Indian Banking Industry - Rising Above The Waves, January 2013

Rising Above the Waves
Indian Banking Industry:
January, 2013
Index
I. II. Executive Summary 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
Index
Mobile Banking : A Technological Revolution Key Challenges The Banking Outlook: 2013 & 2014 How and where will Foreign Investors make money? 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
IV.
Performance of Indian Banks

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
M&A Deals Private Equity Deals 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
VI.
Deals in the Industry

VII. Special Section on Foreign Banks in India
Index
VIII. Listed Private Banks in India Common Stock Comparison Listed Players IX. Listed Public Banks in India Common Stock Comparison Listed Players
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 5
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
Financial Sector
Overview
Despite increasing risks both in domestic and global macroeconomic conditions, the financial system of India remains robust. However, the
global risks and domestic factors still looms large
- RBI
INDIAN FINANCIAL SECTOR
concern over evolving
Industry Overview
Section II: Financial Sector in India
The Financial Sector in India (1/2)

The Financial sector in India acts as the nervous system for the nations 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 Indias 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 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
1
Source: Mckinsey & Co., Leveraging the financial services sector as a growth engine for transformation, April 2012
The Financial Sector in India (2/2)

The Indian Financial Sector traditionally was largely divided into three main segments : 1. 2. 3. Organized sector: Consisting of banks, insurance companies, stock markets, financial institutions, NBFCs etc Unorganized sector: The players in this sector include village grocery shops, indigenous bankers, chit fund, money lenders, landlords, traders etc 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
10
Structure of The Financial Sector in India

Broadly, the financial sector in India can be broken into the following main divisions :
Financial Sector
Financial services Banking Sector
NBFCs (Non Banking financial Companies) Capital Markets Forex Markets Asset Management Insurance MFIs (Micro finance Institutions)
Scheduled Commercial Banks (SCBs)
Regional Rural Banks
Scheduled Cooperative Banks
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
11
The Organized Financial Sector in India

The Composition of various institutions in the Organized Industry is: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%.
Housing Finance corporations, 4% Scheduled commercial Banks, 85%
NBFCsInfrastructure, 6%
Public Banks, 65%
NBFCsretail, 5%
Foreign Banks, 4%
Private Banks, 16%
Source: RBI
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Important Milestones of the Banking Industry

1
Prior to 1950 / Evolutionary Phase
Enactment of the RBI Act, 1935 High levels of deprivation in economy
Foundation Phase / 1948-1968 Government adopted the system of planned economic development Complex Interest rates Establishment of Banking Regulation Act, 1949 1985-1990/ Consolidation
1968-1984/Expansion Phase
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
1991 Onwards/Reformatory phase
Lack of professionalism and transparency in the functioning of public sector Series of policy initiatives taken with the objectives of consolidation of banks
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
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Who regulates the Financial Sector in India?
Ministry of Finance (MoF) 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
1GOI:
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
Securities and Exchange Board of India (SEBI)
Insurance Regulatory and Development Authority (IRDA)
Regulator of the securities market in India Protects the interest of investors in securities Also regulates the development of the securities market
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
14
Government of India 2IRDA: Insurance regulatory and development authority
Industry Overview
Section III: The Indian Banking Industry

-Performance of Indian Banks -Regulatory Framework
15
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 todays scenario, Current and saving accounts (CASA) are the banks 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 16
Source: 1 Report on Trend and Progress of Banking in India 2011-12 2CLSA Research
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
17
Structure of the Indian Banking Industry

The Structure of Indian Banking Industry
Reserve Bank of India Banks Public Sector Banks (26) Regional Rural banks (82) Foreign Banks (40) Private Sector Banks (20) Urban Cooperative Banks (51) New Private Sector Banks(7) Old Private Sector Banks(13) Rural Cooperative Credit Institution (31) Scheduled Commercial Banks (SCBs)(168) Financial Institutions All India Financial Institutions
Cooperative Banks (82)
State Level Institutions Other Institutions
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Note: The figures in brackets represent number of respective banks as on 31 st March 2012 Source: RBI
Financial Products of Banks (1/4)

Loan Products
Auto Loan Gold Loan House Loan Credit cards Education Loan Loan against Securities Retail Banking Business Term Loan Guarantees Bill Collection Letter of Credit Working Capital Forex & Derivatives Wholesale Deposits
Deposit Products
Deposits Saving Accounts Current Accounts Fixed / Recurring Corporate Salary A/C
Other Products / Services

NRI services POS Terminals Private Banking Demat Services Mutual Fund Sales Foreign Exchange Services Large Corporates Emerging Corporates Financial Institutions Government/PSUs Agriculture Commodities
Retail Banking
Commercial Banking Transaction Banking Key Segment

Cash Management Custodian Services Clearing Bank Services Tax Collections Banker to Public Issues Commodities(Inc Hedging)
Wholesale Banking
Product Segment
Equities Derivatives Capital Market Debt Securities Foreign Exchange
Other Financing
Cash Management Statutory Reserve Financial Decisions Asset Liability Management
Treasury Banking
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Retail Banking 1
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 Retail Portfolio of Banks (Rs 589,900 Crore) 20121 Retail Lending has been a key profit driver and spectacular innovation in the banking sector Retail Credit/GDP ratio, 2011
Source: CLSA
Other Personal Loans, 35.69%
Housing Loans, 47.89%
Auto Laons, 13.51%
Credit Card, 2.59%
Consumer Durables, 0.31%
Source: 1Report on Trend and Progress of Banking in India 2011-12 2 International referred Research Journal, January 2012
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Wholesale Banking 2
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 Indias 11th Five-Year Plan. To sustain Indias economic growth, the Planning Commission therefore envisages that $1 trillion (about 10% of GDP) will be spent on infrastructure during the 12th plan from 2012 to 20172
Infrastructure Spending
250 200 +15% 158 180 231 204 138
($ Billion)
150 100 50 67 80
89
102
117
Infrastructure development, simplified FDI and Spending as globalization in Indian Companies are key drivers of % of GDP wholesale banking
Source: , 2011 Research 3Empowering SMEs for global Competitiveness
2Mckinsey 1 BANCON
8
5.2
9
6.4
10
7.2
11
7.5
12
8.4
13
9.0
14
9.0
15
16
17
9.9 10.3 10.7
Source: Mckinsey & Company
21

Treasury Management
3
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
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What Michael Porter has to say about Banks

Indian Banking Industry : Not Attractive, unless differentiated
Bargaining Power of Suppliers
Threat of new substitutes
Threat of new entrants
Entry Barriers in the Industry High Medium Low

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Competitive Rivalry
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)
Bargaining Power of Customers
Provides homogenous kinds of services, so there is high chance that customers switch their banks
PEST Analysis on the Banking Industry

Factors Affecting the Industry
Political Factors
Economic Factors
- Monetary Policy - Regulatory Framework - Budget & Budget Measures - Changes in interest rates
- More savings - More Capital Formation - Increase in production of goods and Services - Banking Channels
Social Factors
Technological Factors
- Increase in population - Changes in lifestyle - Easy way of lending money - Exploring banking facilities in rural areas
- Internet Banking - IT Services & Mobile Banking - Credit Cards - Improvement in efficiency
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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
Dr. Duvvuri Subbarao, RBI Governor
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)
P. Chidambaram, Finance Minister of India
Sometimes the government gives debt waivers to certain sections of the society that need to be adhered to by banks as well
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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
26

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
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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
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Growth Drivers of the Banking Industry

High Growth of the Indian Economy & Favorable Demographics 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 Given that 40% of Indians lack access even to the simplest kind of formal financial services, the RBI on July 2011, mandated banks to allocate at least 25% of the total number of branches proposed to be opened during a year in unbanked rural centers Banks considering FI as a banking opportunity rather than a Regulatory obligation are likely to see long term profitable growth and a cushion against market volatility 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 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
Financial Inclusion (FI)
Private Banking & Wealth Management
Technology Innovation
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Opportunities in Banking
Survival of
the fittestgood for the opportunist and bad for the rest, choice is yours
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Opportunities in the Banking (1/3)

1
Mortgages to cross Rs 40 lakh crores by 2020 Mortgage Penetration Rate
India Thailand China Malasiya 10 17 20 29
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 BCGs 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
Singapore
Germany USA UK Demark
32
39 81 88 104
0 50 100 Mortgage Loans / GDP (%)

Source: BCG Research
150
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
2BCG
31
Research, January, 2012 Research

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%
Mobile banking to see huge growth
Key Mobile Banking Services

Mobile Commerce
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
Source:
1 2
Mobile Remittances
Purchase of call credits Transfer, withdraw & deposit
Payment of Bills
32
Celent,The Indian ATM Industry, October 2012 PwC estimates

5
Infrastructure financing to reach over Rs. 20 trillion on Commercial banks book by 2020
Half of the debt finance for infrastructure today comes from banks In order to sustain Indias 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
New Models to serve the Small & Medium Enterprises (SME)
Banks need to be innovative to meet the expectations of SME customers
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
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Banking Sector- Banking Beyond Banking
Theres only one
savior to the Tsunami of competitionInnOvATion
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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
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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
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Key Challenges
Introduction of BaselIII Norms Indian Banks will have to bring in an additional capital of Rs. 5 Lakhs Crore to 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 shareholding under Basel III Basel III norms will be implemented in a phased manner starting from January 2013 (now pushed to April) 2013, to be implemented to the fullest by March 2018
Intensifying Competition
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
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 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) Banks have to incur substantial employee costs as the attrition of the employees in this sector is very high
37
Increasing NPA
Licensing Requirement
Managing Human Resources
The Banking Outlook in 2013 & 2014

Paving 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
M&A Possibilities in small private sector banks
Target Banks Federal Bank ING Vysya Bank Karur Vysya Bank South Indian Bank Karnataka Bank City Union Bank Lakshmi Vilas Bank Dhanlakshmi Bank
1 Market 2As
Likely Applicants of New Banking Licenses NBFCs

PFC IDFC REC Shriram Trans L & T Finance
M Cap (Rs. in Crs.)1

Rs. 26,901.74 25,933.65 24,182.87 17,139.53 15,274.07
M & M Finance
Reliance Cap Sundaram Finance
12,558.90
11,785.46 5,690.18
Sparking M&A hopes
M Cap (Rs. in Crs.)1 Rs. 9,207.49 8,066.43 6,014.43 3,632.61 3,155.08 2,293.68 649.62 567.01
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, Lakshmi38 Vilas Bank2
capital as on 31st December, 2012 per news articles and DCA research
Attraction for Foreign Investors

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
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 stock39 exchanges (BSE,NSE)
Refer Slide no 63
Indian Banking Industry
Section IV: Performance of Indian Banks
40
Banking Industry : A Positive Surprise (1/2)

