India Commercial Bank Report 2016

Q2 2016
www.bmiresearch.com
INDIA
COMMERCIAL BANKING REPORT
INCLUDES 5-YEAR FORECASTS TO 2020
Published by:BMI Research
India Commercial Banking Report Q2 2016

INCLUDES 5-YEAR FORECASTS TO 2020
Part of BMIs Industry Report & Forecasts Series

Published by: BMI Research
Copy deadline: January 2016
ISSN: 1747-8596
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CONTENTS
BMI Industry View ............................................................................................................... 7
Table: Commercial Banking Sector Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table: Commercial Banking Sector Key Ratios, November 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table: Annual Growth Rate Projections 2015-2020 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table: Ranking Out Of 75 Countries Reviewed In 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Table: Commercial Banking Sector Indicators, 2013-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SWOT .................................................................................................................................... 9
Commercial Banking .................................................................................................................................. 9
Political ................................................................................................................................................. 11
Economic ............................................................................................................................................... 13
Operational Risk ..................................................................................................................................... 15
Industry Forecast .............................................................................................................. 17

Industry Trend Analysis ............................................................................................................................ 17
Table: New Guidelines To Lower Banks' Lending Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Table: Government Public Sector Bank Reform Roadmap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Commercial Banking Risk/Reward Index ....................................................................... 22

Asia Commercial Banking Risk/Reward Index ............................................................................................... 22
Table: Asia Commercial Banking Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Market Overview ............................................................................................................... 24

Asia Commercial Banking Outlook ............................................................................................................. 24
Table: Banks' Bond Portfolios, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Table: Comparison of Total Assets & Client Loans & Client Deposits (USDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Comparison of USD Per Capita Deposits, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Economic Analysis ................................................................................................................................... 27

Table: Agriculture Uptick Unlikely To Last . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Table: Economic Activity (India 2014-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Competitive Landscape .................................................................................................... 32

Market Structure ..................................................................................................................................... 32
Protagonists .......................................................................................................................................... 32
Table: Protagonists In India's Commercial Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Definition Of The Commercial Banking Universe ......................................................................................... 32

List Of Banks ......................................................................................................................................... 33
Table: Public Sector Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Table: Foreign Banks In India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Company Profile ................................................................................................................ 36

Bank of Baroda ....................................................................................................................................... 36
Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Business Monitor International Ltd
Page 4

Table: Balance Sheet (INRmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
HDFC Bank ........................................................................................................................................... 39

Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ICICI Bank ............................................................................................................................................. 43

Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Punjab National Bank .............................................................................................................................. 47

Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
State Bank of India ................................................................................................................................... 51

Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Regional Overview ............................................................................................................ 55

Asia Overview ......................................................................................................................................... 55
Global Industry Overview .................................................................................................. 61

Global Commercial Banking Overview ........................................................................................................ 61
Regional Outlooks .................................................................................................................................. 61
Demographic Forecast ..................................................................................................... 68

Table: Population Headline Indicators (India 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Table: Key Population Ratios (India 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Table: Urban/Rural Population & Life Expectancy (India 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table: Population By Age Group (India 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table: Population By Age Group % (India 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Methodology ...................................................................................................................... 73
Industry Forecast Methodology ................................................................................................................ 73
Sector-Specific Methodology .................................................................................................................... 74
Risk/Reward Index Methodology ............................................................................................................... 75
Table: Commercial Banking Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
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BMI Industry View

Table: Commercial Banking Sector Indicators
Total
assets
Date
Client
Bond
loans portfolio
Other
Liabilities
and capital
Client
Capital deposits
Other
November 2013, INRbn
84,144.9
56,464.8
22,172.2
5,507.9
84,144.9
7,183.0
71,965.0
4,996.9
November 2014, INRbn
93,194.1
62,553.5
24,298.6
6,341.9
93,194.1
8,149.6
80,010.6
5,033.8
10.8%
10.8%
9.6%
15.1%
10.8%
13.5%
11.2%
0.7%
November 2013, USDbn
1,347.4
904.2
355.0
88.2
1,347.4
115.0
1,152.4
80.0
November 2014, USDbn
1,502.3
1,008.4
391.7
102.2
1,502.3
131.4
1,289.8
81.1
11.5%
11.5%
10.3%
15.9%
11.5%
14.2%
11.9%
1.4%
% change y-o-y
% change y-o-y
Source: BMI; Central banks; Regulators
Table: Commercial Banking Sector Key Ratios, November 2014
Loan/deposit ratio
Loan/asset ratio
Loan/GDP ratio
GDP Per Capita, USD
Deposits per capita, USD
78.18%
67.12%
50.28%
1,598.8
996.8
Falling
Rising
Rising
n.a.
n.a.
Table: Annual Growth Rate Projections 2015-2020 (%)
Assets
Loans
Deposits
Annual Growth Rate
19
19
20
CAGR
17
17
20
13
Ranking
Page 7
Table: Ranking Out Of 75 Countries Reviewed In 2016
Loan/deposit ratio
Loan/asset ratio
Loan/GDP ratio
70
13
51
Local currency asset growth
Local currency loan growth
Local currency deposit growth
15
16
Table: Commercial Banking Sector Indicators, 2013-2020
2013
2014
2015e
2016f
93,440.1 103,251.3
116,674.0
Total assets, INRbn
84,904.6
Total assets, USDbn
1,373.9
1,482.1
1,535.3
1,690.9
Client loans, INRbn
57,413.4
63,185.2
69,819.7
78,896.2
929.0
1,002.2
1,038.2
1,143.4
86,681.9 104,018.3
124,821.9
Client loans, USDbn

Client deposits, INRbn
72,234.9
Client deposits, USDbn
1,168.8
1,374.9
1,546.7
1,809.0
2017f
2019f
2020f
137,675.3 162,456.9 191,699.1
228,122.0
1,964.6
2018f
2,708.4
3,207.0
91,519.6 107,993.2 127,432.0
152,068.8
1,306.0
2,306.7
1,800.4
2,137.8
149,786.3 179,743.5 215,692.2
258,830.7
2,137.5
1,533.4
2,552.2
3,047.4
3,638.7
e/f = estimate/forecast. Source: BMI; Central banks; Regulators
Page 8
SWOT
Commercial Banking
India Commercial Banking SWOT
Strengths
In macroeconomic terms, India is set to be a global growth outperformer in the

coming years.
India's high consumer savings rate and the efficacy of the regulation undertaken by
the Reserve Bank of India have provided stability.
Although loans have been growing rapidly, there are few signs of the excesses that
have taken place over the last few years in China.
The lack of linkages between Indian banks and the global financial system means that
they are comparatively immune to volatility in global markets.
Weaknesses
A legacy of the protection of the commercial banking sector, which remains

dominated by the State Bank of India, is that efficiency levels and product offerings
are a long way from best practice globally.
The banking system is particularly held back by low levels of per capita GDP.
The logistics involved in running a bank can be daunting due to the prevalence of
paper-based payment systems (e.g., instruments such as cheques).
Opportunities
India is still under-banked. Per-capita deposits are low. People with savings often
hold their wealth outside the formal banking system.
India's banking industry is progressively being opened up to competition from foreign

banks.
The Reserve Bank of India is looking to enact major reforms to the sector, after
several years of policy stagnation.
Opportunities exist for mutual funds, insurance companies and organisations offering
related products.
Page 9
India Commercial Banking SWOT - Continued
The government's progressive sale of public banks to private sector participants

could help improve the management and efficiency of these institutions.
Threats
The development of particular products - such as mortgages - is hampered by

inefficiencies in the housing market (e.g., a cumbersome legal system and bizarre
planning regulations) that need to be removed through the process of reform.
It remains to be seen how effective pension and insurance reforms will be in boosting
financial intermediation.
State-directed lending requirements and other debt waivers reduce the profitability
and resilience of the sector, with asset quality deteriorating over the past few years.
Page 10
Political
Political SWOT Analysis
Strengths
India is the world's largest democracy. A secular constitution, framed in 1950,

officially guarantees justice, liberty and equality while aiming to promote fraternity
among the citizenry. More than 1,600 political parties registered for the April-May
2014 general elections, competing for the preference of India's 814mn eligible voters.
Despite its multitude of problems, India has generally managed to avoid hard
authoritarian rule or military coups, which have happened in many other developing
countries, including India's neighbours Bangladesh, Myanmar, and Pakistan.
Weaknesses
Large coalition governments complicate policymaking at the centre as coalition

partners and outside parties pursue their own agendas. The competence of state
government varies enormously across India's 35 states and union territories.
India's tense relationship with Pakistan still weighs on regional stability. The two
countries have gone to war three times since they were 'partitioned' on independence
from British rule in 1947.
Issues such as the ineffectiveness of the executive and judiciary in controlling

