Comparable Analysis of players in Indian Banking Sector

1. INDIAN BANKING SECTOR
KAPISH KAUSHAL http://in.linkedin.com/pub/kapish-kaushal/37/7a1/124

2. INDEXED SHARE PRICE PERFORMANCE
 Post Elections, the banking stocks saw an immediate increase in their prices
 Kotak Mahindra, Axis Bank, HDFC, ICICI and Yes Bank have been the best performers over the last 2 years
 Union Bank of India, Canara, Punjab National Bank, Bank of Baroda and State Bank of India have been the laggards
26.0%
26.7%
20.1%
54.3%
(28.6%)
(28.8)%
39.1%
1.0%
0.8%
(2.8%)
0
20
40
60
80
100
120
140
160
180
Jan-2013
Apr-2013
Jul-2013
Oct-2013
Jan-2014
Apr-2014
Jul-2014
Oct-2014
SBI
ICICI
HDFC
Yes
Kotak
Canara
UBI
Axis
PNB
BOB
May Elections
Source: NSE India Website 1. Market Data as of 10-Oct-2014

3. FUNDAMENTAL ANALYSIS (1/2)
Private sector banks fare much better than public sector banks on fundamentals
Source: Company Filings (2013 YE Financials)
1.NIM calculated as Net Interet Income divided by Total Assets
2.Coverage ratio caluclated as Provisions / Gross NPAs
3.NPL ratio calculated on the basis of Gross NPAs
Net Interest Margin¹
Cost / Income
NPL Ratio³
Coverage Ratio²
4.8%
4.2%
3.3%
3.0%
2.8%
2.8%
2.6%
2.4%
2.1%
1.9%
24.5%
39.4%
41.2%
41.5%
42.6%
46.7%
53.1%
60.1%
61.5%
63.5%
0.3%
0.8%
1.0%
1.3%
1.6%
2.5%
2.9%
4.1%
5.0%
5.3%
85.1%
71.7%
68.6%
66.3%
49.3%
47.7%
46.3%
45.9%
44.2%
20.9%

4. FUNDAMENTAL ANALYSIS (2/2)
 Private Sector banks are better capitalized than Public Sector banks and generate higher returns for shareholders
Source: Company Filings (2013 YE Financials) 1. CET 1 and CAR as disclosed by banks under Basel III common disclosure template to be used during the transition phase
CET 1 Ratio¹
Capital Adequacy Ratio¹
RoATE
RoAA
17.8%
12.8%
12.6%
11.8%
9.2%
9.1%
9.0%
9.0%
7.5%
7.2%
18.8%
17.7%
16.1%
16.1%
14.4%
12.3%
12.2%
12.1%
10.8%
10.8%
24.9%
21.6%
17.6%
15.2%
14.4%
14.1%
13.7%
10.4%
9.5%
9.3%
2.1%
1.9%
1.7%
1.6%
1.5%
0.9%
0.8%
0.6%
0.6%
0.5%

5. Net Interest Margin¹
Cost / Income
NPL Ratio³
Coverage²
CET 1 Ratio4
Capital Adequacy Ratio4
RoATE
RoAA
INDUSTRY ANALYSIS (1/2) WHERE THE BANKS SHOULD BE ASPIRING TO?
4.8%
3.2%
2.8%
2.4%
Top Quartile
Second Quartile
Third Quartile
Bottom Quartile
41.3%
44.6%
58.3%
63.5%
1.1%
2.0%
3.8%
5.3%
85.1%
68.0%
48.5%
46.0%
17.8%
12.4%
9.2%
9.0%
18.8%
16.1%
13.3%
12.1%
24.9%
17.0%
14.2%
11.2%
2.1%
1.7%
1.2%
0.7%
Source: Company Filings (2013 YE Financials)
1.NIM calculated as Net Interet Income divided by Total Assets
2.Coverage ratio caluclated as Provisions / Gross NPAs
3.NPL ratio calculated on the basis of Gross NPAs
4.CET 1 and CAR as disclosed by banks under Basel III common disclosure template to be used during the transition phase

6. Net Interest Margin¹
Cost / Income
NPL Ratio³
Coverage²
CET 1 Ratio4
Capital Adequacy Ratio4
RoATE
RoAA
INDUSTRY ANALYSIS (2/2) WHERE THE BANKS SHOULD BE ASPIRING TO?
1.5%
5.0%
0.0%
6.0%
15.0%
90.0%
6.0%
20.0%
8.0%
20.0%
8.0%
26.0%
0.5%
2.5%
20.0%
70.0%
Source: Company Filings (2013 YE Financials)
1.NIM calculated as Net Interet Income divided by Total Assets
2.Coverage ratio caluclated as Provisions / Gross NPAs
3.NPL ratio calculated on the basis of Gross NPAs
4.CET 1 and CAR as disclosed by banks under Basel III common disclosure template to be used during the transition phase

7. TRADING COMPARABLES
Price (in Rs)
Mkt Cap (in Rs crores)
Rating
NIM
RoAE
RoAA
P/TBV
P/E
LTD Ratio
NPL Ratio
C/I
Coverage
CET 1 Ratio
CAR
Beta
YesBank
572
20,612
Baa3
2.6%
24.9%
1.5%
2.90x
12.89x
75%
0.3%
39%
85%
9.1%
14.4%
1.88
KotakMahindra
1,003
76,804
NA
4.8%
14.4%
2.1%
4.03x
31.20x
126%
1.6%
63%
46%
17.8%
18.8%
1.05
ICICI
1,459
1,68,409
Baa2
2.8%
15.2%
1.6%
2.15x
15.33x
108%
0.8%
62%
69%
12.8%
17.7%
1.49
AXIS
379
89,083
NA
3.3%
17.6%
1.7%
2.32x
14.13x
83%
1.3%
41%
66%
12.6%
16.1%
1.47
HDFC
867
2,08,858
NA
4.2%
21.6%
1.9%
4.73x
23.89x
86%
1.0%
25%
72%
11.8%
16.1%
1.08
SBI
2,451
1,83,000
Baa3
3.0%
10.4%
0.6%
1.24x
15.64x
86%
5.0%
60%
48%
9.2%
12.2%
1.48
PNB
900
32,032
NA
2.8%
13.7%
0.9%
0.84x
8.86x
79%
5.3%
43%
46%
9.0%
12.1%
1.66
BOB
859
36,330
NA
2.1%
14.1%
0.8%
0.96x
7.27x
70%
2.9%
41%
49%
9.0%
12.3%
1.67
UBI
201
12,176
Baa3
2.4%
9.3%
0.5%
0.65x
7.29x
77%
4.1%
53%
44%
7.2%
10.8%
1.90
Canara
367
16,944
NA
1.9%
9.5%
0.6%
0.56x
6.25x
72%
2.5%
47%
21%
7.5%
10.8%
1.90
Lowest
1.9%
9.3%
0.5%
0.56x
6.25x
69.6%
0.3%
24.5%
20.9%
7.2%
10.8%
1.05
Mean
3.0%
15.1%
1.2%
2.04x
14.27x
86.1%
2.5%
47.4%
54.6%
10.6%
14.1%
1.56
Median
2.8%
14.2%
1.2%
1.69x
13.51x
81.1%
2.0%
44.6%
48.5%
9.2%
13.3%
1.58
Highest
4.8%
24.9%
2.1%
4.73x
31.20x
125.9%
5.3%
63.5%
85.1%
17.8%
18.8%
1.90
Source: Company Filings (2013 YE Financials)
1.Market data as of 10th Oct, 2014
2.Axis Bank adjusted for the stock split