Balance sheet highlights of Banks in India: 2012
Amount in Crores
Particulars Cash & RBI balances Money at call Investments -GOI Bonds Loans & Advances Fixed Assets Other Assets Total Assets Total Deposits -Demand Deposits -Savings Deposits -Term Deposits Borrowings Other Liabilities Capital & Reserve Total Liabilities Public Bank Rs. 280,000 176,000 1,504,100 1,258,000 3,878,300 38,300 161,300 (%) 5% 3% 25% 21% 64% 1% 3% Private Bank Rs. 70,600 36,600 526,000 347,400 966,400 13,400 64,900 (%) 4% 2% 31% 21% 58% 1% 4% Foreign Bank 31,200 200,500 (%) 5% 34% Total SCB's Rs. 373,800 243,800 2,230,600 1,743,000 5,074,500 56,700 320,100 Rs. 8,299,500 Rs. 6,453,700 630,400 1,528,800 4,294,500 840,100 397,000 608,600 Rs. 8,299,400 (%) 5% 3% 27% 21% 61% 1% 4% 100% 78% 8% 18% 52% 10% 5% 7% 100% Rs. 23,200 4%
137,600 24% 229,800 39% 5,000 1% 93,900 16% Rs. 583,600 100% Rs. 277,100 47% 80,100 14% 41,900 7% 155,100 27% 119,900 21% 92,900 16% 93,700 16% Rs. 583,600 100%
Rs. 6,038,000 100% Rs. 1,677,900 100% Rs. 5,002,000 83% 384,400 1,214,000 3,403,600 461,800 218,600 355,600 6% 20% 56% 8% 4% 6% Rs. 1,174,600 70% 165,900 272,900 735,800 258,400 85,500 159,300 10% 16% 44% 15% 5% 9%
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%
Rs. 6,038,000 100% Rs. 1,677,800 100%
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
Source: Report on Trend and Progress of Banking in India, RBI 1 Statutory Liquidity Ratio 2 Cash Reserve Ratio
41
Banking Industry : A Positive Surprise (2/2)

Balance sheet highlights of Banks in India: 2012
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 201011, 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 201112 as against 14.19% in 2010-11, which remained well above the required minimum of 9%
42
Banking Industry 2012 : Rising Profitability

(Rs. In Crores)
Total Loans
6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 2007-08 ROA (%) 1.12% 2008-09 1.13% 2009-10 1.05% 2010-11 1.10% 2011-12 1.08% 2,999,923.90 2,476,936.00
20%
4,297,487.50 3,496,720.00
5,074,579.30
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
NIM
Cost-to-income ratio (%) 3.50 3.00 2.50 2.00 1.50 1.00 0.50 2.90% 2.30% 2.17% 2.91% 2.90% 22.00
Cost-to-Income Ratio
21.00
20.00 19.00 18.00 17.00
21.00% 19.50%
20.00 %
21.50% 18.50%
NIM (%)
2007-08
2008-09
2009-10
2010-11
2011-12
2007-08
2008-09
2009-10
2010-11
2011-12
43
Source: Report on Trends and Progress of Banking in India 2011-12
Snapshot of Credit Deployment by the Banks

(Rs. In Crores)
Sectoral Deployment of Gross Bank credit1
1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2011 2012 Gross Bank Credit 31.40% 29.84% 12.18% 12.55% 14.43% 14.36% 3.05% 2.81% Agriculture 460,300 522,600 Industry 1,094,200 1,346,800 Infrastructure 526,600 619,100 Real Estate 111,800 120,500 Total Non-food Gross Bank Credit 2011:-3,667,300 2012:- 4,289,800
17.91% 18.69%
5.17% 4.79% Finance 175,600 221,800 Personal* 685,400 768,300
16.10% 16.73%
Others** 613,400 690,700
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
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
44
Soar Spot of the Banking Industry

All those assets which do not generate periodical income are known as Non-Performing Loans (NPL) or NonPerforming 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). Indias 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 Public sector banks saw three times faster growth in stressed 45 loans than in private peers
Source: RBI
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 sectors 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 201213 is qualitatively different from that in 2008-09 and 200910. 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
46
Loan Restructuring : Survival or Edge (2/2)

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
Global Rankings
Indian banks are doing better than their emerging Asian counterparts, with 10 of them among Asias 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 Asias 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 worlds third largest in asset size by 2025 Indian Banking will be the worlds 3rd largest by 2025
48
1
Source: BANCON 2012
Global vs. Indian Banking Industry

Indian Banking: Soundness, Health and Balanced Performance
Return on Equity (%) Return On Equity 19.60% 17.8% 17.4% 16.7% 15.3% 14.6% 14.0% 12.4% 10.1% 8.2% 7.9% 6.9% 4.0% 2.7% -8.0% Cost: Income ratio (%) Cost to Income Ratio 79.30% 75% 73% 66% 65% 59% 57% 56% 55% 47% 47% 42% 42% 40% 40% Valuation (P-BV) Price to Book Value Ratio 3.6 2.3 2 2 1.9 1.8 1.7 1.6 1.5 1.4 0.9 0.8 0.8 0.5 0.3 Bad Debt to Assets Ratio Bad Debt to Assets Ratio 2.4% 2.0% 1.3% 1.2% 0.9% 0.7% 0.6% 0.6% 0.5% 0.4% 0.4% 0.4% 0.4% 0.3% 0.2%
Country Turkey Indonesia Malaysia China India Singapore Australia Canada South Korea Spain Russia Thailand France USA Germany
Country Indonesia Germany France Canada USA Russia Thailand Australia Malaysia India South Korea Spain Turkey China Singapore
Country Indonesia Malaysia Canada Russia Thailand India China Australia Turkey Singapore South Korea USA Spain France Germany
Country Russia Indonesia Turkey USA China Spain South Korea India Singapore Thailand Malaysia Germany Australia Canada France
Indian Banks Profitability leans towards the higher end of the spectrum while its cost -toincome ratio leans towards the lower end. In addition Bad debts charged to P&L remain moderate and valuation is sound
Source: Report By BCG -Big Five Stars In Productivity, August 2011
49
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:
1. 2. 3. 4. Credit take off of the corporate sector slowed down particularly because of down-sized capital expenditure programs Banks have been focusing on secured lending products (such as mortgage and auto loans) for retail customers to drive credit off take Policy uncertainty over the micro finance institutions and recent changes to banks credit off take to non banking Pressure to meet targets under Financial Inclusion also increased the cost of lending and decreased returns on advances for banks Key trends
CASA growth slowed Competition in savings deposits Volatility in margins
Reasons
High Interest rates and pressure on corporate cash flows Deregulation of Interest rates on saving deposits Mismatch in maturity of assets and liabilities
Impact on Banks
Effect felt by all banks Similar private banks gain share, albeit at higher cost Most banks except HDFC Bank and ICICI ICICI, Axis and SBI All Public banks, Axis and Yes
Fee growth slowed Interest-rate sensitivities

Source: CLSA Research
Slowdown in investment linked credit demand Decline in yields on government and corporate bonds
50
Key Trends in the Industry (2/2)

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. 2. There was slight improvement on retail loans, as banks had cut the lending rates on vehicle and home loans, so consumption credit went up 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 Big bang reforms announcements such as opening of the retail sector to foreign chains and hiking diesel prices aimed for reviving economic growth 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
3. 4.
51
Industry Snapshot
(Rs. In Crores)
Total Banking Business in India
Deposits
6,000,000 5,000,000 Deposits 4,000,000 3,000,000 2,000,000 1,000,000 2011 2012 Advances 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 2011 2012
Advances
Public
4,372,448.70 5,002,013.40
Private
1,002,758.80 1,174,587.40
Foreign
240,666.80 277,063.40
Public
Private
Foreign
3,304,432.90
3,878,312.50
797,544.00
966,418.20
195,510.60
229,848.60
Net Interest Income

4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2011 2012
Source: RBI
Return on Assets
3.93% Return on Assets 2.00% 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2011 2012 1.75% 1.76% 1.53% 1.43% 0.96% 0.88%
Net Inetrest Income
3.86%
2.77% 2.76% 3.10% 3.07%
Public 2.77% 2.76%
Private 3.10% 3.07%
Foreign 3.86% 3.93%
Public 0.96% 0.88%
Private 1.43% 1.53%
Foreign 1.75% 1.76%
52
Valuation Snapshot of Major Listed Banks
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
53
Source: Bloomberg Finance, Deutshe Bank, Price as on Dec 20,2012
Bankex vs. Sensex
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
54
Source: Bloomberg,CLSA Research , Jan 2013
Section V: Regulatory Framework
55
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 Fiscal Deficit & Inflation
60 12% 10% 50 6% 4% 3.30% 6.50% 4.80% 2.50% 4.60% 40 30 20 10 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Fiscal Deficit as % of GDP Inflation March March March March March March March January 2006 2007 2008 2009 2010 2011 2012 2013 39.97 44.61 43.59 44.65
INR/USD
50.95 45.14
51.15
54.54
8%
6% 4% 2% 0%
56
Source : RBI & Economy survey 2011-12
Monetary Policy Transmission Mechanism

Repo rate hike Expectations of Repo rate
Rise in market interest rates
Inflation Expectation
Lower expected profitability of the firms
Strong 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
The credit channel
The Interest rate channel
The exchange rate channel
57
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
58
How Banks are Regulated in the System?

Financial Institutions
Banking
Non-Banking
Scheduled Banks
Public
Private
Cooperative Banks
Housing Finance
NonBanking Finance
Development Finance
Insurance
Mutual Funds etc.
Foreign
Reserve Bank of India
`
Insurance Regulatory and Development Authority Security Exchange Board of India 59
-Regulatory bodies
Current Policy Rates

Indian Interest Rates
Repo Rate, Reverse Repo, CRR, SLR & MSF
30.00 25.00 20.00 15.00 10.00 5.00 0.00 Apr. 09 Nov.09 13 Feb. 10 16 Sep. 10 27 Feb. 2010 18 Dec. 10 17 Mar. 11 16 Sep. 11 17 Apr. 12 26 Jun. 11 25 Oct. 11 27 Jul.10 25 Jan. 11 20 Apr. 10 24 Apr. 10 24 Jan. 12 3 May. 11 9 May. 11 Mar. 10
Current Rates1
Policy Rates Bank Rates Repo Rate Reverse Repo Rate MSF Rate Reserves Rates CRR SLR 9.00% 7.75% 6.75% 9.00% 4.00% 23.00% 9.75% 10.50% 8.50%-9.00%
Lending / Deposit Rates Base Rate

Deposit Rate
16 Jun.11
2 Nov.10 2 Jul. 10
Repo Rate
Reverse Repo
CRR
SLR
MSF
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
60
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.
1 Source:
As per the RBI website and news in Economic Times as on 29 th Jan 2013
Major Banking Regulations & their Effects

BASEL III Norms-------------------------------------------------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
-------------------------------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
Government Initiatives-----------------------------------------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 strategic changes will leave more loanable funds with banks and help them widen their credit network
Foreign Direct Investment-------------------------------------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
-------------------------------
Other Reforms-----------------------------------------------------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
-------------------------------
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
61
Changing Industry Dynamics by New Rules

BASEL III Norms 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 Government Initiatives
Foreign Direct Investment(FDI)
Other Reforms
62
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
Allow Public banks to : Hold more than Rs.3,000 crores of authorized capital Issue two additional instruments (rights issue and bonus shares)
Establish Depositor Education and Awareness Fund which will take over deposit accounts that have not been claimed for 10 years 63
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 RBIs 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
64
Section VI: Deals in the Banking Industry in India

65
Banking Sector
Recent Deals (M&A)
Announced Date Target Acquirer
Stake (%) 100
Value ($US mn) 36.00
December 2011 April 2011 November 2010 August 2010 July 2010 February 2008
Barclays Bank Plc, Performing Credit Card Portfolio
Standard Chartered Bank India
Tamilnad Mercantile Bank Ltd. Enam Securities Direct Pvt. Ltd. Bank of Rajasthan Ltd.
Standard Chartered Bank India Axis Bank Ltd. ICICI bank Ltd.
4.64 NA 100
NA 439.79 658.65
Kotak Mahindra Bank Ltd

Centurioun Bank of Punjab
Sumitomo Mitsui Banking Corporation

HDFC Bank
4.50
100
294.00
2200.00
66
Source: VCCEdge, DCA Research
Banking Sector
Recent Deals (PE)
Announced Date Investor Investee
Stake (%) NA
Value ($US mn) 54.00
January 2013 April 2012
Ratnakar Bank Ltd.
Aditya Birla PE, Norwest venture capital partners and Fearing Capital Olympus Capital Holdings Asia
Karur Vysya Bank Ltd.
4.80 3.90 0.60
38.47 31.23 14.57
March 2012
February 2011 February 2011
Karur Vysya Bank Ltd.