underhand practices, the apparent arbitrary allocation of government licences, and
the uneasy influence of special interest groups remain key investor concerns.
Opportunities
India has in recent years edged closer to the US in foreign policy. Both the US and
India are democracies and face threats from militant Islamists; this, combined with the
presence of a 2mn-strong affluent Indian diaspora in the US, is bringing the two
countries closer together.
Thawing relations with Pakistan has made it easier for the parties to defuse potentially
explosive situations, such as the Mumbai attacks in November 2008, which
Islamabad acknowledges were planned and launched from its territory.
Threats
India's growing regional rivalry with China, if unchecked, could lead to a more hostile
regional outlook.
Page 11
Political SWOT Analysis - Continued
India has experienced a series of serious terrorist attacks over the past few years,
perpetrated by radical Islamist and rural Maoist groups. The surge in Naxalite attacks
has also raised the spectre of further violence.
Page 12
Economic
Economic SWOT Analysis
Strengths
India has a very large domestic market, and rising domestic demand is a major driver
of economic growth.
A vast supply of inexpensive but skilled labour has turned India into the back office of
the world. Around half of the population is younger than 25.
Weaknesses
Despite rapid economic growth, India remains a very poor country. According to BMI
estimates, India's GDP per capita was roughly USD1,621 in 2014, a quarter of the
size of China's.
Agriculture remains inefficient, and poor monsoon rains can slash rural incomes and
consumption. Two-thirds of the population depend on farming for their livelihood.
India runs chronic trade and fiscal deficits, both of which are likely to persist. The
government spends a significant part of its revenue on interest payments, subsidies,
salaries, and pensions. This limits the amount of money available for infrastructural
improvements.
Opportunities
India's emerging middle class will continue to drive demand for new goods and
services. A wealthier society, combined with tax reforms, would serve to boost
revenue receipts, relieving fiscal pressure.
The government has implemented some tax reforms. A uniform goods and services
tax to be implemented in the near future should help boost compliance, thereby
raising government revenue.
With Chinese labour costs rising aggressively, India may well enjoy a manufacturing
boom in the coming years as multinational look to take advantage of a young,
competitive workforce and major transport network improvements.
Threats
India's dependency on oil imports is problematic. This undermines the trade balance
and makes India vulnerable to energy price-driven inflation and oil price spikes during
periods of political instability abroad.
Page 13
Economic SWOT Analysis - Continued
India is at risk of severe environmental problems. Many of its cities' air and rivers are
heavily polluted, raising questions about the sustainability of the economy's rapid
growth.
Page 14
Operational Risk
SWOT Analysis
Strengths
Low minimum wage rates and high productivity reduce operating costs for
businesses.
India has one of the largest and best funded armed services in the world, offering a
major deterrence against potential adversaries.
A high presence of international banks facilitates the flow of funds into the country
without the risk of losing money in transfer fees.
Weaknesses
The cost of electricity has fallen marginally in the past decade.
Major disparities exist in terms of access to education depending on socio-economic

status.
India's cyber capacities are underdeveloped, constricting the ability to cope with the
emerging cyber threat.
Corruption, weak government policies and poor law enforcement increase legal risks
and operating costs of businesses present in India.
High lead times and lengthy administration costs drive up the cost of doing business
in India and delay supply chains.
Opportunities
Investment in education will boost the mean years of schooling in the medium term.
Border cooperation with neighbouring states could reduce organised crime.
Increasing internet penetration rates create opportunity for internet-focused

businesses.
The government is undertaking a number of projects to increase the quality of India's

ports including the development of a transhipment hub.
Threats
Low rate of urbanisation means a highly dispersed work force, posing a risk to
businesses.
Page 15
SWOT Analysis - Continued
Inefficient bureaucratic processes and corruption facilitate money laundering activities

and are difficult and time-consuming to root out.
India's tense relations with Pakistan reduce the likelihood that the Kashmir crisis will
be resolved.
Poor contract enforceability has the potential to severely damage small businesses in
need of cheap trials to stay solvent.
Page 16
Industry Forecast
Industry Trend Analysis
BMI View: Indian public sector banking equities continue to underperform, and despite their cheap
valuations, we maintain our negative view owing to their weak fundamentals.
The fundamentals of Indian public sector banks (PSBs) remain weak as they face multiple headwinds from
falling lending rates and deteriorating asset quality, and we maintain our negative view on their equities.
Although the Nifty Bank Index has outperformed the broader Nifty Index (returning 6.4%) since Prime
Minister Narendra Modi assumed office on May 26 2014, the Nifty PSU Bank Index has fallen significantly
by 31.6%. In addition, using all available data from Bloomberg, the ratio between the Nifty PSU Bank
Index and the Nifty Bank Index hit a new low, and we see little prospects for a significant reversal.
State Owned Banks Continue To Lag

India - Nifty PSU Bank & Nifty Bank Indices Equity Performance (LHS) & Indices
Source: BMI, Bloomberg
We expect profitability of Indian banks to remain under pressure as lending rates decline given that we
expect the Reserve Bank of India (RBI) to cut its repurchase (repo) rate by 50bps to 6.25% in FY2016/17
(April-March) as inflation remains subdued (see 'Margins To Decline Further As Worst Is Not Over Yet',
October 6 2015). Additionally, in an effort to improve the transmission of the RBI key policy rates to the
Page 17
lending rates of Indian banks, the central bank released the finalised guidelines on the marginal cost of
funds based lending rate (MCLR) in December 2015. According to the authorities, the new rules will be
effective for new loans starting from April 1 2016 (more details provided in the table), and we expect a
slight negative impact on net interest margins.
Table: New Guidelines To Lower Banks' Lending Rates
Highlights
1)
All rupee loans sanctioned and credit limits renewed from April 1 2016 will priced with reference to the MCLR
2)
The MCLR will be a tenor linked internal benchmark.
3)
Actual lending rates will be determined by adding a spread to the MCLR.
4)
Banks will review and publish their MCLR of different maturities every month on a pre-announced date.
5)
Banks may specify interest reset dates on their floating rate loans. They will have the option to offer loans with
resets linked either to the date of the sanction of the loan/credit limits or to the review date of the MCLR.
6)
The periodicity of reset shall be one year or lower.
7)
The MCLR prevailing on the day the loan is sanctioned will be applicable until the next reset date, irrespective of the
changes in the benchmark rate during the interim period.
8)
Existing loans and credits linked to the Base Rate may continue until repayment or renewal. Existing borrowers will
have the option to move to the MCLR linked loan at mutually acceptable terms.
9)
Banks will continue to review and publish the Base Rate.
Source: RBI
Asset quality of Indian state-owned banks continues to deteriorate, and given the potential increase in
stressed assets due to elevated corporate leverage, we expect the surge in loan growth to the commercial
sector (from 9.0% y-o-y in October 2015 to 11.0% y-o-y in December) to be capped as banks take a
conservative approach to lending. Indeed, data from the RBI showed that the ratios of gross non-performing
assets (NPAs) to gross advances of India's largest state-owned lender, State Bank of India (SBI) and other
nationalised banks rose to 5.0% and 6.4%, respectively, as of June 2015 (versus 4.8% and 5.7% in March
2015). Corporate leverage remains elevated within the industrials, materials and utilities sectors, and would
potentially lead to higher non-performing loans (NPLs) over the coming months.
Page 18
Balance Sheets Of State-Owned Banks Remain Stressed

India - Gross NPA To Gross Advances, %
Source: BMI, RBI
While several reform announcements by the government will be positive for the long-term performance of
PSBs, we are unlikely to see a significant improvement in fundamentals any time soon as these plans take
time to materialise. For example, in August 2015, the government announced a seven pronged plan (also
known as Indradhanush), and we believe the plan will help to improve the long-term performance of PSBs
as they operate like private sector banks.
Page 19
Table: Government Public Sector Bank Reform Roadmap
1)
Appointment of private sector banks to head state-owned banks
2)
Setting up a Bank Board Bureau as a watchdog for performance of public sector banks
3)
Capitalisation infusion plan of INR700bn over the next four years
4)
Creating a framework of accountability that focussed on profitability
5)
Distressing bad loans such as taking over management control in dire situations
6)
Empowering banks by providing more autonomy such as hiring
7)
Governance reforms such as focussing on risk management practices
Source: BMI, Ministry Of Finance
According to the RBI's December 2015 Financial Stability Report, the central bank also stated that: ' As
envisaged under these reforms, they are expected to work as 'private' entities in terms of their business
strategies, operations, controls and financial targets. Therefore, the business models of PSBs, their capital
structures and dividend policies need a review'. Meanwhile, the decision by the Indian government in
November 2015 to ease the capital crunch facing the country's power distribution companies (DISCOMs)
through the package, called UDAY (Ujwal Discom Assurance Yojna), is a positive step in attempting to
reducing leverage in one of the most distressed areas in the country.
Page 20
Widening Discount
India - Nifty PSU & Nifty Bank Indices' Price-To-Book Ratios And Spread
With respect to valuations, the Nifty PSU Bank Index is trading at a significant discount of 0.6x book value,
when compared with the Nifty Bank Index's 1.9x price-to-book ratio. The lower valuations of the Nifty PSU
Bank Index merely reflect the weaker profitability, capitalisation and asset quality of state-owned banks
relative to the broader banking sector. Despite signs of positive reforms, until we see a visible turnaround in
the performance of PSBs, their share prices are unlikely to rally significantly.
Page 21
Commercial Banking Risk/Reward Index

