
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 8
pace of asset quality improvement is likely to be much slower than earlier
anticipated. Hence, we recommend a Neutral rating on the stock.
Exhibit 13: Key assumptions
Particulars (%)Earlier estimates Revised estimates
FY2014 FY2015 FY2014 FY2015
Credit growth 10.0 12.0 10.0 12.0
Deposit growth 10.0 12.0 8.0 12.0
CASA Ratio 26.3 27.3 25.6 26.6
NIMs 1.9 2.0 1.9 2.0
Other Income growth (5.5) 2.0 (0.7) 3.5
Growth in Staff Expenses 17.0 17.0 20.0 17.0
Growth in Other Expenses 17.0 17.0 15.0 17.0
Slippages 1.7 1.7 2.5 1.8
Coverage Ratio 73.0 75.0 70.0 75.0
Source: Angel Research
Exhibit 14: Change in estimates
Particulars (`cr)
FY2014 FY2015
Earlierestimates
Revisedestimates
Var. (%)Earlier
estimatesRevised
estimatesVar. (%)
NII 6,374 6,321 (0.8) 7,289 7,158 (1.8)
Non-interest income 3,043 3,197 5.1 3,103 3,310 6.7
Operating income 9,416 9,518 1.1 10,392 10,468 0.7
Operating expenses 3,667 3,683 0.4 4,291 4,309 0.4
Pre-prov. profit 5,749 5,835 1.5 6,101 6,159 0.9
Provisions & cont. 1,876 2,799 49.2 1,497 1,697 13.4
PBT 3,873 3,036 (21.6) 4,604 4,462 (3.1)
Prov. for taxes 1,239 972 (21.6) 1,565 1,517 (3.1)
PAT 2,634 2,065 (21.6) 3,039 2,945 (3.1)
Source: Angel Research
Exhibit 15: P/ABV# band
Source: Company, Angel Research; Note: #Without adjusting the book value for SASF
0
50
100
150
200
250
300
A p r - 0 6
O c t - 0 6
A p r - 0 7
O c t - 0 7
A p r - 0 8
O c t - 0 8
A p r - 0 9
O c t - 0 9
A p r - 1 0
O c t - 1 0
A p r - 1 1
O c t - 1 1
A p r - 1 2
O c t - 1 2
A p r - 1 3
O c t - 1 3
Price (`) 0.45x 0.7x 0.95x 1.2x 1.45x
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IDBI Bank | 1QFY2014 Result Update
July 19, 2013 9
Exhibit 16: Recommendation summary
Company Reco.CMP
(`)Tgt. price
(`)Upside
(%)FY2015EP/ABV (x)
FY2015ETgt. P/ABV (x)
FY2015EP/E (x)
FY2013-15EEPS CAGR (%)
FY2015ERoA (%)
FY2015ERoE (%)
AxisBk Buy 1,191 1,441 21 1.3 1.6 7.6 19.1 1.6 18.1
FedBk Neutral 381 - - 0.8 - 6.7 7.5 1.1 13.1
HDFCBk Accumulate 681 745 9 3.2 3.5 15.1 26.3 1.9 22.8
ICICIBk* Buy 959 1,160 21 1.4 1.7 9.6 17.4 1.6 16.2
SIB Neutral 23 - - 0.9 - 5.5 5.7 0.9 16.2
YesBk Neutral 425 - - 1.8 - 8.5 17.1 1.3 22.8
AllBk Accumulate 85 95 13 0.4 0.4 2.6 18.3 0.7 13.6
AndhBk Neutral 78 - - 0.5 - 3.4 (0.3) 0.7 13.2
BOB Accumulate 570 642 13 0.6 0.7 3.9 16.8 0.9 16.0
BOI Accumulate 211 236 12 0.5 0.5 3.1 21.6 0.7 15.1
BOM Accumulate 49 54 9 0.5 0.6 3.8 10.0 0.6 15.3