IndusInd Bank Ltd. Ratnakar Bank Ltd.
ChrysCapital V LLC
General Atlantic Pvt. 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 Arcstone Capital LLC
NA
163.00
March 2010
Dhanlaxmi Bank Ltd.
5.00
9.30
67
Source: VCCEdge, DCA Research
Section VII: Special Section on Foreign Banks in India
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 industrys assets and there has not been any change in their market share over the years. The main reason for this is RBIs 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 investors, businesses and wealthy consumers in metro and tier I cities carter to
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 69 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 :
1RBI 2As
70
per Zee News article on 22nd August , 2012
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). Citibanks 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

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)
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 Industrys 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
72
Source : Article in The Livemint news pblication
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 Bank
74
Major Players in the Industry
Its better to
know all the players in the field before they snatch your piece of the cake
75
Major Players in the Industry

Major Banks in India
These are the small banks in terms of market capitalization These are the midsized 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
Market Cap (in Thousand Crores)
OBC Federal Allahabad UBI Yes Canara Indusind Bank of India Axis Bank of Baroda Punjab National Kotak Mahindra SBI ICICI HDFC
76
Banking Industry
Section VIII: Listed Private Banks in India
77
Common Stock Comparison

Private Banks in India (Rs. in Crores)
S.No 1 2 3 4 5 6 7
S.No 1 2 3 4 5 6 7
Banks HDFC Bank ICICI Bank Axis Bank Kotak Mahindra Indusind Bank Yes Bank Federal Bank
Banks HDFC Bank ICICI Bank Axis Bank Kotak Mahindra Indusind Bank Yes Bank Federal Bank Average Median Minimum Maximum
Market Cap Rs. 148,479.97 121,903.85 48,495.64 48,158.89 16,612.07 13,610.56 7,624.44
P/E (x) FY12 28.74x 18.86 11.43 26.28 20.70 13.93 9.82 18.54x 18.86 9.82 28.74
B/V or Shareholder's equity FY12 Rs. 29,924.40 60,405.24 22,808.50 12,901.00 4,742.00 4,676.60 5,706.33
P/BV (x) FY12 4.96x 2.02 2.13 3.73 3.50 2.91 1.34 2.94x 2.91 1.34 4.96 FY 13E 4.23x 1.83 1.77 3.24 2.18 1.87 1.18 2.33x 1.87 1.18 4.23
Net income FY12 Rs. 5,167.09 6,465.30 4,242.20 1,832.23 802.60 977.10 776.80 FY 13E Rs. 6,737.70 7,835.50 4,613.60 2,010.20 1,031.50 1,211.40 826.40
ROA (%) FY12 1.68% 1.47% 1.61% 2.21% 1.55% 1.47% 1.39% 1.63% 1.55% 1.39% 2.21% FY 13E 1.81% 1.55% 1.49% 2.02% 1.59% 1.46% 1.26% 1.60% 1.55% 1.26% 2.02%
FY 13E Rs. 35,110.70 66,560.50 27,381.50 14,843.90 7,627.10 7,294.60 6,444.00

ROE(%) FY12 18.69% 11.20% 20.29% 15.36% 18.27% 23.07% 14.37% 17.32% 18.27% 11.20% 23.07%
FY 13E 22.04x 15.56 10.51 23.96 16.10 11.24 9.23 15.52x 15.56 9.23 23.96
FY 13E 20.72% 12.34% 18.38% 14.49% 16.68% 20.24% 13.60% 16.64% 16.68% 12.34% 20.72%
Note: Market data as on 31st September 2012 and B/V or shareholders equity and Net Income figures are based on 31 st March 2012 (Financial Year closing) Source: Company Financial Statements as on 31st March 2012 and Research Reports
78
Profiles of the Major Players
Listed Players
79
HDFC Bank
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Mumbai, India 1977 10% Over 2,500 Over 10,300 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 To my mind, the winning strategy for banks in India is Basic Banking Model what is otherwise known as boring banking
Market Data (30-Sep-2012) Market Cap (Rs in Crs.): 2012 P/BV : 148,479.97 4.96x
52 week High / Low :
705.5/458.25
Key Management
Chairman:
Vice chairman: Executive Director: Managing Director:
Mr. Deepak Parekh Mr. Keshub Mahindra Mr. V. Srinivasa Rangan Mr. Renu Sud Karnad
14th
80
Note: 52 week High / Low is taken as on January 2013 Source: 1 News in Economic times dated 1st August 2012
- Mr. Deepak Parekh
HDFC Bank
Financial Summary (Rs. In Crores)
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 16,314.02 % Growth Interest Expense 8,903.37 % Growth Net Interest Income 7,410.65 % Growth Non Interest Income 3,439.74 % Growth Non-Interest Expense 5,649.27 Net Income 2,248.99 % Growth % Margin 11.39% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 16,232.74 -0.50% 7,797.60 -12.42% 8,435.14 13.82% 4,212.84 22.48% 6,080.83 3,003.65 33.56% 14.69% 2011 Rs. 20,043.33 23.47% 9,425.15 20.87% 10,618.18 25.88% 4,585.05 8.84% 7,310.91 3,992.49 32.92% 16.21% 2012 Rs. 27,605.56 37.73% 15,106.12 60.27% 12,499.44 17.72% 5,452.39 18.92% 8,803.48 5,247.02 31.42% 15.87% CAGR 19.16% 2013(6M) Rs. 16,532.07 9,316.33 19.04% 16.60% 7,215.74 2,874.61 4,938.10 2,977.37 15.34%
32.63%
Rs. 99,027.37 Rs. 126,162.74 Rs. 160,831.42 Rs. 198,837.53 26.16% Rs. 231,648.61 27.40% 27.48% 23.63% 142,644.80 167,297.78 208,287.21 246,539.58 20.01% 274,130.04 17.28% 24.50% 18.37% 15,094.53 21,618.81 25,586.05 30,210.75 26.02% 33,345.00 43.22% 18.35% 18.08% 58,715.15 58,508.28 -0.35% 70,276.67 20.11% 96,795.11 37.73% 91,733.77
4.33% 51.70% 1.42% 16.89% 69.42% 15.10%
4.21% 49.40% 3.00% 16.80% 75.41% 17.40%
4.14% 47.90% 1.61% 16.50% 77.22% 16.20%
4.02% 48.40% 1.61% 18.40% 80.65% 16.50%
81
HDFC Bank
Financial Summary (Rs. In Crores)
Deposits Deposit & Loan Loans
300,000 250,000 Deposits & Loans 200,000 150,000 100,000 50,000 2009 142,645 99,027 2010 167,298 126,163 17.28% 27.40% 2011 208,287 160,831 24.50% 27.48% 2012 246,540 198,838 18.37% 23.63%
NII & NIM

30% 25% 20% Y-o-Y 15% 10% 5% 0% 14,000 12,000 10,000 8,000 6,000 4,000 2,000 NII 4.35% 4.30% 4.25% 4.20% 4.15% 4.10% 4.05% 4.00% 3.95% 3.90% 3.85%
NII
Deposits Loans Deposits (y-o-y) Loans (y-o-y)
2009 7,411 4.33%
2010 8,435 4.21%
2011 10,618 4.14%
2012 12,499 4.02%
NIM
P A T , R O E & R O A
PAT, ROE & ROA

6,000 5,000 4,000 PAT 3,000 2,000 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
Loans & % of net NPL to Loans

210,000 190,000 170,000 150,000 130,000 110,000 90,000 70,000 50,000 30,000 10,000 Loans % of Net NPL to Loans 0.70% 0.50% % of NPL to Loans 0.60%
RoA & RoE
0.40%
0.30% 0.20% 0.10% 2009 99,027 2010 2011 2012 0.00%
1,000
PAT ROE (%) 2009 2,249 16.89% 1.42% 2010 3,004 16.80% 3.00% 2011 3,992 16.50% 1.61% 2012 5,247 18.40% 1.61%
Loans
126,163 160,831 198,838
NIM
ROA(%)
0.63%
0.31%
0.19%
0.18%
82
ICICI Bank
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Vadodra, India 1994 9.75% Over 2,880 Over 10,000 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 The strategy of focusing on profitability, growth and risk management for fiscal 2012 resulted in better than the expected results
Market Data (30-Sep-2012)
Market Cap (Rs in Crs.):

2012 P/BV : 52 week High / Low : Key Management
MD & CEO: MD & CFO: Executive Director: Executive Director:
121,903.85
2.02x 1,192/762
Ms. Chanda Kocchar Mr. N.S. Kannan Mr. K. Ramkumar Mr. Rajiv Sabharwal
Note: 52 week High / Low is taken as on 14th January 2013
- Ms. Chanda Kocchar
83
ICICI Bank
Financial Summary (Rs. in Crores)
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 36,250.71 % Growth Interest Expense 26,487.25 % Growth Net Interest Income 9,763.45 % Growth Non Interest Income 27,902.37 % Growth Non-Interest Expense 28,185.79 Net Income 3,379.42 % Growth % Margin 5.27% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 30,153.71 -16.82% 20,729.19 -21.74% 9,424.52 -3.47% 29,446.07 5.53% 27,733.24 4,843.41 43.32% 8.13% 2011 Rs. 30,081.40 -0.24% 19,342.57 -6.69% 10,738.84 13.95% 31,513.30 7.02% 31,302.45 6,318.19 30.45% 10.26% 2012 Rs. 37,994.86 26.31% 25,013.24 29.32% 12,981.61 20.88% 28,663.42 -9.04% 29,552.05 7,937.63 25.63% 11.91% CAGR 1.58% 2013(6M) Rs. 19,571.98 13,007.81 9.96% 0.90% 6,564.17 3,922.89 4,344.43 3,771.16 16.05%
32.93%
Rs. 266,130.47 261,855.75 46,777.53 119,493.05
Rs. 225,778.13 -15.16% 241,572.30 -7.75% 51,296.50 9.66% 134,850.53 12.85%
Rs. 256,019.31 13.39% 259,106.00 7.26% 55,302.50 7.81% 150,826.24 11.85%
Rs. 292,125.42 14.10% 281,950.47 8.82% 61,276.50 10.80% 182,046.72 20.70%
3.16% Rs. 275,075.63 2.50% 9.42% 281,438.20 64,462.14 157,913.96
2.26% 43.40% 0.70% 7.23% 91.44% 15.50%
2.14% 37.00% 1.00% 9.66% 90.04% 19.40%
2.21% 41.95% 1.24% 11.57% 87.81% 19.50%
2.35% 42.91% 1.40% 11.10% 92.23% 18.50%
84
ICICI Bank
Deposits & Loans
350,000 300,000 250,000 200,000 150,000 100,000 50,000 20% 15% 10% 5% 0% -5% -10% -15% -20% Deposits & Loans 14,000 12,000 10,000 8,000 6,000 4,000 2,000 NII NIM
NII & NIM