Asia Commercial Banking Risk/Reward Index
Commercial Banking Risk/Reward Index Methodology
Since Q108, we have described numerically the banking business environment for each of the countries
analysed by BMI. We do this through our Commercial Banking Industry Risk/Reward Index (RRI), a
measure that ensures we capture the latest quantitative information available. It also ensures consistency
across all countries. Like all of BMI's Industry Risk/Reward Indices, its takes into account the Rewards on
offer within the banking sector in a given country, but also the Risks to investors being able to realise those
opportunities. The overall index is weighted 70% towards Rewards and 30% towards Risks.
Within the Rewards category, we look at factors that are specific to the banking industry (accounting for
60% of the score within this category), and elements that relate to that country in general (accounting for
40% of the weighting). These include, but are not limited to, total assets, asset and loan growth, GDP and
taxation. Likewise on the Risks side, we look at industry-specific Risks (weighted 40% of the Risks total)
and country-specific Risks (weighted 60%). These include, but are not limited to, the regulatory framework
and environment, the competitive environment, financial risk, legal risk and policy continuity.
In general three aspects need to be borne in mind when interpreting the RRIs. The first is that the Industry
Rewards element is the most heavily weighted of the four elements, accounting for 42% (60% of 70%) of
the overall Index. Second, if the Industry Rewards score is significantly higher than the Country Rewards
score, within the Rewards category, it usually implies that the banking sector is (very) large and/or
developed relative to the general wealth, stability and financial infrastructure in the country. Conversely, if
the industry score is significantly lower, it usually means that the banking sector is small and/or
underdeveloped relative to the general wealth, stability and financial infrastructure in the country. Third,
within the Risks category, the industry-specific elements (ie, how regulations affect the development of the
sector, how regulations affect competition within it, and Moody's Investor Services' Ratings for local
currency deposits) can be markedly different from BMI's long-term Country Risk Index for a given market.
Page 22
Table: Asia Commercial Banking Risk/Reward Index
Limits of Potential Returns
Risks to Potential Returns
Overall
Market Structure
Country Structure
Market Risks
Country Risks
Index
Ranking
Bangladesh
60.0
47.5
43.3
48.0
52.3
52
China
93.3
57.5
63.3
70.0
75.5
15
Hong Kong
80.0
95.0
73.3
82.0
83.8
India
83.3
57.5
60.0
56.0
68.4
28
Indonesia
76.7
65.0
80.0
54.0
69.7
25
Japan
30.0
75.0
66.7
78.0
55.6
46
Malaysia
70.0
80.0
83.3
76.0
75.5
16
Pakistan
50.0
50.0
53.3
46.0
49.7
58
Philippines
56.7
62.5
60.0
62.0
59.7
39
Singapore
70.0
95.0
96.7
84.0
82.7
Sri Lanka
33.3
57.5
33.3
50.0
43.1
62
South Korea
76.7
85.0
83.3
78.0
80.0
10
Taiwan
76.7
72.5
86.7
74.0
76.2
14
Thailand
63.3
65.0
86.7
70.0
67.8
31
Vietnam
63.3
57.5
36.7
56.0
57.2
41
New Zealand
53.3
87.5
86.7
82.0
72.1
20
United States
93.3
85.0
100.0
82.0
89.8
Scores out of 100, with 100 the highest. Source: BMI
Page 23
Market Overview
Asia Commercial Banking Outlook
Table: Banks' Bond Portfolios, 2014
Bond Portfolio, USDbn
Bond as % total assets
Year-on-year growth %
33.1
23.3
23.8
1,873.0
8.7
17.5
Hong Kong*
379.3
19.8
8.1
India
357.2
26.0
13.9
17.3
4.3
17.7
2,089.4
25.5
-3.2
Malaysia
89.0
14.4
22.1
Pakistan
45.6
42.1
12.3
Philippines
48.6
21.6
14.8
Singapore
96.9
12.1
9.1
Sri Lanka
8.1
21.9
8.4
South Korea
289.5
15.6
12.0
Taiwan
202.9
15.1
3.1
Thailand
80.6
15.8
0.9
Vietnam*
20.4
10.9
64.4
New Zealand
10.7
3.1
-4.7
United States
647.1
4.3
33.0
Bangladesh
China*
Indonesia**
Japan
Source: Central banks, regulators, BMI. **Only 2011 data available. * Only 2012 data available.
Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2016
Loan/Deposit
ratio %
Rank
Trend
Loan/Asset
ratio %
Rank
Trend
Loan/GDP
ratio %
Rank
Trend
Bangladesh
92.9
38
Rising
53.3
45
Falling
48.1
51
Rising
China
79.4
55
Falling
54.3
40
Falling
149.0
Falling
Hong Kong
73.4
64
Rising
39.1
66
Rising
325.7
Rising
India
63.2
68
Falling
67.6
12
Falling
51.6
49
Rising
Indonesia
76.4
54
Falling
60.5
17
Falling
35.2
62
Rising
Japan
68.7
66
Rising
46.2
60
Falling
89.8
23
Falling
Page 24
Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2016 - Continued
Loan/Deposit
ratio %
Rank
Trend
Loan/Asset
ratio %
Rank
Trend
Loan/GDP
ratio %
Rank
Trend
Malaysia
73.9
62
Falling
60.5
31
Falling
123.1
13
Falling
Pakistan
64.3
70
Rising
42.5
62
Falling
22.4
69
Rising
Philippines
73.6
65
Rising
55.6
44
Rising
44.8
55
Rising
Singapore
101.4
19
Falling
60.2
36
Rising
160.7
Rising
Sri Lanka
78.9
60
Rising
57.2
37
Falling
34.0
65
Rising
South Korea
122.8
Rising
75.9
Rising
104.8
18
Rising
Taiwan
80.9
56
Rising
62.6
29
Rising
173.2
Rising
Thailand
97.8
28
Falling
67.6
11
Falling
88.3
26
Rising
Vietnam
113.0
15
Rising
73.1
Falling
104.9
17
Rising
New Zealand
211.1
Rising
95.6
Rising
171.3
Rising
United States
102.8
18
Falling
72.5
Falling
64.4
38
Falling
Source: Central banks, regulators, BMI.
Table: Comparison of Total Assets & Client Loans & Client Deposits (USDbn)
2016
2015
Total Assets
Client Loans
Client Deposits
Total Assets
Client Loans
Client Deposits
193.3
103.0
110.9
165.4
88.1
98.7
China
30,077.3
16,331.3
20,570.7
29,182.5
15,845.4
19,773.9
Hong Kong
2,716.2
1,062.1
1,447.0
2,538.6
983.4
1,352.3
India
1,690.9
1,143.4
1,809.0
1,535.3
1,038.2
1,546.7
516.9
312.8
409.2
449.2
288.7
352.7
8,307.5
3,841.7
5,593.5
8,468.1
3,923.8
5,770.7
Malaysia
613.9
371.6
502.6
549.0
332.3
429.3
Pakistan
137.9
58.6
89.8
123.9
52.7
83.2
Philippines
245.8
136.7
185.7
231.1
124.5
175.5
Singapore
737.6
443.7
437.8
746.9
434.3
414.7
Sri Lanka
46.3
26.5
33.5
40.6
23.2
29.9
South Korea
1,806.8
1,371.2
1,116.5
1,765.0
1,314.3
1,078.3
Taiwan
1,438.6
900.1
1,113.0
1,366.2
830.1
1,057.0
Thailand
505.8
342.1
350.0
481.7
325.9
333.3
Vietnam
286.7
209.7
185.6
256.0
190.6
173.4
Bangladesh
Indonesia
Japan
Page 25
Comparison of Total Assets & Client Loans & Client Deposits (USDbn) - Continued
2016
2015
New Zealand
249.1
238.2
112.8
266.4
246.3
120.7
United States
16,667.2
12,075.6
11,741.7
16,026.2
11,723.9
11,182.6
Table: Comparison of USD Per Capita Deposits, 2016
GDP Per Capita
Client Deposits, per