CanBk Neutral 319 - - 0.5 - 3.7 15.4 0.8 14.2CentBk Neutral 63 - - 0.6 - 3.4 52.3 0.6 14.3
CorpBk Accumulate 327 360 10 0.4 0.5 3.1 5.7 0.7 14.2
DenaBk Neutral 68 - - 0.4 - 2.7 3.7 0.7 14.7
IDBI# Neutral 70 - - 0.4 - 3.1 27.1 0.8 13.5
IndBk Accumulate 107 113 5 0.4 0.4 2.6 7.0 0.9 14.7
IOB Neutral 47 - - 0.3 - 2.4 78.9 0.6 13.0
J&KBk Neutral 1,250 - - 1.0 - 5.9 (1.7) 1.2 16.8
OBC Buy 174 203 17 0.4 0.4 2.8 17.0 0.8 12.9
PNB Accumulate 631 718 14 0.6 0.7 3.6 14.5 1.1 16.5
SBI* Accumulate 1,814 2,077 14 1.0 1.2 6.4 17.5 1.0 17.0
SynBk Accumulate 111 121 9 0.6 0.6 4.0 (8.5) 0.6 14.6
UcoBk Reduce 69 63 (9) 0.7 0.7 4.4 67.5 0.6 13.6
UnionBk Accumulate 157 178 14 0.5 0.6 3.3 14.7 0.7 15.2
UtdBk Neutral 46 - - 0.3 - 2.3 54.6 0.6 14.7
VijBk Accumulate 45 47 6 0.5 0.5 4.1 9.5 0.4 11.5
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF
Company Background
IDBI Bank is the sixth largest PSU bank in India, with a branch network of ~1,100branches and a balance sheet size of over ` 2.8lakh cr. IDBI was incorporated in
1964 as a development financial institution; but in October 2004, it was
transformed into a banking company with the reverse merger of IDBI and its
subsidiary IDBI Bank. The bank now offers an array of wholesale and retail
banking products, apart from providing long-term finance for industrial
development.
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Income statement (standalone)
Y/E March (` cr) FY10 FY11 FY12 FY13 FY14E FY15E
Net Interest Income 2,256 4,269 4,545 5,373 6,321 7,158
- YoY Growth (%) 82.0 89.2 6.5 18.2 17.6 13.2
Other Income 2,181 2,143 2,119 3,220 3,197 3,310
- YoY Growth (%) 39.6 (1.7) (1.1) 52.0 (0.7) 3.5
Operating Income 4,437 6,413 6,664 8,593 9,518 10,468
- YoY Growth (%) 58.4 44.5 3.9 28.9 10.8 10.0
Operating Expenses 1,831 2,255 2,607 3,134 3,683 4,309
- YoY Growth (%) 36.9 23.1 15.6 20.2 17.5 17.0
Pre - Provision Profit 2,605 4,158 4,056 5,458 5,835 6,159
- YoY Growth (%) 78.0 59.6 (2.4) 34.6 6.9 5.5
Prov. & Cont. 1,561 1,877 1,426 2,836 2,799 1,697
- YoY Growth (%) 226.3 20.3 (24.0) 98.8 (1.3) (39.4)
Profit Before Tax 1,045 2,281 2,630 2,622 3,036 4,462
- YoY Growth (%) 6.0 118.3 15.3 (0.3) 15.8 46.9
Prov. for Taxation 14 631 598 740 972 1,517
- as a % of PBT 1.3 27.6 22.7 28.2 32.0 34.0
PAT 1,031 1,650 2,032 1,882 2,065 2,945
- YoY Growth (%) 20.1 60.0 23.1 (7.4) 9.7 42.6
Balance sheet (standalone)
Y/E March (` cr) FY10 FY11 FY12 FY13 FY14E FY15E