2.40% 2.35% 2.30% 2.25% 2.20% 2.15% 2.10% 2.05% 2.00%
Y-OY
2009
2010
2011
2012
261,856 241,572 259,106 281,950 266,130 225,778 256,019 292,125 -7.75% 7.26% 8.82% -15.16% 13.39% 14.10%
2009 9,763 2.26%
2010 9,425 2.14%
2011 10,739 2.21%
2012 12,982 2.35%
PAT, ROE & ROA

9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 PAT ROE (%) ROA(%) 14% 12% 8% 6% 4% 2% 2009 3,379 7.23% 2010 4,843 9.66% 2011 6,318 11.57% 2012 7,938 11.10% 0% ROE & ROA 10%

310,000
260,000 210,000 Loans 160,000 110,000 60,000 10,000
Loans % of Net NPL to Loans 2009 266,130 2010 225,778 2011 256,019 2012 292,125
2.50%
% of NPL to Loans 2.00% 1.50% 1.00% 0.50% 0.00%
PAT
0.70%
1.00%
1.24%
1.40%
1.96%
1.87%
0.94%
0.62%
NIM
NII
85
Axis Bank
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: Ahmedabad, India 1994 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 Enams Shareholders in 2010 The loan growth of Axis bank is largely driven by drawdown of existing loans and demand for working capital I want to make Axis Bank Indias JPMorgan
86
No. of branches:
No. of ATMs:
Over 1,600
Over 10,000
Market Data (30-Sep-2012) Market Cap (Rs in Crs.): 2012 P/BV : 48,495.64 2.13x
52 week High / Low :
1,396.50/893.10
Key Management
Chairman: MD & CEO: Director Director:
Mr. Adarsh Kishore Ms. Shikha Sharma Mr. Rama Bijapurkar Mr. S. B. Mathur
- Ms. Shikha Sharma
Axis Bank
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 10,829.11 % Growth Interest Expense 7,148.92 % Growth Net Interest Income 3,680.19 % Growth Non Interest Income 2,915.93 % Growth Non-Interest Expense 2,873.80 Net Income 1,812.93 % Growth % Margin 13.19% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth 2010 Rs. 11,639.10 7.48% 6,632.60 -7.22% 5,006.50 36.04% 3,964.20 35.95% 3,762.50 2,478.10 36.69% 15.88% 2011 Rs. 15,154.86 30.21% 8,588.61 29.49% 6,566.25 31.15% 4,671.45 17.84% 4,865.24 3,339.91 34.78% 16.85% 2012 Rs. 21,994.90 45.13% 13,969.18 62.65% 8,025.72 22.23% 5,487.19 17.46% 6,098.63 4,219.78 26.34% 15.35% CAGR 26.64% 2013(6M) Rs. 13,170.09 8,663.30 29.68% 23.46% 4,506.79 2,928.57 3,293.44 2,277.06 14.14%
32.53%
Rs. 81,556.77 Rs. 104,341.00 Rs. 142,407.83 Rs. 169,759.54 27.68% Rs. 172,131.57 27.94% 36.48% 19.21% 117,357.66 141,278.70 189,166.43 219,987.68 23.30% 235,619.09 20.38% 33.90% 16.29% 10,195.71 15,989.20 18,894.61 22,681.71 30.54% 30,096.04 56.82% 18.17% 20.04% 39,431.80 51,451.60 30.48% 71,743.30 39.44% 92,877.17 29.46% 99,690.94
Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio
2.68% 43.42% 1.41% 19.13% 69.49% 13.69%
2.95% 41.45% 1.51% 18.93% 73.85% 15.80%
2.88% 42.69% 1.58% 19.15% 75.28% 12.65%
2.94% 44.70% 1.60% 20.30% 77.17% 13.66%
87
Axis Bank
Deposits & Loans
250,000 40% 35% 30% 25% 20% 15% 10% 5% 0%
NII& NIM
9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 NII NIM 3.00% 2.95% 2.90% 2.85% 2.80% 2.75% 2.70% 2.65% 2.60% 2.55% 2.50%
Deposits & Loans
200,000
150,000 100,000 50,000 -
Y-o-Y
NII
2009 117,358 81,557
2010 141,279 104,341 20.38% 27.94%
2011 189,166 142,408 33.90% 36.48%
2012 219,988 169,760 16.29% 19.21%
2009 3,680 2.68%
2010 5,007 2.95%
2011 6,566 2.88%
2012 8,026 2.94%
PAT, ROE & ROA

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 PAT ROE (%) ROA(%) 25% 20% 15% 10% 5% 2009 1,813 19.13% 1.41% 2010 2,478 18.93% 1.51% 2011 3,340 19.15% 1.58% 2012 4,220 20.30% 1.60% 0% ROA & ROE Loans
LoansLoan & %& ofProvision net NPL to NPL Loans

190,000 170,000 150,000 130,000 110,000 90,000 70,000 50,000 30,000 10,000 Loans % of Net NPL to Loans 0.45% 0.40% 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00%
NIM
% of NPL to Loans
PAT
2009 81,557 0.40%
2010
2011
2012
104,341 142,408 169,760 0.40% 0.29% 0.27%
88
Kotak Mahindra Bank

Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Mumbai, India 2003 9.75% Over 400 Over 100 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 The most important challenges in the Indian banking sector are the ability to define and price risk

Vice chairman & MD:
48,158.89
3.73x 677/456.10
Mr. Uday S Kotak
Joint Managing Director: Mr. C Jayram Joint Managing Director: Mr. Dipak Gupta
-Mr. Uday Kotak
89
Kotak Mahindra Bank

Statement of Profit and Loss Particulars 2009 Interest Income Rs. 4,366.56 % Growth Interest Expense 1,992.39 % Growth Net Interest Income 2,374.17 % Growth Non Interest Income 2,851.70 % Growth Net Income 652.39 % Growth % Margin 9.04% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 4,601.16 5.37% 1,772.86 -11.02% 2,828.30 19.13% 5,452.14 91.19% 1,307.00 100.34% 13.00% 2011 Rs. 6,141.44 33.48% 2,634.55 48.60% 3,506.89 23.99% 4,887.84 -10.35% 1,566.74 19.87% 14.21% 2012 Rs. 8,470.42 37.92% 4,541.96 72.40% 3,928.46 12.02% 4,543.40 -7.05% 1,832.24 16.95% 14.08% CAGR 24.72% 2013(6M) Rs. 5,079.61 2,818.30 18.28% 16.80% 41.09% 2,261.31 2,287.78 945.65 12.84%
Rs. 22,497.62 13,822.78 6,522.54 13,313.03
Rs. 29,724.00 32.12% 21,819.18 57.85% 7,910.94 21.29% 19,484.78 46.36%
Rs. 41,241.95 38.75% 27,312.98 25.18% 10,962.94 38.58% 26,048.99 33.69%
Rs. 53,143.61 33.18% Rs. 61,254.81 28.86% 36,460.73 38.17% 43,864.52 33.49% 12,901.05 25.53% 13,942.72 17.68% 31,658.43 33,058.02 21.53%
5.80% 66.80% 1.60% 10.50% 100.38% 22.50%
5.80% 47.80% 2.70% 18.20% 94.61% 19.30%
5.20% 54.00% 2.40% 16.40% 94.27% 19.50%
4.80% 53.00% 2.20% 15.40% 100.90% 17.50%
90
Kotak Mahindra Bank

Deposits & Loans
60,000 50,000 Deposits & Loans 40,000 70% 60% 50% 40% 30% 20% 10% 0% 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 NII NIM
NII & NIM

7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%
10,000 2009 13,823 2010 21,819 2011 27,313 2012 36,461
Deposits
Loans Deposits (y-o-y) Loans (y-o-y)
Y-OY
20,000
2009
2010
2011
2012
22,498
29,724
57.85% 32.12%
41,242
25.18% 38.75%
53,144
33.49% 28.86%
2,374
5.80%
2,828
5.80%
3,507
5.20%
3,928
4.80%
PAT, ROA & ROE

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 PAT ROE (%) ROA(%) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 Loans % net NPL to Loans 1.40% 1.00% 0.80% 0.60% 0.40% 0.20% 2009 22,498 1.20% 2010 29,724 1.10% 2011 41,242 0.40% 2012 53,144 0.50% 0.00% % of NPL to Loans 1.20%
PAT
ROE & ROA
2009 652 10.50% 1.60%
2010 1,307 18.20% 2.70%
2011 1,567 16.40% 2.40%
2012 1,832 15.40% 2.20%
Loans
NIM
30,000
NII
91
Indusind Bank
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: Mumbai, India 1994 10.75% Over 440 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
No. of ATMs:
Over 750
Market Data (30-Sep-2012) Market Cap (Rs in Crs.): 2012 P/BV : 52 week High / Low : Key Management
Chairman: Managing Director: Managing Director:
Mr. R. Seshasayee Mr. Romesh Sobti
16,612.07 3.50x 444.90/270.50
The bank acquired Deutsche Banks 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
92
Mr. Ajay Hinduja
Indusind Bank
Statement of Profit and Loss Particulars Interest Income % Growth Interest Expense % Growth Net Interest Income % Growth Non Interest Income % Growth Non-Interest Expense Net Income % Growth % Margin Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth 2009 Rs. 2,309.47 1,850.44 459.03 456.25 547.03 148.34 5.36% 2010 Rs. 2,706.99 17.21% 1,820.58 -1.61% 886.42 93.11% 553.48 21.31% 736.00 350.31 136.15% 10.74% 2011 Rs. 3,589.36 32.60% 2,212.86 21.55% 1,376.49 55.29% 713.66 28.94% 1,008.48 577.33 64.81% 13.42% 2012 Rs. 5,359.19 49.31% 3,654.95 65.17% 1,704.24 23.81% 1,011.78 41.77% 1,343.00 802.61 39.02% 12.60% CAGR 2013(6M) 32.39% Rs. 3,359.97 2,366.14 54.84% 30.41% 993.83 629.27 809.25 480.51 12.05%
75.56%
Rs. 15,770.64 22,110.25 1,664.39 8,083.41
Rs. 20,550.59 30.31% 26,710.17 20.80% 2,397.23 44.03% 10,401.84 28.68%
Rs. 26,165.65 27.32% 34,365.37 28.66% 4,050.21 68.95% 13,550.81 30.27%
Rs. 35,063.95 30.52% 34.01% 42,361.55 24.20% 23.27% 4,741.71 41.76% 17.07% 14,571.95 7.54%
39,427.19 47,764.54 5,242.50 15,609.35
1.83% 59.77% 0.58% 9.84% 71.33%
2.68% 51.12% 1.11% 16.18% 76.94% 15.33%
3.26% 48.25% 1.43% 17.91% 76.14% 15.89%
3.24% 52.30% 1.57% 18.26% 82.77% 13.85%
93
Indusind Bank
Deposits & Loans
45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 40% 35% 30% 25% 20% 15% 10% 5% 0% 1,800 1,600 1,400 1,200 1,000 800 600 400 200 NII NIM
NII & NIM