capita
Rich 20% Client

Deposits, per capita
Poor 80% Client

Deposits, per capita
Bangladesh
1,331
681
2,724
170
China
7,925
14,881
59,525
3,720
44,281
196,965
787,860
49,241
India
1,688
1,363
5,454
341
Indonesia
3,508
1,570
6,281
393
34,020
44,279
177,116
11,070
Malaysia
9,813
16,344
65,377
4,086
Pakistan
1,384
466
1,864
116
Philippines
2,975
1,816
7,266
454
Singapore
48,467
76,847
307,388
19,212
Sri Lanka
3,817
1,611
6,445
403
South Korea
26,446
22,107
88,427
5,527
Taiwan
22,322
47,572
190,289
11,893
Thailand
5,734
5,136
20,542
1,284
Vietnam
2,122
1,965
7,860
491
New Zealand
31,847
24,712
98,847
6,178
United States
55,436
36,227
144,906
9,057
Hong Kong
Japan
Page 26
Economic Analysis
BMI View: India's real GDP growth slowed to 7.0% y-o-y in the first quarter of FY2015/16 (April-March)
from 7.5% y-o-y in the previous quarter, and we are downgrading our full-year forecast to 7.3% (versus
7.6% previously). We expect weakening agricultural growth and slowing reform momentum to weigh on
overall economic growth.
India's Q1FY2015/16 (quarter ending June 2015) real GDP growth came in at a disappointing rate of 7.0%
y-o-y (versus the Bloomberg consensus of 7.4%) from a level of 7.5% y-o-y in the previous quarter. We are
downgrading our FY2015/16 (April-March) growth forecast to 7.3% from 7.6% previously as a result of an
uneven monsoon season, which is likely to result in poor agricultural growth, and slowing reform
momentum (notably in the area of land).
Slowing
India - Quarterly GDP (Market Prices), % chg y-o-y
Source: BMI, MOSPI
From a production perspective, growth in the agricultural sector expanded for the first time in three
quarters, coming in at 1.9% y-o-y in Q1FY2015/16, versus a contraction of 1.4% y-o-y in the previous
Page 27
quarter. On the industrial side, the manufacturing sector was in solid shape, growing by 7.2% y-o-y (versus
8.4% y-o-y in Q4FY2014/15), despite dismal performance of the power sector as it slowed further to 3.2%
y-o-y. Meanwhile, both the mining and construction sector performed strongly, growing by 4.0% y-o-y and
6.9% y-o-y (versus 2.3% y-o-y and 1.4% y-o-y previously). Lastly, the services sector remained resilient,
with growth in the trade and transportation segment coming in at 12.8% y-o-y versus 14.1% y-o-y in the
previous quarter. The public administration, defence and other services category picked up to 2.7% y-o-y in
the first quarter (versus 0.1% y-o-y previously) as the government frontloaded spending to support the
infrastructure sector.
Table: Agriculture Uptick Unlikely To Last
Industry, GVA At Basic Prices

(at 2011/12 prices), % chg y-o-y
Q1FY2014/15
Q2FY2014/15
Q3FY2014/15
Q4FY2014/15
Q1FY2015/16
Agriculture, forestry & fishing
2.6
2.1
-1.1
-1.4
1.9
Mining & quarrying
4.3
1.4
1.5
2.3
4.0
Manufacturing
8.4
7.9
3.6
8.4
7.2
10.1
8.7
8.7
4.2
3.2
6.5
8.7
3.1
1.4
6.9
12.1
8.9
7.4
14.1
12.8
Financial, real estate & professional

services
9.3
13.5
13.3
10.2
8.9
Public administration, defence & other

services
2.8
7.1
19.7
0.1
2.7
Electricity, gas, water supply & other

utility services
Construction
Trade, hotels, transport,
communication and services
Source: BMI, MOSPI
Agricultural Growth To Weaken
Considering the prospect of a weaker monsoon in India, we expect growth in the agricultural sector (which
is the single largest sector, accounting for approximately 18-20% of GDP) to slow down over the coming
months, which will in turn drag down overall economic growth. The monsoon season has been uneven as
rainfall dipped sharply in August, and the Indian Meteorological Department (IMD) has forecasted the
monsoon season to be weak, with rainfall coming in at 88% of the long-term average, which is technically
characterised as a drought. Indeed, our Agribusiness team is forecasting the production of rice, sugar and
wheat to decline in FY2015/16, and the upcoming FY2016/17 wheat crop may also be hampered by low
rainfall levels in H215, as the level of water dams may be low, limiting irrigation.
Page 28
Modi's Backtracking On Land Reforms Negative For Infrastructure
Despite signs of moderate improvements in India's investment cycle, we believe that the recent step back on
land acquisition reforms will continue to weigh on the infrastructure sector. On August 30, Prime Minister
Narendra Modi announced that his administration will not renew the executive order (also known as an
ordinance), which exempts certain infrastructure projects from obtaining the consent of 80.0% of
landowners during the acquisition. This will lead to a slowdown in the implementation of existing projects,
at the same time hindering further investment. While a joint parliamentary panel is still in the process of
examining the land bill, and there remains a possibility that the government may look to implement land
laws at the state level, we argued previously that the growth potential of the sector is likely to be limited.
We expect investor confidence to be negatively impacted due to the uncertain regulatory environment
(see 'Land Bill: Downside Risks To Construction Growth', August 12).
Expansion Still Intact

India - Nikkei Manufacturing Purchasing Managers' Index
Source: BMI, Nikkei-Markit, Bloomberg
Page 29
Manufacturing Still A Bright Spot
While the pace of headline GDP growth in the coming year is unlikely to pick up as rapidly as what most
analysts had initially expected, the manufacturing sector is in a bright spot. We expect the government's
efforts to boost the manufacturing sector through the 'Make In India' campaign to continue gaining traction,
and this is evident in various high frequency data. For instance, the Nikkei Manufacturing Purchasing
Managers' (PMI) Index remained in expansionary territory in July, posting a six-month high of 52.7, as
firms increased production amid an increase in new orders, while industrial production (on a three-month
moving average [3mma]) continues to be on an uptrend. Meanwhile, we expect continued foreign direct
investment inflows into the sector, and we have seen various companies announcing their plans to set up
factories in India. For example, Taiwanese electronics maker Foxconn announced in early August that it
will invest about USD5.0bn over the next five years to build a manufacturing facility in Maharashtra.
GDP By Expenditure Breakdown
Private Consumption: Private consumption makes up 60.1% of GDP in India. Over the coming years, we
forecast a very gradual decline in private consumption relative to GDP, with the figure falling to 56.9% by
2024. As inflation declines over the coming years, consumers will likely shift a portion of their savings
from physical assets such as gold to other financial assets such as deposits due to greater access to financial
services as a result of the government's 'financial inclusion' push and higher real yields on such financial
instruments. However, positive demographic trends, rising incomes, and further access to credit will mean
private consumption growth will remain relatively robust.
Government Consumption: Government consumption represents 11.4% of GDP, and we expect this
proportion to rise slowly over the long-term as the government broadens the tax base, and has more
resources at its disposal. However, efforts by the Ministry of Finance to reduce the country's fiscal deficit
through reining in expenditures such as subsidies and enacting tax reforms will prevent this figure from
increasing rapidly.
Fixed Investment: Gross capital formation makes up 31.6% of GDP, and we expect this proportion to
remain roughly stable over the long-term. Indian policy makers recognise that decades of underinvestment
in the infrastructure sector have impeded the country's economic growth, and are taking efforts to accelerate
infrastructure development. However, various business environment issues, such as land disputes, funding
constraints, delays in environmental clearances, and contractual issues will result in project delays.
Page 30
Net Exports: India's net export deficit accounts for 2.3% of GDP as imports outstrip exports, particularly
due to oil imports, which represents around a-third of the country's import bill. Over the long term, this
external deficit is likely to flip into a surplus as the country's manufacturing export sectors grows in
importance on the back of the 'Make In India' campaign while the country's savings rate increases.
Table: Economic Activity (India 2014-2024)
2014
Nominal GDP,
USDbn
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
2,054.8 2,096.1 2,240.2 2,446.9 2,690.1 2,970.3 3,272.0 3,606.3 3,969.1 4,368.5 4,808.3
Real GDP
growth, % y-o-y
7.3
7.3
7.2
6.8
6.8
6.7
6.5
6.5
6.4
6.4
6.4
GDP per capita,

USD
1,586
1,598
1,688
1,822
1,980
2,162
2,355
2,568
2,797
3,048
3,321
2.8
3.2
4.8
5.8
6.5
7.0
6.8
6.5
6.5
6.5
0.0
Industrial
production, % yo-y, ave
Population, mn
1,295.3 1,311.1 1,326.8 1,342.5 1,358.1 1,373.6 1,388.9 1,403.9 1,418.7 1,433.2 1,447.6
f= BMI forecast. Source: National Sources, BMI
Page 31
Competitive Landscape
Market Structure
Protagonists
Table: Protagonists In India's Commercial Banking Sector
Central bank: Reserve Bank of India (RBI)

www.rbi.org.in
The RBI was established in 1935 in accordance with the Reserve Bank of India Act 1934. Its principle functions are to
'regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in India and generally
to operate the currency and credit system of the country to its advantage. The RBI was nationalised in 1949, and has
remained government owned ever since. Through the Board of Financial Supervision, a committee of the central board of
directors of the RBI, the central bank is the supervisor and regulator of the commercial banking sector and other financial
institutions and banking finance companies. The RBI's functions include: formulation and implementation of monetary
policy; management of foreign exchange; issuing of notes and coins; being a banker to government; being a banker to
banks; and 'a wide range of promotional functions to support national objectives' in relation to development.
Principal banking regulator: Reserve Bank of India (RBI)
www.rbi.org.in
Among its other roles, the RBI regulates the commercial banking sector.
Banking trade association: Indian Banks' Association (IBA)
www.iba.org.in
The interests of India's commercial banking sector are represented by the IBA, established in 1946. It has 135 ordinary
and more than 60 associate members. Its membership includes public sector banks, private sector banks, foreign banks
with offices in India, and urban cooperative banks.
Definition Of The Commercial Banking Universe