Share Capital 725 985 1,278 1,333 1,333 1,333Reserve & Surplus 9,440 13,583 18,150 19,903 21,506 23,758
Deposits 167,667 180,486 210,493 227,116 245,286 274,720
- Growth (%) 49.2 7.6 16.6 7.9 8.0 12.0
Borrowings 35,010 36,607 38,451 51,158 54,045 60,021
Tier 2 Capital 12,699 14,962 15,027 14,651 14,285 13,928
Other Liab. & Prov. 8,031 6,754 7,439 8,607 9,994 11,001
Total Liabilities 233,573 253,377 290,837 322,769 346,449 384,762
Cash Balances 13,903 19,559 15,090 10,544 11,038 12,362
Bank Balances 679 1,207 2,967 7,381 5,197 5,771
Investments 73,345 68,269 83,175 98,801 103,920 113,378
Advances 138,202 157,098 181,158 196,306 215,937 241,850
- Growth (%) 33.6 13.7 15.3 8.4 10.0 12.0
Fixed Assets 2,997 3,037 3,019 2,925 3,046 3,281
Other Assets 4,446 4,206 5,427 6,811 7,311 8,120
Total Assets 233,573 253,377 290,837 322,769 346,449 384,762
- Growth (%) 35.5 8.5 14.8 11.0 7.3 11.1
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Ratio analysis
Y/E March FY10 FY11 FY12 FY13 FY14E FY15E
Profitability ratios (%)
NIMs 1.2 1.8 1.7 1.8 1.9 2.0Cost to Income Ratio 41.3 35.2 39.1 36.5 38.7 41.2
RoA 0.5 0.7 0.7 0.6 0.6 0.8
RoE 13.2 15.8 13.4 10.2 10.2 13.3
B/S ratios (%)
CASA Ratio 14.6 20.9 24.1 25.1 25.6 26.6
Credit/Deposit Ratio 82.4 87.0 86.1 86.4 88.0 88.0
CAR 11.3 13.6 14.7 13.5 13.1 12.5
- Tier I 6.2 8.0 8.5 8.0 8.1 8.1
Asset Quality (%)
Gross NPAs 1.5 1.8 2.5 3.2 4.6 4.6
Net NPAs 1.0 1.1 1.6 1.6 2.0 1.6
Slippages 1.4 1.4 1.6 1.5 2.5 1.8
Loan Loss Prov. /Avg. Assets 0.4 0.5 0.4 0.7 0.7 0.4
Provision Coverage 74.9 74.7 68.3 70.8 70.0 75.0
Per Share Data (`)EPS 14.2 16.8 15.9 14.1 15.5 22.1
ABVPS (75% cover.) 113.4 128.5 132.6 142.1 152.2 174.4
DPS 3.0 3.5 3.0 3.5 3.0 4.5
Valuation Ratios
PER (x) 4.9 4.2 4.4 4.9 4.5 3.2
P/ABVPS (x) 0.6 0.5 0.5 0.5 0.5 0.4
Dividend Yield 4.3 5.0 4.4 5.0 4.3 6.4
DuPont Analysis
NII 1.1 1.8 1.7 1.8 1.9 2.0
(-) Prov. Exp. 0.8 0.8 0.5 0.9 0.8 0.5
Adj. NII 0.3 1.0 1.1 0.8 1.1 1.5
Treasury 0.3 0.1 0.1 0.1 0.0 0.0
Int. Sens. Inc. 0.7 1.0 1.2 1.0 1.1 1.5
Other Inc. 0.7 0.8 0.7 0.9 0.9 0.9
Op. Inc. 1.4 1.9 1.9 1.9 2.0 2.4
Opex 0.9 0.9 1.0 1.0 1.1 1.2PBT 0.5 0.9 1.0 0.9 0.9 1.2
Taxes 0.0 0.3 0.2 0.2 0.3 0.4
RoA 0.5 0.7 0.7 0.6 0.6 0.8
Leverage 25.9 23.3 18.0 16.6 16.6 16.5
RoE 13.2 15.8 13.4 10.2 10.2 13.3
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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement IDBI Bank
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)
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