3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%
Deposits & Loans
2009 22,110 15,771
2010 26,710 20,551 20.80% 30.31%
2011 34,365 26,166 28.66% 27.32%
2012 42,362 35,064 23.27% 34.01%
Y-OY
2009 459 1.83%
2010 886 2.68%
2011 1,376 3.26%
2012 1,704 3.24%
PAT, ROA & ROE

900 800 700 600 500 400 300 200 100 PAT ROE (%) ROA(%) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
Loans & % of net NPL to Loans]
40,000 ROE & ROA 35,000 30,000 Loans 25,000 20,000 15,000
PAT
NIM
1.20% 1.00% 0.80% 0.60% 0.40% 0.20%
NII
2009 148 9.84% 0.58%
2010 350 16.18% 1.11%
2011 577 17.91% 1.43%
2012 803 18.26% 1.57%
10,000
Loans % net NPL to Loans
2009 15,771 1.14%
2010 20,551 0.50%
2011 26,166 0.28%
2012 35,064 0.27%
0.00%
94
% of NPL to Loans
YES Bank
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Mumbai, India 2004 10.50% Over 380 Over 650 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 2.91x 516.80/273.80
MD & CEO:
Dr. Rana Kapoor
13,610.56
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
The India story may have slowed down, but banking continues to be grossly underpenetrated
Independent Director: Mr. Arun K Mago Independent Director: Ms. Radha Singh
-Dr. Rana Kapoor
95
YES Bank
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 2,001.43 % Growth Interest Expense 1,492.14 % Growth Net Interest Income 509.30 % Growth Non Interest Income 436.90 % Growth Non-Interest Expense 418.55 Net Income 303.84 % Growth % Margin 12.46% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 2,369.71 18.40% 1,581.76 6.01% 787.95 54.71% 575.53 31.73% 500.15 477.74 57.23% 16.22% 2011 Rs. 4,041.75 70.56% 2,794.82 76.69% 1,246.93 58.25% 623.27 8.29% 679.81 727.14 52.20% 15.59% 2012 Rs. 6,307.36 56.06% 4,691.72 67.87% 1,615.64 29.57% 857.12 37.52% 932.53 977.00 34.36% 13.64% CAGR 46.61% 2013(6M) Rs. 3,872.71 2,876.36 46.93% 25.19% 996.35 564.86 616.86 596.22 13.44%
47.60%
Rs. 12,403.09 16,169.42 1,624.22 7,117.02
Rs. 22,193.12 78.93% 26,798.57 65.74% 3,089.55 90.22% 10,209.94 43.46%
Rs. 34,363.64 54.84% 45,938.93 71.42% 3,794.08 22.80% 19,000.06 86.09%
Rs. 37,988.64 45.22% Rs. 42,019.25 10.55% 49,151.71 44.86% 52,290.81 6.99% 4,676.64 42.26% 5,313.49 23.26% 28,641.61 31,754.98 50.74%
2.45% 44.20% 1.52% 20.65% 76.71% 16.60%
2.29% 36.70% 1.61% 20.27% 82.81% 20.60%
2.30% 36.30% 1.52% 21.13% 74.80% 16.50%
2.52% 37.70% 1.47% 23.07% 77.29% 17.90%
96
YES Bank
Deposits & Loans
60,000 50,000 Deposits & Loans 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1,800 1,600 1,400 1,200 1,000 800 600 400 200 NII NIM
NII & NIM

2.55% 2.50% 2.45% 2.40% 2.35% 2.30% 2.25% 2.20% 2.15%
40,000
30,000 20,000 10,000 2009 16,169 12,403 2010 26,799 22,193 65.74% 78.93% 2011 45,939 34,364 71.42% 54.84% 2012 49,152 37,989 6.99% 10.55%
Y-OY
NII
2009
509 2.45%
2010
788 2.29%
2011
1,247 2.30%
2012
1,616 2.52%
PAT, ROE & ROA

1,200 1,000 PAT 800 600 25% 20% Loans ROE & ROA 15% 10% 5% 2009 304 20.65% 1.52% 2010 478 20.27% 1.61% 2011 727 21.13% 1.52% 2012 977 23.07% 1.47% 0%

40,000 35,000 30,000 25,000 20,000 15,000 10,000 Loans % net NPL to Loans 2009 12,403 0.33% 2010 22,193 0.06% 2011 34,364 0.03% 2012 37,989 0.05% 0.35% 0.25% 0.20% 0.15% 0.10% % of NPL to Loans 0.30%
400
200 PAT ROE (%) ROA(%)
0.05%
0.00%
NIM
97
The Federal Bank

Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Kerala, India 1947 10.45% Over 1,000 Over 800 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 Improved risk management practices have kept the banks NPAs under check
MD & CEO: Director: Director:
Mr. Shyam Srinivasan
7,624.44 1.34x 571.00/355.10
Mr. P C John
Mr. Suresh Kumar
- Mr. Shyam Srinivasan
98
The Federal Bank

Statement of Profit and Loss Particulars 2009 Interest Income Rs. 3,315.38 % Growth Interest Expense 1,999.24 % Growth Net Interest Income 1,316.14 % Growth Non Interest Income 516.02 % Growth Non-Interest Expense 600.82 Net Income 472.01 % Growth % Margin 12.32% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 3,673.24 10.79% 2,261.77 13.13% 1,411.47 7.24% 532.55 3.20% 703.32 439.67 -6.85% 10.45% 2011 Rs. 4,052.03 10.31% 2,304.49 1.89% 1,747.54 23.81% 518.33 -2.67% 868.54 556.47 26.57% 12.18% 2012 CAGR Rs. 5,581.72 18.96% 37.75% 3,606.67 56.51% 1,975.05 14.49% 13.02% 532.20 1.03% 2.68% 1,008.06 753.73 16.88% 35.45% 12.33% 2013(6M) Rs. 3,062.34 2,064.79 997.55 263.74 565.14 405.45 12.19%
Rs. 22,391.88 32,192.31 4,290.41 12,073.51
Rs. 26,950.11 20.36% 36,049.29 11.98% 4,630.10 7.92% 12,981.88 7.52%
Rs. 31,957.81 18.58% 42,988.45 19.25% 5,017.70 8.37% 14,407.91 10.98%
Rs. 37,945.85 19.22% Rs. 36,299.18 18.74% 48,934.73 14.98% 49,518.07 13.83% 5,592.29 9.24% 6,111.79 11.45% 17,102.02 18.70% 18,550.22
3.59% 31.21% 1.32% 11.50% 69.56% 20.14%
3.34% 34.86% 1.07% 9.86% 74.76% 17.27%
3.54% 36.94% 1.17% 11.54% 74.34% 15.39%
3.44% 39.40% 1.35% 14.21% 77.54% 13.83%
99
The Federal Bank

Deposits & Loans
Deposits & Loans 60,000 50,000 40,000 30,000 20,000 25% 20% 15% 2,500 2,000 NII 1,500 1,000 500 NII 2009 1,316 3.59% 2010 1,411 3.34% 2011 1,748 3.54% 2012 1,975 3.44%
NII & NIM

3.65% 3.60% 3.55% 3.50% 3.45% 3.40% 3.35% 3.30% 3.25% 3.20%
10,000
Deposits Loans Deposits (y-o-y) Loans (y-o-y) 2009 32,192 22,392 2010 36,049 26,950 11.98% 20.36% 2011 42,988 31,958 19.25% 18.58% 2012 48,935 37,946 13.83% 18.74%
5% 0%
Y-OY
10%
NIM
PAT, ROA & ROE

800 700 600 500 400 300 200 100 PAT ROE (%) ROA(%) 16% 14% 12% 10% 8% 6% 4% 2% 0%
Loans Loan & % &of Provision net NPL NPL to Loans

40,000 35,000 30,000 Loans 25,000 20,000 15,000 10,000 Loans % net NPL to Loans 2009 22,392 0.30% 2010 26,950 0.48% 2011 31,958 0.60% 2012 37,946 0.53%
0.70%
PAT
0.50% 0.40% 0.30% 0.20% 0.10% 0.00%
2009
2010
2011
2012
472
11.50% 1.32%
440
9.86% 1.07%
556
11.54% 1.17%
754
14.21% 1.35%
% of NPL to Loans
0.60%
ROE & ROA
NIM
100
Banking Industry
Section IX: Listed Public Banks in India
Common Stock Comparison

Public Banks in India (Rs. in Crores)
B/V or Shareholder's equity S.No Banks 1 2 3 4 5 6 7 8 State Bank of India Bank Of Baroda Punjab National Bank Canara Bank Bank of India Union Bank of India Oriental Bank of Commerce Allahbad Bank Market Cap FY12 FY 13E Net income FY12 FY 13E
Rs. 150,173.12 Rs. 106,230.01 Rs. 116,869.50 32,830.26 28,480.83 19,099.95 17,810.14 11,432.15 8,799.52 7,327.88
P/E (x)
Rs. 15,343.10 Rs. 16,488.50 5,007.00 4,884.20 3,282.70 2,677.50 1,787.20 1,141.60 1,867.00 4,344.90 4,667.60 3,312.90 2,797.80 2,157.40 1,481.70 1,513.00
ROA (%) FY12 0.88% 1.24% 1.17% 0.92% 0.73% 0.72% 0.67% 1.12% 0.93% 0.90% 0.67% 1.24% FY 13E 0.86% 0.90% 0.95% 0.84% 0.67% 0.77% 0.78% 0.79% 0.82% 0.82% 0.67% 0.95%
27,476.90 27,817.10 22,690.00 20,961.80 14,522.10 11,942.50 10,869.53

P/BV (x) FY12 1.41x 1.19 1.02 0.84 0.85 0.79 0.74 0.67 0.94x 0.85 0.67 1.41
31,001.60 31,509.60 25,358.20 23,227.10 16,164.10 13,085.10 11,700.00

ROE(%) FY12 16.18% 20.66% 19.80% 15.36% 13.06% 13.10% 9.91% 19.27% 15.92% 15.77% 9.91% 20.66%
S.No Banks 1 2 3 4 5 6 7 8 State Bank of India Bank Of Baroda Punjab National Bank Canara Bank Bank of India Union Bank of India Oriental Bank of Commerce Allahbad Bank Average Median Minimum Maximum
FY12 9.79x 6.56 5.83 5.82 6.65 6.40 7.71 3.92 6.58x 6.48 3.92 9.79
FY 13E 9.11x 7.56 6.10 5.77 6.37 5.30 5.94 4.84 6.37x 6.02 4.84 9.11
FY 13E 1.28x 1.06 0.90 0.75 0.77 0.71 0.67 0.63 0.85x 0.76 0.63 1.28
FY 13E 14.78% 14.86% 15.74% 13.79% 12.66% 14.06% 11.84% 13.41% 13.89% 13.93% 11.84% 15.74%
102
Note: Market data as on 31st September 2012 and B/V or shareholders equity and Net Income figures are based on 31 st March 2012 (Financial Year closing) Source: Company Financial Statements as on 31st March 2012 and Research Reports
Profiles of the Major Players
Listed Players
State Bank of India

Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Mumbai, India 1806 9.75% Over 14,000 Over 10,000 Business Overview State Bank of India (SBI) is the Indias oldest and largest bank by revenue, assets and market capitalization
Market Data ( 30-Sep-2012)

Market Cap (Rs in Crs.): 150,173.12
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 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
2012 P/BV : 52 week High / Low :
1.41x 2,551.70/1,748.40
Key Management
MD & CEO: Managing Director: Managing Director: Managing Director:
Mr. Pratip Chaudhari Mr. Hemant G. Contractor Mr. Diwakar Gupta Mr. A. Krishna Kumar
104
- Mr. Pratip Chaudhari
State Bank of India

Company Profile : SBI Bank
Subsidiaries of SBI
The State Bank Group includes a network of eight banking subsidiaries and several nonbanking 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)
Banking segments of SBI

Treasury
Corporate/Wholesale
Retail
Other Services
Includes investment portfolio and trading in foreign exchange contracts and derivative contracts
Comprises of lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group
Comprises of branches in National Banking Group, which includes personal banking activities, including lending activities to corporate customers
NRI Services ATM Services Demat Services E-Pay/E Rail Broking Services
105
State Bank of India

Statement of Profit and Loss Particulars 2009 2010 Interest Income Rs. 91,667.01 Rs. 100,080.73 % Growth 9.18% Interest Expense 62,626.46 66,637.51 % Growth 6.40% Net Interest Income 29,040.55 33,443.22 % Growth 15.16% Non Interest Income 21,426.08 33,771.10 % Growth 57.62% Non-Interest Expense 26,571.72 42,415.39 Net Income 10,955.29 11,733.83 % Growth 7.52% % Margin 9.69% 8.77% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2011 Rs. 113,636.44 13.54% 68,086.40 2.17% 45,550.04 36.20% 34,207.48 1.29% 46,518.01 10,684.95 -6.94% 7.23% 2012 Rs. 147,197.38 29.53% 89,319.55 31.19% 57,877.83 27.06% 29,835.44 -12.78% 46,856.03 15,343.09 42.87% 8.67% CAGR 2013(6M) 17.10% Rs. 82,275.40 51,806.11 25.84% 11.67% 30,469.29 14,424.77 24,301.08 9,450.01 9.77%
11.88%
Rs. 750,362.39 Rs. 869,501.64 Rs. 1,006,401.55 Rs. 1,163,670.21 15.75% 15.88% 15.74% 15.63% 1,011,988.33 1,116,464.57 1,255,562.48 1,414,689.40 11.81% 10.32% 12.46% 12.67% 72,390.39 83,135.58 83,471.25 106,230.01 13.64% 14.84% 0.40% 27.27% 372,231.45 412,749.26 10.89% 419,066.45 1.53% 460,949.14 9.99%
1,231,129.25 1,522,606.90 116,426.35 534,487.86
2.13% 46.62% 0.96% 16.21% 74.15% 14.25%
2.24% 52.59% 0.87% 14.98% 77.88% 13.39%
2.95% 47.60% 0.72% 12.98% 80.16% 11.98%
3.40% 45.23% 0.92% 16.27% 82.26% 13.86%
106
State Bank of India

Deposits & Loans
1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
NII & NIM

70,000 60,000 50,000 40,000 30,000 20,000 10,000 NII NIM
2009 1,011,988 750,362
2010 1,116,465 869,502 10.32% 15.88%
2011 1,255,562 1,006,402 12.46% 15.74%
2012 1,414,689 1,163,670 12.67% 15.63%
2009 29,041 2.13%
2010 33,443 2.24%
2011 45,550 2.95%
2012 57,878 3.40%
4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%
Deposits & Loans
NII
PAT, ROA & ROE

18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 PAT ROE (%) ROA(%) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
Y-OY

1,410,000 1,210,000
NIM
1.85% 1.80% 1.75%
ROE & ROA
1,010,000 810,000
1.70%
1.65% 1.60% 1.55%
2009 750,362 1.79% 2010 869,502 1.72% 2011 1,006,402 1.63% 2012 1,163,670 1.82%
610,000 410,000 210,000 10,000
2009 10,955 16.21% 0.96%
2010 11,734 14.98% 0.87%
2011 10,685 12.98% 0.72%
2012 15,343 16.27% 0.92%
1.50%
Loans % net NPL to Loans
107
% of NPL to Loans
PAT
Loans
Bank of Baroda
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Baroda, India 1908 10.50% Over 4,000 Over 1,800 Business Overview Bank of Baroda is a 103 year old Stateowned Bank with a good mix of modern & contemporary personality, offering banking products and services to large industrial, SME, retail & agricultural customers across the country

Chairman & MD: Executive Director: Executive Director: Executive Director:
32,830.26
1.19x 899/605.55
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 The Indian banking industry has always been resilient in facing challenges
Mr. M. D. Mallya Mr. S. K. Jain Mr. P. Srinivas Mr. Ranjan Dhawan
- Mr. M. D. Mallya
108
Bank of Baroda
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 15,547.56 % Growth Interest Expense 10,167.35 % Growth Net Interest Income 5,380.21 % Growth Non Interest Income 2,909.02 % Growth Non-Interest Expense 3,712.36 Net Income 2,384.08 % Growth % Margin 12.92% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 17,234.82 10.85% 11,023.34 8.42% 6,211.48 15.45% 2,965.30 1.93% 3,938.96 3,179.30 33.36% 15.74% 2011 Rs. 22,513.31 30.63% 13,349.60 21.10% 9,163.71 47.53% 3,287.10 10.85% 4,815.87 4,433.71 39.46% 17.18% 2012 Rs. 30,488.49 35.42% 19,724.34 47.75% 10,764.15 17.46% 4,100.42 24.74% 5,402.42 5,248.57 18.38% 15.17% CAGR 2013(6M) 25.17% Rs. 17,280.16 11,619.79 26.01% 12.12% 5,660.37 1,599.11 2,623.72 2,440.25 12.93%
30.09%
Rs. 145,559.50 196,608.44 13,324.70 53,626.58
Rs. 177,711.90 22.09% 245,951.15 25.10% 15,714.59 17.94% 63,163.27 17.78%
Rs. 232,085.11 30.60% 311,603.25 26.69% 21,826.57 38.89% 74,154.42 17.40%
Rs. 292,077.14 26.13% 292,180.92 25.85% . 392,615.95 25.93% 408,149.50 26.00% 28,516.30 28.87% 29,793.89 30.65% 86,697.00 16.91% 101,430.13
2.56% 45.38% 1.15% 19.34% 74.04% 14.05%
2.44% 43.57% 1.24% 21.91% 72.25% 14.36%
2.81% 39.87% 1.37% 23.64% 74.48% 14.52%
2.68% 37.55% 1.28% 20.87% 74.39% 14.67%
109
Bank of Baroda
Deposits & Loans
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 Deposits Loans Deposits (y-o-y) Loans (y-o-y)
NII & NIM

35% 30% 25% 20% 15% 10% 5% 0% 12,000 10,000 2.90% 2.80% 2.70% 2.60% 2.50% 2.40% 2.30% 2.20%
Deposits & Loans
Y-OY
8,000
NII 6,000 4,000
2,000
NII NIM 2009 5,380 2.56% 2010 6,211 2.44% 2011 9,164 2.81% 2012 10,764 2.68%
2009 196,608 145,559
2010 245,951 177,712 25.10% 22.09%
2011 311,603 232,085 26.69% 30.60%
2012 392,616 292,077 26.00% 25.85%
PAT, ROE & ROA

6,000 5,000 PAT 4,000 3,000 2,000 1,000 PAT ROE (%) ROA(%) 2009 2,384 19.34% 1.15% 2010 3,179 21.91% 1.24% 2011 4,434 23.64% 1.37% 2012 5,249 20.87% 1.28%
Loans

25% 20% 15% 10% 5% 0% ROE & ROA 310,000 260,000 210,000 Loans 160,000 110,000 60,000 10,000
2009 2010 2011 2012
0.60%
0.40% 0.30% 0.20% 0.10% 0.00%
145,559 177,712 232,085 292,077 0.31% 0.34% 0.35% 0.54%
% net NPL to Loans
% of NPL to Loans
0.50%
NIM
110
Punjab National Bank

Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: New Delhi, India 1895 10.50% Over 5,900 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
No. of ATMs:
Over 6,000
Market Data ( 30-Sep-2012) Market Cap (Rs in Crs.): 2012 P/BV : 28,480.83 1.02x
52 week High / Low : 1,091.05/659.20 Key Management

Chairman & MD:
Mr. K. R. Kamath
PNB Prerna and PNB Pragati are two corporate social responsibility initiatives undertaken by the bank
The status of the banking sector in 2013 will depend on how the economy behaves over the next one year
Executive Director: Mr. Rakesh Sethi Executive Director: Executive Director:

Mr. Usha A Subramanian Mr. S. R. Bansal
Mr. K. R. Kamath
111

Statement of Profit and Loss Particulars 2009 Interest Income Rs. 19,578.71 % Growth Interest Expense 12,576.36 % Growth Net Interest Income 7,002.35 % Growth Non Interest Income 3,057.08 % Growth Non-Interest Expense 4,179.23 Net Income 3,200.10 % Growth % Margin 14.14% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 21,937.57 12.05% 13,230.01 5.20% 8,707.56 24.35% 3,498.17 14.43% 4,725.82 3,988.48 24.64% 15.68% 2011 Rs. 27,551.24 25.59% 15,506.68 17.21% 12,044.56 38.32% 3,655.36 4.49% 6,368.62 4,596.64 15.25% 14.73% 2012 Rs. 37,447.31 35.92% 23,741.40 53.10% 13,705.91 13.79% 4,239.51 15.98% 7,044.23 5,052.49 9.92% 12.12% CAGR 2013(6M) 24.13% Rs. 20,966.08 13,621.57 25.09% 11.52% 7,344.51 2,071.38 4,042.14 2,311.25 10.03%
16.44%
Rs. 158,453.42 Rs. 191,110.85 20.61% 210,659.17 251,457.66 19.37% 15,560.22 18,702.74 20.20% 65,391.68 79,253.88 21.20%
Rs. 247,746.58 29.64% 316,231.93 25.76% 22,614.66 20.92% 96,911.28 22.28%
Rs. 301,346.52 23.90% 21.63% 384,408.22 22.20% 21.56% 29,203.84 23.35% 29.14% 125,746.34 29.75%
294,746.52 400,747.49 30,117.99 128,980.06
2.91% 42.50% 1.40% 22.14% 75.22% 14.03%
3.02% 39.39% 1.43% 23.03% 76.00% 14.82%
3.27% 41.27% 1.33% 21.97% 78.34% 13.01%
3.08% 39.75% 1.18% 19.27% 78.39% 13.12%
112

Deposits & Loans
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 35% 30% 25% 20% 15% 10% 5% 0% 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 NII NIM
NII & NIM