We define the universe of Indian banks as including 91 organisations, which are variously identified by the
Indian Banks' Association as public sector banks (27), private sector banks (23) and foreign banks in India
(41). Public sector banks include 20 nationalised banks, the State Bank of India (SBI), the five associates
of SBI and the Industrial Development Bank of India (IDBI).
Page 32
List Of Banks
Table: Public Sector Banks
Nationalised Banks
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Bhartiya Mahila Bank
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
State Bank of India (SBI)
IDBI Bank
Associates of SBI
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Source: IBA, BMI
Page 33
Table: Foreign Banks In India
AB Bank Ltd
Abu Dhabi Commercial Bank
American Express Banking Corporation
Antwerp Diamond Bank
Australia & New Zealand Banking Group
Bank of America
Bank of Bahrain and Kuwait
Barclays Bank
BNP Paribas
Citibank
Commonwealth Bank of Australia
Credit Agricole CIB
Credit Suisse AG
DBS Bank
Deutsche Bank
FirstRand Bank
HSBC Bank Oman S.A.O.G
ICBC
JPMorgan Chase Bank
Japan Bank for International Cooperation
JSC VTB Bank
Krung Thai Bank
Mashreq
Mizuho Corporate Bank
National Australia Bank
Rabobank International
Sberbank
Societe Generale
Sonali Bank
Standard Chartered Bank
State Bank of Mauritius
Sumitomo Mitsui Banking Corporation
Bank of Nova Scotia
Bank of Tokyo-Mitsubishi UFJ
HSBC Ltd
Page 34
Foreign Banks In India - Continued
Royal Bank of Scotland

The Toronto Dominion Bank
UBS
United Overseas Bank
Westpac Banking Corporation
Woori Bank
Source: IBA, BMI (as of January 2015)
Page 35
Company Profile
Bank of Baroda
SWOT Analysis
Strengths
Weaknesses
Large state-backed bank.
Well capitalised balance-sheet and robust business model.
Strong overseas footprint.
Branch network could be far stronger to garner faster growth from expanding
economy.
Opportunities
Threats
International and domestic expansion plans.
Operating profit rose in FY15.
Global deposits increased in 2015.
Uncertain regional economic climate could hamper international expansion and

growth at home.
Company Overview
NPL ratio ticked up in 2014.
Bank caught up in money laundering scandal.
Mumbai-based Bank of Baroda was established in 1908 and is now normally ranked
behind State Bank of India and Punjab National Bank amid the biggest state-owned
banks in India. At the end of 2014, the government owned a 56.3% stake in the bank,
with the remaining shares publicly listed.
The bank had a total of 5,160 branches globally as of January 2015, including 104
overseas outlets, and had a total staff of over 46,000 as of March 2014. The lender also
has 13 zonal controlling offices and 56 regional controlling offices. The bank has
subsidiaries in Botswana, Kenya, Uganda, New Zealand, Tanzania, Trinidad & Tobago,
Guyana, and Ghana. The bank also has representative offices in Thailand, and branches
in 15 other countries, including the US, UK, and China.
The bank signed a partnership agreement with the Khalifa Industrial Zone Abu Dhabi
(Kizad) in the UAE in July 2011 to supply its tenants with retail banking facilities and
financial services. The deal is part of Kizad's 'one-stop-shop' approach to providing for
Page 36
its businesses and Baroda will help the zone in trying to attract more overseas
investment.
In 2015 Bank of Baroda has been caught up in an alleged INR60bn foreign exchange
scam. As a result, the Reserve Bank of India (RBI) is likely to make it mandatory for all
lenders to report smaller transactions from a single account.
Corporate
Highlights
The bank posted operating profit of INR99.15bn (up 6.01%, y-o-y) supported by healthy
Net Interest Income at INR13.19bn. However, due to higher tax and non-tax provisions,
the bank posted net profit of INR33.98bn (down 25.16%, y-o-y) during FY15.
The bank's Capital Adequacy Ratio continued to reflect its capital strength. The CRAR
was healthy at 13.33% in terms of Basel II and 12.60% in terms of Basel III at the end of
March 2015, with Tier 1 capital ratios at 10.14% and 9.87%, respectively. Common
Equity Tier 1 was at 9.35% as per Basel III norms.
The bank's global deposits registered a growth of 8.55% (y-o-y) to INR6,175.6bn by the
end of March 2015. Within this, domestic deposits at the bank expanded by 9.29% to
INR4,142.8bn and the overseas deposits rose by 7.08% to INR2,032.8bn.
In 2014 Moody's affirmed its 'Baa3' long-term credit rating for Bank of Baroda, though
warned that India's public-sector banks have a negative outlook due to weakening
profits and deteriorating asset quality. In September 2014 Fitch affirmed the bank's IDR
at 'BBB-'.
Table: Stock Market Indicators
2009
Market Capitalisation INR
Market Capitalisation USD
2010
2011
2012
2013
2014
2015 13-Jan-2016
187,215 326,638 260,515 339,255 271,942 465,443 360,947
298,504
4,024
7,307
4,906
6,192
4,396
7,362
5,450
4,466
102.79
179.34
133.07
173.29
129.11
216.78
156.65
129.60
Share Price USD
2.21
4.01
2.51
3.16
2.09
3.43
2.37
1.94
Share Price USD, % change (eop)
92.0
81.6
-37.5
26.2
-34.0
64.3
-31.0
na
na
na
na
na
na
na
na
-18.1
1,821
1,821
1,958
2,056
2,106
2,147
2,211
na
Share Price INR
Change, year-to-date
Shares Outstanding (mn)
Source: Bank of Baroda, Bloomberg
Page 37
Table: Balance Sheet (INRmn)
2009
2010
2011
2012
2013
2014
2015
Total Assets
2,315,767
2,842,768
3,662,138
4,574,120
5,593,883
6,761,141
7,339,774
Loans & Mortgages
1,453,339
1,775,489
2,314,703
2,899,645
3,310,228
4,037,154
3,608,021
Total Deposits
1,790,417
2,121,519
2,696,071
3,382,624
4,086,616
4,716,971
5,168,552
133,711
157,740
218,453
286,075
333,918
380,052
422,044
13.09
17.46
24.33
26.80
23.34
23.65
18.22
2009
2010
2011
2012
2013
2014
2015
Total Assets
45,644
63,243
82,134
89,785
102,668
112,890
117,797
Loans & Mortgages
28,646
39,499
51,914
56,917
60,755
67,408
57,905
Total Deposits
35,290
47,197
60,467
66,398
75,004
78,759
82,950
Total Shareholders' Equity
2,635
3,509
4,899
5,615
6,129
6,346
6,773
Earnings per share (USD)
0.29
0.37
0.53
0.56
0.43
0.39
0.30

Earnings per share (INR)
Table: Balance Sheet (USDmn)
Table: Key Ratios (%)
2009
2010
2011
2012
2013
2014
2015
Return on Assets
1.1
1.2
1.4
1.3
0.9
0.8
0.6
Return on Equities
19.3
21.9
23.7
20.9
15.5
14.1
9.8
Loan Deposit Ratio
81.2
83.7
85.9
85.7
81.0
na
na
Loan Asset Ratio
62.8
62.5
63.2
63.4
59.2
na
na
Equity Asset Ratio
5.8
5.5
5.9
6.2
5.9
5.6
5.7
Page 38
HDFC Bank
SWOT Analysis
Strengths
Weaknesses
High-performing and highly rated bank.
Large branch network across India.
Strong capital ratios.
Expanding branch and ATM network.
Exposure to unsecured consumer finance has had an adverse affect during a financial
crisis.
Opportunities
The acquisition and associated extra business, including retail customer acquisition.
Net profit up 20.5% in FY15.
HDFC is becoming a market leader in fast-growing online and mobile banking

sectors.
Threats
Company Overview
Recorded an increase in operating expenses in FY15.
Mumbai-headquartered HDFC Bank was incorporated in August 1994, and had a

