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Spark Capital: 4QFY13 Result reviews of ING Vysya Bank




Spark Capital Advisors(India) Private Limited


02 May 2013





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4QFY13 Result reviews of ING Vysya Bank and LIC Housing Finance ING Vysya Bank 4QFY13 result review - On expected lines: Maintain BUY ING Vysya’s (VYSB) 4QFY13 performance was an extension of 3QFY13’s positive undertone on asset quality, business parameters and growth. Asset quality was exceptional with slippages of just 0.5% (annualised); for FY13 slippages at 0.7% rank amongst the best in our coverage universe - all the more appreciable as restructuring was negligible during the year. Led by forex and advisory related fee income of Rs. 873mn, other income grew 7% sequentially, (2% yoy), although wealth management and trade finance streams continue to remain lacklustre. The CIR declined to 55%, down from 57% in 4QFY12; given that 34% of employees are covered under the IBA settlement we believe the CIR is unlikely to see a dramatic fall and accordingly factor in a 53% CIR by end FY14. NIMs are likely to remain healthy over FY14 as ING Vysya’s ~45% of wholesale liabilities reprice quicker than assets while stable fee income streams, an ameliorating CIR, durable asset quality and ~20% CAGR in customer assets over FY13-15E are other positives. Additionally, a likely capital infusion in FY14E offers the possibility of a meaningful bump up in book value. We therefore maintain our BUY rating with a price target of Rs. 703, valuing the bank at 2.1x FY14E ABV. Business growth was on track with both customer assets and deposits expanding yoy by 17%. CASA balances were up 13% qoq, with SA additions rising 14% to 74000 for the quarter; we note that SA account additions are up 32% yoy, indicating higher accretions going forward. Our comfort on asset quality is also a function of the bank’s low exposure to risky sectors – infrastructure (4.6%), textiles (3.4%) and metals (3.1%) - and relatively low restructuring (1.1% of advances), restructured assets are also the lowest amongst relevant peers while the absence of bilateral restructuring further strengthens VYSB’s asset quality.

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