3.30% 3.20% 3.10% 3.00% 2.90% 2.80%
2009 7,002 2.91% 2010 8,708 3.02% 2011 12,045 3.27% 2012 13,706 3.08%
Deposits & Loans
2009
2010
2011
2012
Y-OY
2.70%
210,659
158,453
251,458
191,111 19.37%
316,232
247,747 25.76%
384,408
301,347 21.56%
20.61%
29.64%
21.63%
PAT, ROA & ROE

6,000 5,000 PAT 4,000 3,000 2,000 10% 5%
2009 3,200 22.14% 1.40% 2010 3,988 23.03% 1.43% 2011 4,597 21.97% 1.33% 2012 5,052 19.27% 1.18% Loans

25% 20% 15% ROE & ROA 360,000 310,000 260,000 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20%
2009 2010 2011 2012
210,000
Loans 160,000 110,000 60,000 10,000
1,000
PAT
0%
0.00%
ROE (%)
ROA(%)
158,453 191,111 247,747 301,347 0.17% 0.53% 0.85% 1.52%
% of NPL to Loans
NIM
NII
% net NPL to Loans
113
Canara Bank
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Bangalore, India 1906 10.50% Over 3,600 Over 3,100 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
114
Market Data ( 30-Sep-2012)

2012 P/BV : 52 week High / Low :
19,099.95
0.84x 566.00/306.25
Key Management
Chairman & Managing Director: Executive Director: Executive Director:
Mr. R. K . Dubey Ms Archana S. Bhargava Mr. Ashok Kumar Gupta
Note: 52 week High / Low is taken as on 17h January 2013
Canara Bank
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 17,128.56 % Growth Interest Expense 12,417.96 % Growth Net Interest Income 4,710.60 % Growth Non Interest Income 2,352.96 % Growth Non-Interest Expense 3,212.06 Net Income 2,042.00 % Growth % Margin 10.48% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 18,755.84 9.50% 13,080.80 5.34% 5,675.04 20.47% 2,932.05 24.61% 3,651.42 2,999.71 48.85% 13.83% 2011 Rs. 23,000.89 22.63% 15,238.92 16.50% 7,761.97 36.77% 2,833.26 -3.37% 4,550.30 4,034.18 36.70% 15.62% 2012 CAGR 2013(6M) Rs. 30,815.64 21.62% Rs. 17,068.40 33.98% 23,159.47 13,268.06 51.98% 7,656.17 17.57% 3,800.34 -1.36% 3,104.51 9.68% 1,300.68 9.57% 4,760.02 2,425.16 3,341.69 17.84% 1,436.00 -16.29% 9.85% 7.82%
Rs. 138,360.53 Rs. 169,463.86 Rs. 211,448.51 Rs. 232,728.74 18.93% 22.48% 24.77% 10.06% 186,756.47 234,517.78 293,257.91 326,894.04 20.52% 25.57% 25.05% 11.47% 12,581.11 15,022.38 20,402.16 23,043.40 22.35% 19.40% 35.81% 12.95% 58,425.40 71,120.48 21.73% 86,499.41 21.62% 106,496.62 23.12%
215,751.01 336,761.62 24,130.28 121,255.34
2.78% 43.61% 1.06% 22.61% 74.09% 14.10%
2.21% 40.73% 1.30% 26.76% 72.26% 13.43%
2.42% 42.05% 1.42% 29.47% 72.10% 15.38%
2.14% 44.02% 0.95% 18.75% 71.19% 13.76%
115
Canara Bank
Deposits & Loans
350,000 300,000 250,000 200,000 150,000 100,000 50,000 30% 25% 20% Y-OY 15% 10% 5% 2009 186,756 138,361 2010 234,518 169,464 25.57% 22.48% 2011 293,258 211,449 25.05% 24.77% 2012 326,894 232,729 11.47% 10.06% NIM 0% NII 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 2009 4,711 2010 5,675 2.21% 2011 7,762 2.42% 2012 7,656 2.14% 0.00% NIM
NII & NIM
Deposits & Loans
NIM Margin 2.78%
PAT, ROE & ROA

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 PAT ROE (%) ROA(%) 35% 30% 25% ROE & ROA 20% 15% 10% 5% 2009 2,042 22.61% 1.06% 2010 3,000 26.76% 1.30% 2011 4,034 29.47% 1.42% 2012 3,342 18.75% 0.95%
Loans

260,000 210,000 160,000 Loans 110,000 60,000 10,000
2009 2010 2011 2012
1.60%
1.40%
1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00%
0%
138,361 169,464 211,449 232,729 1.09% 1.06% 1.10% 1.46%
% of NPL to Loans
PAT
% net NPL to Loans
116
Bank of India
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: Mumbai, India 1906 10.50% Over 4,000 Over 3,000 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
Chairman & MD: Executive Director: Executive Director: Executive Director:
Mr. V. R. Iyer Mr. N. Seshadri Mr. M. S. Raghvan Mr. B. B. Sharma
17,810.14 0.85x 408/253.30
The bank is always looking forward to being more consumer centric and reaching out especially in the rural belts of the country
117
Bank of India
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 16,416.51 % Growth Interest Expense 10,880.09 % Growth Net Interest Income 5,536.42 % Growth Non Interest Income 3,151.00 % Growth Net Income 3,087.54 % Growth % Margin 15.78% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth 2010 Rs. 17,996.25 9.62% 12,163.27 11.79% 5,832.98 5.36% 2,600.66 -17.47% 1,787.15 -42.12% 8.68% 2011 Rs. 21,858.43 21.46% 13,980.93 14.94% 7,877.50 35.05% 2,641.83 1.58% 2,542.42 42.26% 10.38% 2012 CAGR Rs. 28,610.95 20.34% 30.89% 20,216.30 44.60% 8,394.65 14.88% 6.56% 3,319.24 1.75% 25.64% 2,724.85 -4.08% 7.18% 8.53% 2013(6M) Rs. 15,714.63 11,475.12 4,239.51 1,734.95 1,189.30 6.82%
Rs. 143,322.61 190,176.67 13,656.55 52,871.81
Rs. 169,031.01 17.94% 230,408.21 21.15% 14,445.03 5.77% 68,112.69 28.83%
Rs. 213,708.36 26.43% 299,559.40 30.01% 17,636.08 22.09% 86,676.59 27.25%
Rs. 249,733.44 20.33% 16.86% 319,412.53 18.87% 6.63% 21,414.00 16.18% 21.42% 88,056.87 1.59%
256,147.90 332,694.67 22,348.44 90,146.98
2.70% 36.18% 1.52% 25.22% 75.36% 13.10%
2.31% 43.81% 0.71% 12.51% 73.36% 12.94%
2.44% 48.49% 0.81% 15.70% 71.34% 12.17%
2.38% 42.47% 0.74% 13.96% 78.19% 11.95%
118
Bank of India
Deposits & Loans
350,000 300,000 250,000 200,000 150,000 100,000 50,000 35% 30% 25% 20% 15% 10% 5% 0%
NII & NIM

9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 NII
NIM
2009 190,177 143,323
2010 230,408 169,031 21.15% 17.94%
2011 299,559 213,708 30.01% 26.43%
2012 319,413 249,733 6.63% 16.86%
2009 5,536 2.70%
2010 5,833 2.31%
2011 7,878 2.44%
2012 8,395 2.38%
2.80% 2.70% 2.60% 2.50% 2.40% 2.30% 2.20% 2.10%
Deposits & Loans
Y-OY
PAT, ROA & ROE

3,500 3,000 2,500 2,000 1,500 1,000 500 PAT 2009 3,088 25.22% 1.52% 2010 1,787 12.51% 0.71% 2011 2,542 15.70% 0.81% 2012 2,725 13.96% 0.74% Loans

30% 25% ROE & ROA 20% 15% 10% 5% 0% 310,000 260,000 210,000 Loans 160,000 110,000 60,000 10,000
2009 2010 2011 2012
1.60% 1.40% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% % of NPL to Loans 1.20%
PAT
ROE (%)
ROA(%)
143,323 169,031 213,708 249,733 0.44% 1.31% 0.91% 1.47%
NIM
NII
% net NPL to Loans
119
Union Bank of India

Company Profile
Company Information Headquarter: Year of Incorporation: Base interest rate: No. of branches: Mumbai, India 1919 10.50% Over 2,800 Business Overview Union Bank of India is a heritage institution. Its head office building in Mumbai was inaugurated by Mahatma Gandhi himself
No. of ATMs:
Over 2,500
Chairman & MD:
Mr. D Sarkar Mr. Suresh Kumar Jain Mr. S. S. Mundra Mr. B. M. Sharma
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 The restructuring of loans will continue and it may be the only way forward for reviving some troubled units. However, Corporates should 120 not take undue advantage of the mechanism - Mr. D Sarkar
11,432.15 0.79x 288/150.50
Executive Director:
Executive Director: Executive Director:
Union Bank of India

Statement of Profit and Loss Particulars Interest Income Rs. % Growth Interest Expense % Growth Net Interest Income % Growth Non Interest Income % Growth Non-Interest Expense Net Income % Growth % Margin Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2009 11,889.38 8,075.81 3,813.57 1,482.55 2,214.11 1,726.55 12.91% 2010 Rs. 13,302.68 11.89% 9,110.27 12.81% 4,192.41 9.93% 1,974.74 33.20% 2,507.85 2,074.92 20.18% 13.58% 2011 Rs. 16,460.94 23.74% 10,234.31 12.34% 6,226.63 48.52% 2,039.72 3.29% 3,838.15 2,205.16 6.28% 11.92% 2012 CAGR Rs. 21,152.48 21.17% 28.50% 14,229.73 39.04% 6,922.75 21.99% 11.18% 2,316.31 16.04% 13.56% 4,012.28 1,759.74 0.64% -20.20% 7.50% 2013(6M) Rs. 12,179.73 8,507.82 3,671.91 1,037.03 2,169.23 1,066.15 8.07%
Rs. 96,534.23 138,702.83 8,740.36 42,996.96
Rs. 119,315.30 23.60% 170,039.74 22.59% 10,423.78 19.26% 54,403.53 26.53%
Rs. 150,993.22 26.55% 202,400.01 19.03% 12,821.44 23.00% 58,913.15 8.29%
Rs. 177,882.09 22.60% 17.81% 222,776.52 17.11% 10.07% 14,667.69 18.83% 14.40% 63,103.81 7.11%
172,901.14 226,094.92 15,680.17 71,885.22
2.57% 41.81% 1.21% 21.46% 69.60% 13.27%
2.25% 40.66% 1.17% 21.65% 70.17% 12.51%
2.74% 47.85% 1.02% 18.84% 74.60% 12.95%
2.74% 43.15% 0.70% 12.66% 79.85% 11.85%
121
Union Bank of India

Deposits & Loans
250,000 Deposits & Loans 200,000 150,000 100,000 50,000 Deposits Loans Deposits (y-o-y) Loans (y-o-y) 2009 138,703 96,534 2010 170,040 119,315 22.59% 23.60% 2011 202,400 150,993 19.03% 26.55% 2012 222,777 177,882 10.07% 17.81% 30% 25%
NII & NIM

8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 NII NIM 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 2009 3,814 2.57% 2010 4,192 2.25% 2011 6,227 2.74% 2012 6,923 2.74% 0.00% NIM % of NPL to Loans
20%
Y-OY 15%
10%
5%
0%
PAT, ROA & ROE