nationwide network of 4,014 Branches and 11,766 ATM's across 2,464 Indian towns
and cities as of October 2015. The bank was established in 1994 after the RBI allowed
private entrants into the banking sector and it is now one of the country's largest banks
in terms of market capitalisation. HDFC Bank had over 28mn customers as of March
2014.
HDFC Bank offers a wide range of commercial and transactional banking services and
treasury products to wholesale and retail customers. The bank has received many
awards in recent years, including the 'Best Domestic Bank in India' for the last three
years in Asiamoney magazine.
The bank is 22.5% owned by HDFC Group. The remaining shares in the bank are
publicly listed on the Bombay Stock Exchange and The National Stock Exchange of
India. The Bank's American Depository Shares (ADS) are listed on the New York Stock
Exchange (NYSE) and the Bank's Global Depository Receipts (GDRs) are listed on
Luxembourg Stock Exchange.
Page 39
In December 2013, the Reserve Bank of India (RBI), restricted any further foreign
investment in HDFC, after the bank crossed the threshold for 49% foreign ownership.
The bank filed an application with the Foreign Investment Promotion Board (FIPB) to
increase its foreign shareholding limit to 74%, and this was eventually approved in
December 2014.
In Q314, HDFC became the leading private-sector bank for mobile transactions; to
further boost its standing in this fast-growing sector, the bank launched a new mobile
banking platform in December 2014 and a 'digital wallet' in January 2015.
In February 2015, HDFC Bank launched a share offer in India and the US to raise up to
INR100bn (USD1.6bn) to meet the Basel III global banking industry rules. HDFC, which
reportedly filed with the US watchdog to sell 22mn American Depositary Shares, also
plans to sell shares to investors in India to raise up to INR20bn (USD324mn). The lender
secured the Indian government's approval in the week ended January 31 2015 to raise
up to USD1.6bn by selling shares. However, the government granted approval on
condition that its foreign ownership must not be more than 74%. HDFC lacks
immediate capital requirement, but the new finances raised via share sale are expected
to help boost its growth.
Corporate
Highlights
As of the end of FY15 on March 31 2015, the bank had total net revenues increasing by
18.9% to INR313.920bn compared with INR264.023bn a year earlier. Revenue growth
was driven by an increase in both, net interest income and other income. Net interest
income grew by 21.2% due to acceleration in loan growth of 20.6% coupled with a net
interest margin (NIM) of 4.4% for the year ending March 31, 2015.
The bank's profit before tax was INR153.287bn, representing an increase of 20.0% over
the year ended March 31 2014. After providing for income tax of INR511.280bn, the net
profit for the year ended March 31, 2015 was INR102.159bn, up 20.5%, over the year
ended March 31 2014.
During the same time period operating expenses increased from INR120.4bn in FY14 to
INR139.876bn a year later.
As at March 31 2015, the bank's total balance sheet was at INR5,905.03bn, an increase
of 20.1% over INR4,916.0bn as at March 31, 2014. Total deposits increased 22.7%
from INR3,673.37bn as on March 31, 2014 to INR4,507.96bn as on March 31, 2015.
The bank's total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital
regulations stood at 16.8%, well above the regulatory minimum of 9.0%. Of this, Tier I
CAR was 13.7%.
During 2014, Moody's held HDFC Bank's credit rating at 'Baa2', with a stable outlook.
S&P also affirmed its BBB- long-term credit rating for HDFC Bank, though assigned a
negative outlook in September 2014 due to a similar revision for India's sovereign
rating.
Page 40
Company Data
Website: www.hdfcbank.com
Status: Private Sector Bank
2010
2011
2012
2013
2014
2015 13-Jan-2016
1,088,174 999,027 1,606,969 1,594,440 2,300,405 2,732,522
2,624,954
24,341
18,812
29,330
25,777
36,384
41,256
39,248
Share Price INR
469.27
426.85
678.60
665.85
951.60
1082.15
1039.55
Share Price USD
10.50
8.04
12.39
10.76
15.05
16.34
15.54
43.5
-23.4
54.1
-13.1
39.8
8.6
na
na
na
na
na
na
na
-4.9
2,289
2,326
2,347
2,379
2,399
2,506
na

Source: The HDFC Bank Ltd, Bloomberg
2009
2010
2011
2012
2013
2014
2015
1,834,028
2,229,475
2,779,629
3,410,550
4,077,230
5,036,200
6,070,965
986,607
1,255,398
1,608,028
1,984,661
2,471,534
3,145,542
3,817,934
1,402,550
1,648,599
2,058,420
2,442,434
2,936,254
3,643,210
4,468,111
151,379
216,947
257,077
303,944
368,641
443,184
633,157
10.59
13.76
17.29
22.57
29.10
36.58
44.10
2009
2010
2011
2012
2013
2014
2015
Total Assets
36,149
49,599
62,341
66,946
74,832
84,089
97,433
Loans & Mortgages
19,446
27,929
36,065
38,957
45,362
52,521
61,274
Total Deposits
27,645
36,676
46,166
47,943
53,891
60,830
71,709
2,984
4,826
5,766
5,966
6,766
7,400
10,162
0.23
0.29
0.38
0.47
0.54
0.61
0.72
Total Assets
Loans & Mortgages
Total Deposits
Page 41
2009
2010
2011
2012
2013
2014
2015
Return on Assets
1.4
1.5
1.6
1.7
1.8
1.9
1.9
Return on Equities
16.9
16.4
16.9
18.9
20.6
21.6
19.9
Loan Deposit Ratio
70.3
76.1
78.1
81.3
84.8
86.9
86.0
Loan Asset Ratio
53.8
56.3
57.9
58.2
61.1
62.9
63.3
Equity Asset Ratio
8.2
9.7
9.2
8.9
9.0
8.8
10.4
Total Risk Based Capital Ratio
15.1
17.5
16.5
16.7
16.9
16.0
16.8
Tier 1 Capital Ratio
10.2
13.3
12.3
11.7
11.0
11.7
13.7
Page 42
ICICI Bank
SWOT Analysis
Strengths
Weaknesses
Dominant private sector bank.
Well-capitalised and a high capital adequacy ratio.
Highly rated by international agencies.
The bank has faced losses due to its exposure to consumer lending.
The bank has been forced to sell its subsidiary in Russia and trim back other
international operations.
Opportunities
Increased business with customers in rural areas (low-value, high-volume

transactions).
Threats
Company Overview
Expects to increase its infrastructure lending in the short-term.
14% rise in post-tax profit in FY15.
Increase and advances and deposits in 2015.
The gradual entry of foreign banks operating more fully.
New licenses for private banks would pose a threat to existing players.
Slight increase in NPL ratio, albeit from a low base.
ICICI Bank is India's largest private sector bank with total assets of INR6,461.29bn at
March 31, 2015 and profit after tax of INR111.75bn as of the same date. ICICI Bank,
which was founded in 1994 by ICICI Ltd after the government allowed new private
banks to be established, currently has a network of 4,050 Branches and 12,991 ATM's
across India. It has been listed on the Bombay Stock Exchange since 1998 and the New
York Stock Exchange since 2000.
The bank has subsidiaries in the UK, Russia, and Canada, plus branches in the US,
Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai. It also has representative
offices in the UAE, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia.
The UK subsidiary has branches in Belgium and Germany.
Page 43
In 2012, ICICI bank started opening electronic branches - 24/7 one-stop shops for all
banking transactions - and now has over 100 across the country. In January 2015, to
mark the 60th anniversary since ICICI Ltd was founded, the bank launched a new
'digital village' project in Gujarat, bringing technological solutions to banking and
everyday life in rural India.
In December 2014, the bank announced that it would sell its Russian subsidiary, ICICI
Bank Eurasia, to Sovcombank. The transaction is currently pending regulatory approval.
The bank also increased the repatriation of capital at its UK and Canadian subsidiaries
as it looks to the domestic market for future growth.
Corporate
Highlights
The bank posted a 14% y-o-y increase in standalone profit after tax to INR111.75bn for
the year ended March 31 2015, up from INR98.10bn a year earlier in FY14.
Total advances increased by 14% y-o-y to INR3,875.2bn in FY15, up from
INR3,387.0bn in FY14. The y-o-y growth in domestic advances, meanwhile, was 18%.
In FY15 the bank recorded a total capital adequacy ratio of 17.02% and a Tier-1 capital
adequacy of 12.78%.
Rating's agency Moody's held its long-term credit score for ICICI Bank at 'Baa2' during
2014, maintaining a stable outlook. Meanwhile, in September 2014 Fitch affirmed its
long-term IDR for ICICI Bank at 'BBB-', noting that the bank had some of the strongest
financial metrics in the sector.
Company Data
Website:
www.icicibank.com
Status:
Private Sector Bank
Media Contact:
Charudatta Deshpande
Tel: 91-22-2653-8208
Email: charudatta.deshpande@icicibank.com
Page 44
2009
Market Capitalisation
INR
2010
977,089 1,315,21
8
2011
2012
2013
2014
2015
13-Jan-2016
789,104 1,308,64
3
1,268,544
2,044,925
1,519,003
1,384,468
USD
21,000
29,420
14,859
23,885
20,508
32,344
22,934
20,712
Share Price INR
175.40
229.02
136.93
227.65
219.75
353.10
261.35
238.20
3.77
5.12
2.58
4.15
3.55
5.58
3.95
3.56
104.7
35.9
-49.7
61.1
-14.5
57.2
-29.3
na
na
na
na
na
na
na
na
-9.7
5,566
5,574
5,759
5,764
5,768
5,775
5,797
na
Share Price USD

Share Price USD, %
change (eop)
Change, year-todate
Shares Outstanding
(mn)
Source: ICICI Bank Limited, Bloomberg
2009
2010
2011
2012
2013
2014
2015
Total Assets
4,826,910
4,893,473
5,337,679
6,192,869
6,748,217
7,477,624
8,260,792
Loans & Mortgages
2,644,433
2,244,090
2,514,674
2,893,444
3,282,061
3,862,271
4,371,855
Total Deposits
2,453,084
2,312,717
2,417,325
2,701,121
3,009,624
3,467,715
3,739,458
480,380
525,669
566,607
627,042
704,682
784,406
872,104
6.43
8.39
10.71
13.27
16.66
19.13
21.17
2009
2010
2011
2012
2013
2014
2015
Total Assets
95,140
108,865
119,712
121,560
123,855
124,853
132,578
Loans & Mortgages
52,122
49,924
56,399
56,795
60,238
64,488
70,164
Total Deposits
48,351
51,451
54,215
53,020
55,238
57,900
60,015
9,468
11,695
12,708
12,308
12,933
13,097
13,996
0.14
0.18
0.24
0.28
0.31
0.32
0.35

