ING Vysya Bank – Reiterate ‘Buy’

ING Vysya Bank reported a robust set of Sept 2012 quarter numbers. The numbers were better than the street’s expectations, which resulted in the stock moving higher by almost by 4% to Rs 464 per share. We, at DSIJ, had recommended ING Vysya Bank in our magazine (Vol. 27, Issue No. 17, dated 12th August, 2012) at Rs 391 per share, which is currently yielding returns of 19% in less than three months. We continue to remain bullish on the scrip and reiterate our ‘buy’ call.

The bank has posted stupendous numbers in almost each and every aspect. Its margins have expanded and non-performing assets (NPAs) have declined, while the Provision Coverage Ratio has increased. The cost to income ratio too declined, and it finally saw good business growth. The key financial parameters of the bank are as follows:

The bank’s Net Interest Income (NII) increased by 21.5% to Rs 368.8 crore and its Net Profit grew at 30.2% to Rs 150.2 crore on a YoY basis. On a half-yearly basis, the NII grew by 26% to Rs 712 crore while the profit surged by 34% to Rs 280.3 crore.

At a time when most banks are facing serious headwinds on their asset quality front, ING Vysya Bank's asset quality has seen good strength. The Gross and Net NPAs of the bank decreased by 12 and 18 basis points to 1.9% and 0.13% respectively YoY. Even on a sequential basis, these declined by 7 and 6 basis points respectively, which is very commendable. Further, the Provision Coverage Ratio (PCR) of the bank increased to 93.1% against 84.8% in the same quarter last year. One should also note that bank is maintaing a high PCR, which hints that we may not see much pain on their asset quality front going forward.

The Net Interest Margin (NIM) of the bank improved by 16 basis points to 3.45% on a sequential basis, which is very commendable, and it moved higher by 10 basis points on a YoY basis. As on 30th September, 2012, its Capital Adequacy Ratio (CAR) stands at 13.4%, which is lower by 160 basis points YoY. The Tier 1 CAR stood at 10.58%, which is indeed a very good level.

As on 30th September, 2012, the deposits increased by 18% to Rs 36169 crore and the advances grew by 20.9% to Rs 30581 crore. The CASA ratio of the bank remained stable at 32.8%. Its Current Account Deposits increased by 32.3%, but the Savings Accounts grew on a muted note by 5.8% on a YoY basis.

On the segment front, Treasury performed extremely well as the revenue from the same increased by 29% to Rs 1079 crore while the profit increased by 128% to Rs 53.66 crore. Revenue from Retail banking increased by 19% to Rs 938 crore but the profit from declined by 17% to Rs 71.74 crore.

As on 30 September, 2012, the bank had 527 branches and extension networks and 447 ATMs. On the valuations front, the bank is currently available at a trailing Price to Earnings multiple of 13.16x and a Price to Book value of 1.66x. We believe that ING Vysya Bank currently is trading at fair valuations. One could buy the scrip with a long-term horizon in mind to garner better returns.