2,500 2,000 PAT 1,500 25% 20% 15% ROE & ROA
NII

190,000 170,000 150,000 130,000 110,000 90,000 70,000 50,000 30,000 10,000 Loans 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00%
1,000
500 PAT
10%
5%
2009
1,727 21.46% 1.21%
2010
2,075 21.65% 1.17%
2011
2,205 18.84% 1.02%
2012
1,760 12.66% 0.70%
0%
Loans
2009
96,534 0.34%
2010
2011
2012
119,315 150,993 177,882 0.81% 1.19% 1.70%
ROE (%)
ROA(%)
% net NPL to Loans
122
Oriental Bank of Commerce

Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: No. of ATMs: New Delhi, India 1945 10.65% Over 1,900 Over 1,300 Business Overview Oriental Bank of Commerce started under its founding father, Late Rai Bahadur Lala Sohan Lal, the first Chairman of the Bank
Chairman & MD:
Executive Director: Executive Director:
Mr. S. L. Bansal Mr. V. Kannan Mr. Bhupinder Nayyar Ms. S. C. Sinha
8,799.52 0.74x 368.30/200
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
Executive Director:
123

Statement of Profit and Loss Particulars Interest Income % Growth Interest Expense % Growth Net Interest Income % Growth Non Interest Income % Growth Non-Interest Expense Net Income % Growth % Margin Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2009 2010 2011 Rs. 8,856.47 Rs. 10,257.13 Rs. 12,087.81 15.82% 17.85% 6,859.97 7,349.69 7,910.26 7.14% 7.63% 1,996.50 2,907.44 4,177.55 45.63% 43.68% 1,071.32 1,200.04 960.07 12.02% -20.00% 1,397.84 1,685.98 1,892.48 890.42 1,134.68 1,502.87 27.43% 32.45% 8.97% 9.90% 11.52% 2012 CAGR Rs. 15,814.88 21.32% 30.83% 11,599.09 46.63% 4,215.79 28.29% 0.92% 1,240.25 5.00% 29.18% 2,315.46 1,141.56 8.63% -24.04% 6.69% 2013(6M) Rs. 8,701.74 6,418.79 2,282.95 815.20 1,280.37 693.61 7.29%
Rs. 68,500.38 Rs. 83,489.31 Rs. 95,908.23 Rs. 111,977.72 17.80% Rs. 117,821.35 21.88% 14.87% 16.76% 98,368.85 120,257.59 139,054.26 155,694.29 16.54% 164,174.49 22.25% 15.63% 11.97% 7,403.45 8,237.95 11,097.15 11,942.50 17.28% 11,928.31 11.27% 34.71% 7.62% 28,488.95 35,785.32 25.61% 49,545.41 38.45% 52,101.33 5.16% 55,298.77
1.92% 0.88% 13.51% 69.64% 12.98%
2.28% 0.91% 14.51% 69.43% 12.54%
2.70% 1.01% 15.55% 68.97% 14.23%
2.44% 0.67% 9.91% 71.92% 12.69%
124

Deposits & Loans
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 25% 20% 15% NII 10% 5% 2009 98,369 68,500 2010 120,258 83,489 22.25% 21.88% 2011 139,054 95,908 15.63% 14.87% 2012 155,694 111,978 11.97% 16.76% 0%
Y-OY
NII & NIM

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 NII NIM 3.00% 2.50% 2.00% 1.50% 1.00% NIM
2.50% 1.50% 1.00% 0.50% 0.00%
Deposits & Loans
0.50%
2009 1,997 1.92% 2010 2,907 2.28% 2011 4,178 2.70% 2012 4,216 2.44% 0.00%
PAT, ROA & ROE

1,600 1,400 1,200 1,000 800 600 400 200 PAT ROE (%) ROA(%) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

130,000 110,000 ROE & ROA 90,000 Loans 70,000 50,000 30,000 10,000
Loans % net NPL to Loans 2009 68,500 0.65% 2010 83,489 0.87% 2011 95,908 0.98% 2012 111,978 2.21%
2009 890 13.51% 0.88%
2010 1,135 14.51% 0.91%
2011 1,503 15.55% 1.01%
2012 1,142 9.91% 0.67%
% of NPL to Loans
2.00%
PAT
125
Allahabad Bank
Company Profile
Company Information Headquarters: Year of Incorporation: Base interest rate: No. of branches: Kolkata, India 1865 10.50% Over 2,500 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 126 priority sector lending
No. of ATMs:
Over 1,800
Market Cap (Rs in Crs.): 2012 P/BV : 52 week High / Low :
7,327.88 0.67x 211.30/115.40
Key Management
Chairman & MD: Executive Director: Executive Director: Nominee Director:
Ms. S. A. Panse Mr. T. R. Chawla Mr. Arun Tiwary Mr. Shashank Saksena(GOI)
Allahabad Bank
Statement of Profit and Loss Particulars 2009 Interest Income Rs. 7,364.81 % Growth Interest Expense 5,205.87 % Growth Net Interest Income 2,158.94 % Growth Non Interest Income 1,163.70 % Growth Net Income 790.47 % Growth % Margin 9.27% Balance Sheet Loans % Growth Deposits % Growth Equity % Growth Investments % Growth Ratios NIM % Cost to Income Return on Assets % Return on Equity % Loan Deposit Ratio Capital Adequacy Ratio 2010 Rs. 8,377.18 13.75% 5,718.16 9.84% 2,659.02 23.16% 1,567.71 34.72% 1,228.46 55.41% 12.35% 2011 Rs. 11,024.62 31.60% 6,992.85 22.29% 4,031.77 51.63% 1,375.14 -12.28% 1,440.51 17.26% 11.62% 2012 CAGR Rs. 15,527.67 28.23% 40.85% 10,359.97 48.15% 5,167.70 33.77% 28.17% 1,305.16 3.90% -5.09% 1,864.34 33.11% 29.42% 11.08% 2013(6M) Rs. 8,738.67 6,258.50 2,480.17 611.69 906.14 9.69%
Rs. 58,801.80 84,966.53 6,036.82 29,825.34
Rs. 71,608.15 21.78% 106,050.74 24.81% 6,963.97 15.36% 38,637.57 29.55%
Rs. 93,627.87 30.75% 131,882.16 24.36% 8,722.65 25.25% 43,492.21 12.56%
Rs. 111,145.94 23.64% Rs. 110,847.37 18.71% 159,583.87 23.38% 161,957.03 21.00% 10,718.86 21.09% 11,261.31 22.89% 54,524.21 57,959.69 25.37%
2.30% 42.40% 0.87% 13.84% 69.21% 13.11%
2.26% 38.83% 1.12% 18.90% 67.52% 13.62%
2.78% 43.36% 1.05% 18.37% 70.99% 12.96%
2.96% 41.65% 1.11% 19.18% 69.65% 12.83%
127
Allahabad Bank
Deposits & Loans
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 35% 30% 25% 20% 15% 10% 5% 0% 6,000 5,000 Y-OY 4,000 NII 3,000 2,000 1,000 NII NIM 2009 2,158 2.30% 2010 2,659 2.26% 2011 4,031 2.78% 2012 5,167 2.96%
NII & NIM

3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%
Deposits & Loans
2009 58,802
2010 71,608
2011
2012
Deposits
84,967 106,051 131,882 159,584 93,628 111,146
Loans
Deposits (y-o-y) Loans (y-o-y)
24.81% 24.36% 21.00%

21.78% 30.75% 18.71%
PAT, ROE & ROA

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 PAT ROE (%) ROA(%) 25% 20% ROE & ROA 15% 10% 5% 2009 790 13.84% 0.87% 2010 1,228 18.90% 1.12% 2011 1,441 18.37% 1.05% 2012 1,864 19.18% 1.11% 0%

130,000
110,000 90,000 Loans 70,000 50,000 30,000 10,000 Loans % net NPL to Loans 2009 58,802 0.72% 2010 71,608 0.66% 2011 93,628 0.79% 2012 111,146 0.98%
NIM
1.20%
% of NPL to Loans 1.00% 0.80% 0.60% 0.40% 0.20% 0.00%
PAT
128
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
129

Service Offerings
Dinodia Capital Advisors Advises Clients on :
Mergers and Acquisitions
We help in conducting a robust scan of the market and selecting the most suitable buyer or seller
Capital Raising
We advice clients on their capital needs and find them the right partner who brings more than just capital
Restructuring
We advise on business restructurings to help achieve financial, strategic and operational efficiency
India Entry Strategy

We help set up and incubate businesses in India, acting as a trusted advisors to facilitate the India entry strategy
Organizational Transformation
We work with companies to put systems, processes and people in place to help take advantage of both organic and inorganic synergies
Turnarounds
We work closely with companies to help devise and implement a turnaround strategy by plugging the deficiencies of management, technology, capital or partnerships
130
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: dinodiacapital@dinodiacapital.com
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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Indian Banking Industry - Rising Above The Waves, January 2013

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Rising Above the Waves

Indian Banking Industry:

The Indian Banking Industry

Performance of Indian Banks

Deals in the Industry

VII. Special Section on Foreign Banks in India

Executive Summary (1/2)

Executive Summary (2/2)

global risks and domestic factors still looms large

INDIAN FINANCIAL SECTOR

concern over evolving

Section II: Financial Sector in India

The Financial Sector in India (1/2)

The Financial Sector in India (2/2)

Structure of The Financial Sector in India

Scheduled Commercial Banks (SCBs)

Regional Rural Banks

Scheduled Cooperative Banks

Private Banks Public Banks Foreign Banks

The Organized Financial Sector in India

Public Banks, 65%

Private Banks, 16%

Important Milestones of the Banking Industry

Enactment of the RBI Act, 1935 High levels of deprivation in economy

1991 Onwards/Reformatory phase

Who regulates the Financial Sector in India?

Reserve Bank of India (RBI)

Securities and Exchange Board of India (SEBI)

Insurance Regulatory and Development Authority (IRDA)

Government of India 2IRDA: Insurance regulatory and development authority

Section III: The Indian Banking Industry

The Rising Sun of the Indian Growth Story

Current Players in the Banking Industry

Structure of the Indian Banking Industry

Cooperative Banks (82)

State Level Institutions Other Institutions

Financial Products of Banks (1/4)

Other Products / Services

Commercial Banking Transaction Banking Key Segment

Financial Products of Banks (2/4)

Other Personal Loans, 35.69%

Housing Loans, 47.89%

Auto Laons, 13.51%

Credit Card, 2.59%

Consumer Durables, 0.31%

Financial Products of Banks (3/4)

9.9 10.3 10.7

Source: Mckinsey & Company

Financial Products of Banks (4/4)

What Michael Porter has to say about Banks

Bargaining Power of Suppliers

Threat of new substitutes

Threat of new entrants

Entry Barriers in the Industry High Medium Low

Licensing Requirements are very tough Product differentiation very difficult

Bargaining Power of Customers

PEST Analysis on the Banking Industry

PEST Analysis on the Banking Industry

PEST Analysis on the Banking Industry

PEST Analysis on the Banking Industry

PEST Analysis on the Banking Industry

Growth Drivers of the Banking Industry

Financial Inclusion (FI)