Page 45
2009
2010
2011
2012
2013
2014
2015
Return on Assets
0.7
1.0
1.2
1.3
1.5
1.6
1.6
Return on Equities
7.8
9.5
11.4
13.1
14.8
15.2
15.2
109.9
99.5
107.3
110.1
111.6
113.6
119.5
Loan Asset Ratio
55.9
47.0
48.6
48.0
49.8
52.7
54.1
Equity Asset Ratio
9.7
10.5
10.4
9.9
10.2
10.2
10.3
14.7
19.2
19.9
19.6
19.7
18.3
17.2
10.3
12.9
12.7
12.8
12.9
13.1
12.9
Loan Deposit Ratio
Page 46
Punjab National Bank

SWOT Analysis
Strengths
Weaknesses
Large market share.
Dominance in northern India and in rural retail banking.
Financial high performance.
Strong capital base.
Net profit on the rise.
Potential for political interference.
High concentration of foreign currency loans leaves bank vulnerable to currency

swings.
Opportunities
Reputation damaged by the bribes-for-loans scandal.
Increased business with customers in rural areas through banking correspondents

and technology (for the bank to benefit from low-value, high-volume transactions).
Threats
Company Overview
Deposits and advances to the bank rose in FY15.
The gradual entry of foreign banks operating more fully.
Rising NPL ratio has led to negative outlook on credit rating.
Punjab National Bank (PNB), established in 1895, is India's second largest public sector
bank (the government owned a 58.9% stake as of October 2014) and its largest
nationalised bank in terms of the number of branches, deposits, advances, total
business and operating and net profit.
Based in New Delhi, PNB has a network 6,356 branches and 8,348 ATMs in India. The
bank has a presence in 10 countries with four representative offices, five overseas
branches, three overseas subsidiaries (in London, Bhutan, Kazakhstan), and a jointventure with Everest Bank in Nepal (in which PNB owns a 20% stake). The bank has an
estimated 89mn customers worldwide.
PNB has a policy of inclusive growth in the Indo-Gangetic region, which involves
'banking for the unbanked'. In addition to its large network of nearly 2,500 rural
Page 47
branches, it has launched a number of ATMs designed for disabled customers. PNB is
also expanding its international network, and has been granted permission from the
Reserve Bank of India to open new representative offices in Myanmar and Bangladesh.
However, in June 2014 the bank announced that it would no longer be seeking to set up
a subsidiary in Canada due to ongoing delays and regulatory obstacles.
In 2011, PNB was caught up in a 'bribes-for-loans' scandal that raised concerns over
corruption at state-run banks in India. The problems continued in 2014 as within the
space of three weeks in April one branch manager was sentenced to prison for the
same crime, while another senior manager was arrested on similar charges.
Corporate
Highlights
PNB's net profit closed FY15 on March 31 at INR36.0bn compared with INR33.43bn a
year earlier. Meanwhile operating profit at the bank ended the year up by 5% to
INR119.55bn, up from INR113.84bn in FY14. Total income during this period rose by
9.2% to INR522.1bn, with a growth of 7.4% in interest income on advances. Net
interest income closed 2015 at INR165.56bn against INR161.46bn as of the end of
March 2014.
Deposits at the bank rose to INR5,013.79bn in FY15, up from INR4,513.97bn a year
earlier, exhibiting a y-o-y growth of 11.1%. During the same time period, advances of
the bank reached INR3,805.34bn, up by 9.0% from INR3,492.69bn in March 2014.
The bank has a strong capital base with a capital adequacy ratio of 12.21% and a tier-1
capital ratio of 9.30% as per Basel III as at March 2015.
In December 2013, Moody's changed its rating outlook for PNB from stable to negative
due to concerns over rising NPLs amid an environment of high interest rates and rising
inflation. The bank's long-term foreign currency rating stands at 'Baa2'. In September
2014, Fitch affirmed PNB's long-term IDR at 'BBB-', with a stable outlook.
Company Data
Website: www.pnbindia.in
Status: Public Sector Bank
Page 48
2009
2010
2011
2012
2013
2014
2015 13-Jan-2016
285,728 385,300 247,367 295,526 221,433 396,648 227,188
190,960
6,141
8,619
4,658
5,394
3,580
6,274
3,430
2,855
181.24
244.40
156.16
174.26
125.29
219.10
115.70
97.25
Share Price USD
3.90
5.47
2.94
3.18
2.03
3.47
1.75
1.45
80.0
40.3
-46.2
8.2
-36.3
71.1
-49.6
na
na
na
na
na
na
na
na
-16.8
1,577
1,577
1,584
1,696
1,767
1,810
1,855
na
Share Price INR
Source: Punjab National Bank, Bloomberg
2009
2010
2011
2012
2013
2014
2015
Total Assets
2,535,912
3,035,694
3,862,838
4,704,454
4,966,478
5,748,205
6,360,112
Loans & Mortgages
1,570,257
1,900,218
2,339,245
2,987,608
2,997,562
3,349,158
3,627,743
Total Deposits
2,049,623
2,471,104
3,018,272
3,675,547
3,848,665
4,426,015
4,690,923
157,002
189,298
229,160
295,353
348,353
385,163
425,884
20.28
25.20
29.02
29.63
28.03
20.32
18.78
2009
2010
2011
2012
2013
2014
2015
Total Assets
49,983
67,535
86,635
92,344
91,153
95,977
102,074
Loans & Mortgages
30,950
42,274
52,464
58,644
55,016
55,920
58,222
Total Deposits
40,399
54,975
67,693
72,147
70,637
73,901
75,285
3,095
4,211
5,140
5,797
6,394
6,431
6,835
0.44
0.53
0.64
0.62
0.52
0.34
0.31

Page 49
2009
2010
2011
2012
2013
2014
2015
Return on Assets
1.4
1.4
1.3
1.2
1.0
0.7
0.6
Return on Equities
22.3
23.2
22.1
19.4
15.6
10.0
8.5
Loan Deposit Ratio
76.6
76.9
77.5
81.3
na
96.0
99.1
Loan Asset Ratio
61.9
62.6
60.6
63.5
na
73.9
73.1
Equity Asset Ratio
6.1
6.2
5.9
6.2
6.9
6.6
6.6
na
na
na
13.0
13.2
12.1
12.9
na
na
na
9.4
10.0
9.3
9.7
Page 50
State Bank of India

SWOT Analysis
Strengths
The merger with State Bank of Saurashtra and Indore increased SBI's market
leadership.
Weaknesses
Opportunities
Highly capitalised and a high capital-adequacy ratio, with support from the State.
It is the dominant bank in India and has an extraordinarily large distribution network.
Net profit increased strongly in FY15.
Potential non-performing assets arising in the real estate and SME sectors.
Potential for political interference.
Inefficiency impedes the giant bank's processes.
Further expansion of successful IT-based banking.
Aggressive international expansion will spread SBI's risk and expand overseas
revenue.
SBI's consolidation of its insurance business can take advantage of the bank's large
distribution network.
Threats
Deposits and advances increased in FY15.
State-owned banks may struggle to compete with private sector as RBI accepts new
licenses and more foreign banks arrive.
Company Overview
Exposed to broader economic and political risks.
State Bank of India (SBI) is India's oldest bank and by far the largest; SBI and its
subsidiary associate banks account for about a third of the total banking assets in India.
SBI started as the Bank of Calcutta in 1806. After extensive growth under various
names, SBI was constituted by an act of parliament in 1955. In 1959, it was enabled to
take over former state-associated banks as subsidiaries, later called associates.
Page 51
As of September 2014 (latest available data), SBI had 53,871 group ATMs, 16,086
domestic branches, and 190 foreign offices in 36 other countries, with a total staff
headcount of 217,379. The bank's overseas operations include eight foreign
subsidiaries in Canada, USA, Mauritius, Nepal, Botswana, Indonesia, Bhutan, and
Russia.
SBI has a controlling interest of 75-100% in each of its five associate banks: State Bank
of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of
Patiala and State Bank of Travancore. SBI merged with State Bank of Saurashtra in
August 2008 and with the State Bank of Indore in August 2010. The bank had said it
would merge another of the associate banks in FY14, though later decided against it.
In January 2014, SBI raised INR80.0bn (USD1.2bn) with the country's biggest ever
qualified institutional placement, though it fell short of its INR100bn target. As of
September 2014 the central government owned a 58.6% stake in SBI, with foreign
institutions holding much of the remaining shares.
In July 2014, SBI opened its first six 'digital branches' as part of a drive to strengthen its
challenge to private-sector rivals in the internet and mobile banking sectors. In January
2015, SBI signed a memorandum of understanding with National Australia Bank in a bid
to increase cooperation in migrant banking and international payments between the two
countries.
Corporate
Highlights
Net Profit at SBI increased by 20.30% in FY15 to INR131.02bn from INR108.91bn in

FY14. Similarly, operating profit increased by 21.19% from INR321.09bn as of the end
of March 2014 to INR389.14bn a year later. Meanwhile operating income increased by
14.38% from INR678.35bn in FY14 to INR775.91bn in FY15.
Deposits of the bank increased by 13.08% y-o-y in 2015, while gross advances grew by
7.25% during the same time period.
Return on Assets stood at 0.68% as of the end of March 2015 up from 0.65% in
March 2014. Return on Equity equalled 11.17% in FY15 compared with 10.49% in
FY14.
The bank is rated 'Baa3' (with a stable outlook) by Moody's, and 'BBB-' (negative) by
both Fitch and Standard & Poor's.
Company Data
Website: www.sbi.co.in
Status: Public Sector Bank with Associates
Page 52
2014
2015
13Jan-2016
1,440,54 1,785,551 1,028,096 1,600,779 1,208,346 2,328,188

