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ING Vysya Bank: Leaving the worst behind it
Apr 30, 2010

ING Vysya Bank declared its FY10 results. The institution has reported no growth in interest income while net profits have grown by 12% YoY. Here is our analysis of the results.

Performance summary
  • Interest income remains flat YoY in FY10, despite 10% YoY growth in advances.
  • Net interest margin improves to 3.2% in FY10, due to higher proportion of CASA.
  • Cost to income ratio declines from 65% to 56% in the last 12 months.
  • Bottomline grows 12% YoY in FY10 despite steep rise in provisioning costs.
  • Capital adequacy ratio moves up to 14.9% from 10.5% at the end of FY09.
  • Declared dividend of Rs 2.5 (dividend yield 0.9%).


(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Interest income 6,096 5,679 -6.8% 22,398 22,329 -0.3%
Interest Expense 4,473 3,207 -28.3% 15,902 14,030 -11.8%
Net Interest Income 1,623 2,472 52.3% 6,496 8,299 27.8%
Net interest margin (%)       2.8% 3.2%  
Other Income 1,471 1,479 0.5% 5,476 5,894 7.6%
Other Expense 1,874 2,153 14.9% 7,725 8,081 4.6%
Provisions and contingencies 455 1,063 133.6% 1,301 2,704 107.8%
Profit before tax 765 735 -3.9% 2,946 3,408 15.7%
Tax 274 362 32.1% 1,058 1,292 22.1%
Profit after tax/ (loss) 491 373 -24.0% 1,888 2,116 12.1%
Net profit margin (%) 8.1% 6.6%   8.4% 9.5%  
No. of shares (m)       102.6 120.0 102.8
Book value per share (Rs)*         185.3  
P/BV (x)         1.7  
*Book value as on 31st March 2010

What has driven performance in FY10?
  • While its growth may have been slower than most of its peers in private sector banking space, ING Vysya Bank has put up an appreciable performance during this fiscal. On the back of higher accretion of low cost deposits, ING Vysya Bank managed to grow its advance book by 10% in FY10. While the bank has not divulged the breakup of advances into corporate and retail, large shares of its advances continue to remain concentrated in corporate and SME assets. The bank also managed to marginally improve the proportion of CASA deposits from 30% in FY09 to 36% in FY10, which helped improve its net interest margin (NIMs) to 3.2% (2.8% in FY09). As the bank grows its franchise and re-prices its assets, we expect them to bring in more stability in INGís margins. Having said that, the management believes that the current NIMs are likely to have a downward bias going forward.

    Focusing on cost
    (Rs m) FY09 % of total FY10 % of total Change
    Advances 167,564   185,072   10.4%
    Deposits 224,013   234,619   4.7%
    CASA 67,125 30.0% 84,270 35.9% 25.5%
    Term deposits 156,888 70.0% 150,349 64.1% -4.2%
    C/D ratio 74.8%   78.9%    

  • Having the blemish of bearing one of the highest cost to income ratio in the sector, ING Vysya has effectively put an effort on this front and pared the ratio from 65% in FY09 to 56% in FY10. This was despite the bank opening 27 branches in the past 12 months. The same, however, continues to stay well above that of private sector banks and some PSU banks. Going forward the bank plans to open 60 branches in FY11 of which 52 will be in the north and western regions where it has lesser concentration.

  • ING Vysya has in the past few quarters also addressed its concerns with regard to its lower provision coverage. The bankís NPA coverage ratio has gone up from 36% to 60% in the past 12 months. While the net NPA level has remained stable at 1.2% in the past 12 months, the gross NPAs increased from 1.9% of advances in FY09 to 3% of advances in FY10. The bank believes that most of the slippages that were coming from personal loans segment have now been curtailed. Also, going forward with the RBIís mandate of 70% provision coverage, the bank will be more proactive with its provisioning

  • The concerns with regard to the shortage of capital for the bank were addressed in 2QFY10. The same has shored up ING Vysya Bank CAR to 14.9% in FY10, and will enable the bank to catch up on its balance sheet growth in the medium term.

What to expect?
At the current price of Rs 320, the stock is trading at 1.4 times our estimated FY12 adjusted book value. While we are enthused by the bankís enhanced capital and cost reduction measures, lesser emphasis on asset quality is an area of concern. Under the new leadership, however, ING Vysya Bank is expected to have a streamlined approach for the future growth of the bank. We retain our long term positive view and have revised our target price for the stock.

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