Indian Banking Industry - Rising Above the Waves, January 2013

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%


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


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


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


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


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


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


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


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


Base interest rate: 9.75%




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


“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



% Growth -16.82% -0.24% 26.31%


% Growth -21.74% -6.69% 29.32%


% Growth -3.47% 13.95% 20.88%


% Growth 5.53% 7.02% -9.04%


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


% 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%



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


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


86

Headquarters: Ahmedabad, India


Base interest rate: 10%




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


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



% Growth 7.48% 30.21% 45.13%


% Growth -7.22% 29.49% 62.65%


% Growth 36.04% 31.15% 22.23%


% Growth 35.95% 17.84% 17.46%


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


% 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%



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


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




No. of branches: Over 400

No. of ATMs: Over 100


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


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



% Growth 5.37% 33.48% 37.92%


% Growth -11.02% 48.60% 72.40%


% Growth 19.13% 23.99% 12.02%


% 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


% 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%



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


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


92







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


Key Management

Company Information

Chairman: Mr. R. Seshasayee

Managing Director: Mr. Romesh Sobti

Managing Director: Mr. Ajay Hinduja

Indusind BankCompany Profile


93

Indusind BankFinancial Summary (Rs. in Crores)Statement of Profit and Loss



% Growth 17.21% 32.60% 49.31%


% 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%


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


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







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


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



% Growth 18.40% 70.56% 56.06%


% 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


% 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%



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


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


98

Headquarters: Kerala, India






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


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)




% Growth 10.79% 10.31% 37.75%


% 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


% 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%



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


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


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







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



% Growth 9.18% 13.54% 29.53%


% Growth 6.40% 2.17% 31.19%


% Growth 15.16% 36.20% 27.06%


% Growth 57.62% 1.29% -12.78%


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%



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


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


108

Headquarters: Baroda, India






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


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



% Growth 10.85% 30.63% 35.42%


% Growth 8.42% 21.10% 47.75%


% Growth 15.45% 47.53% 17.46%


% Growth 1.93% 10.85% 24.74%


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%



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


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


111

Headquarters: New Delhi, India






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


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




% Growth 12.05% 25.59% 35.92%


% Growth 5.20% 17.21% 53.10%


% Growth 24.35% 38.32% 13.79%


% Growth 14.43% 4.49% 15.98%


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%



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


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


114

Headquarters: Bangalore, India






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


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




% Growth 9.50% 22.63% 33.98%


% Growth 5.34% 16.50% 51.98%


% Growth 20.47% 36.77% -1.36%


% Growth 24.61% -3.37% 9.57%


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%



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


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








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


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


117

Bank of IndiaFinancial Summary (Rs. in Crores)

118




% Growth 9.62% 21.46% 30.89%


% Growth 11.79% 14.94% 44.60%


% Growth 5.36% 35.05% 6.56%


% 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%



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


Deposits & Loans

120

Headquarter: Mumbai, India






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


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



% Growth 11.89% 23.74% 28.50%


% Growth 12.81% 12.34% 39.04%


% Growth 9.93% 48.52% 11.18%


% Growth 33.20% 3.29% 13.56%


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%



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


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


123

Headquarters: New Delhi, India






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


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


124

Oriental Bank of CommerceFinancial Summary (Rs. in Crores)




% Growth 15.82% 17.85% 30.83%


% Growth 7.14% 7.63% 46.63%


% 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%


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


% 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%



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


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


126

Headquarters: Kolkata, India




No. of ATM‟s: Over 1,800


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


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


127

Allahabad BankFinancial Summary (Rs. in Crores)




% Growth 13.75% 31.60% 40.85%


% Growth 9.84% 22.29% 48.15%


% 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


% 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%



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


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


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]

This report and the information provided herein is the sole Intellectual property of Dinodia Capital Advisors Pvt. Ltd.

(“DCA”) and DCA holds its complete copyrights. No part of this report shall be reproduced / copied / extracted etc. without

the express permission of DCA in writing. This document is being supplied to you solely for your information, and its

contents, information or data may not be reproduced. Neither DCA nor its directors, employees or affiliates shall be liable

for any loss or damage that may arise from or in with the use of this information.

Indian Banking Industry - Rising Above the Waves, January 2013

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