3
1,742,355
1,561,871
2009
INR
2010
2011
2012
2013
USD
30,961
39,941
19,360
29,217
19,535
36,824
26,306
23,366
Share Price INR
226.90
281.19
161.91
238.55
176.65
311.85
224.45
201.20
Share Price USD
4.88
6.29
3.05
4.35
2.86
4.93
3.39
3.01
Share Price USD, %

change (eop)
84.2
29.0
-51.5
42.8
-34.4
72.7
-31.3
na
na
na
na
na
na
na
na
-11.2
6,349
6,349
6,350
6,710
6,840
7,466
7,466
na
2013
2014
2015
Source: State Bank of India, Bloomberg
2009
Total Assets
2010
2011
2012
13,048,257 14,501,440 16,478,983 18,299,562 21,331,086 23,964,953 27,001,100
Loans & Mortgages
7,446,466
Total Deposits
9,868,013 10,872,554 12,303,892 13,885,105 15,898,439 17,963,061 20,338,610
8,525,943
9,822,982 11,461,589 13,587,430 15,282,103 16,411,981
746,187
857,669
864,484
1,099,557
1,292,869
1,522,797
1,668,847
17.27
18.48
16.83
24.16
26.68
20.40
22.76
2009
2010
2011
2012
2013
2014
2015
Total Assets
257,185
322,613
369,587
359,202
391,504
400,139
433,343
Loans & Mortgages
146,772
189,676
220,308
224,980
249,379
255,163
263,397
Total Deposits
194,501
241,881
275,949
272,551
291,795
299,927
326,416
14,708
19,081
19,388
21,583
23,729
25,426
26,783
0.38
0.39
0.37
0.51
0.49
0.34
0.37

Page 53
2009
2010
2011
2012
2013
2014
2015
Return on Assets
0.9
0.9
0.7
0.9
0.9
0.6
0.7
Return on Equities
16.4
15.1
12.8
16.2
15.5
10.4
11.0
Loan Deposit Ratio
76.2
79.4
81.1
84.6
87.7
87.2
82.5
Loan Asset Ratio
57.7
59.6
60.6
64.2
65.3
65.4
62.1
Equity Asset Ratio
5.5
5.7
5.1
5.8
5.9
6.1
6.0
13.5
14.2
13.5
12.3
13.7
12.8
12.2
9.0
9.0
9.3
8.0
9.7
9.5
9.5

Page 54
Regional Overview
Asia Overview
BMI View: Asian banks will continue to face multiple headwinds from the regional economic growth
slowdown, correcting real estate markets and elevated levels of household debt.
We hold a negative view on the outlook for Asian banks in 2016 as headwinds continue to mount amid a
slowing regional economic growth outlook, a correction in the region's property markets and highly
indebted households. Indeed, 2016 will be a year fraught with risks for Asian banks as the Chinese
economic slowdown deepens while developed economies in the EU, along with Japan, are set for continued
mediocre economic growth.
China's New Lending Set To Decline
The Chinese economy will continue to cool in 2016 as policymakers struggle to address pervasive
imbalances and high debt levels in the corporate sector. After years of malinvestment, overcapacity across a
wide range of industries (foremost of which are the mining, metals, energy, and materials sectors) and
excess inventory in the real estate market will limit growth potential. As a greater number of loss-making
enterprises (notably state-owned entities) are allowed to go bankrupt, we expect asset quality to deteriorate
at an even faster pace in 2016. In an environment in which growth is slowing and inflation is still subdued,
we expect the People's Bank of China (PBoC) to ease credit conditions by cutting interest rates and reserve
requirement ratios in an attempt to prevent a debt deflation spiral. However, demand for new credit will
likely remain tepid as highly indebted corporates focus on meeting outstanding obligations. Therefore, we
forecast loan growth to moderate to 10.0% in 2016 (versus an expansion of 15.0% in 2015).
Page 55
NPL Run-Up Just The Beginning

China - Non-Performing Loan Ratio, %
Source: BMI, Bloomberg, PBoC
Elevated Household Debt A Concern For Australia And Thailand
While high corporate debt levels are a concern for Chinese banks, banks in a number of countries in the
region such as Australia and Thailand face headwinds from elevated levels of household indebtedness. In
Australia, households have racked up a significant amount of debt amid declining mortgage interest rates as
the Reserve Bank of Australia (RBA) has sought to cushion the downturn in the mining sector. We are
seeing signs of the country's overvalued property market starting to roll over. Indeed, data from CoreLogic
LP showed that home prices in Sydney fell by 1.2% month-on-month (m-o-m) in December 2015
(following a 1.4% m-o-m decline in November), which also marked the first time since May 2013 that
home prices in the city have contracted for two straight months. Given that Australia's banking assets are
dominated by residential mortgages (which account for more than 60% of total loans), a sharp correction in
the housing market could trigger a significant rise in mortgage defaults, causing a financial crisis.
Page 56
Australia's Household Leverage Rose At A Rapid Pace

Global - Household Debt, % of GDP
Source: BMI, BIS
Note: The 21 countries included in the chart are: Austria (AT), Australia(AU), Belgium (BE), Canada (CA), Switzerland (CH),
Germany (DE), Denmark (DK), Spain (ES), Finland (FI), France (FR), United Kingdom (GB), Greece (GR), Hong Kong (HK), Ireland
(IE), Italy (IT), Japan (JP), South Korea (KR), Netherlands (NL), Norway (NO), Sweden (SE), Singapore (SG), United States (US).
Meanwhile, Thailand is also grappling with elevated household indebtedness, which is among the highest in
the Southeast Asia region at 81.8% of annualised GDP in Q315. As a result, spending will remain
Page 57
constrained despite a boost in consumer sentiment from stimulus measures (aimed at supporting the rural
poor) and continued weak oil prices. Therefore, we expect loan growth in the country to remain tepid over
the coming quarters, forecasting it to come in at 5.0% in 2016, unchanged from 2015.
Tepid Loan Growth

Thailand - Loan Growth, % chg y-o-y
Source: BMI, BoT
Property Correction To Persist In Singapore And Hong Kong
Other than Australia's falling property prices, some of the region's other property markets, notably in
Singapore and Hong Kong, are also undergoing a correction, and we believe that this will weigh on the
lending prospects of banks in the two city states. In Singapore, we expect real estate prices to continue
declining in 2016 as the supply of new units remains ample and marginal demand for rental properties
(which is the key driver of investment demand) will be capped by the government's limits on inflows of
skilled foreign workers. Moreover, the government's cooling measures and loan curbs continue to weigh on
the market, with private property prices contracting for the ninth straight quarter in Q415 (falling by 0.5%
q-o-q), and also marking the longest streak of losses since the last quarter of 1998. Therefore, given that
Page 58
Singapore banks face an uncertain outlook amid a slowing property market, domestic economic
restructuring and weak external demand, we expect loan growth to be muted.
Transactions Hit A New Low

Hong Kong - Private Property Transactions
Meanwhile, in Hong Kong, extremely rich valuations, enduring macroprudential cooling measures, rising
interest rates, and a continued deterioration in the Chinese economy underpin our expectations for a
residential property price correction between 10-15% over the coming years. Indeed, cooling momentum
has already been apparent in transaction volumes, which dipped below 3,000 units in November 2015 for
the first time since at least 2004. Overall private residential property prices also witnessed their steepest
month-on-month decline since mid-2013 in November 2015, falling by 2.1%. Moreover, given our
downbeat outlook on the Chinese economy and Hong Kong's tight trade linkages with the mainland,
corporate loan growth is likely to be negatively impacted.
Page 59
Improving Asset Quality

Vietnam - Non-Performing Loan Ratio, %
Source: BMI, SBV
Vietnam Bucking The Regional Trend
However, Vietnam's banking sector will buck the regional trend, and continue to improve over the coming
years as ongoing financial reform efforts by the government will gain traction. There continue to be signs of
improvement in the sector's asset quality, with the non-performing loan (NPL) ratio remaining on a
downtrend, falling to 2.9% in Q315 (versus 3.7% in Q215 and slightly below the authorities' official 3.0%
target). In addition to ongoing state efforts to reduce bad debts, domestic banks have also sought to put in
place proper credit assessment mechanisms, accelerate loan collection efforts, and strengthen corporate
governance.
Page 60
Global Industry Overview

Global Commercial Banking Overview
Financial market volatility, commodity price weakness, and the economic slowdown in China are key
themes in each of the regions covered in BMI's commercial banking universe. The deterioration in emerging
market economic and financial conditions will limit asset growth in 2016 across both emerging and
developed markets.
Developed market banking sectors will experience slow but steady growth in 2016, with some such as the
UK more heavily exposed to the Chinese-led emerging market slowdown.
The Central Europe region will outperform globally, though poor macroeconomic backdrops will weigh
on the outlook for the Turkish and Russian banking sectors in 2016 and 2017.
Banks in emerging Asia are at high risk of weakening Chinese economic conditions. We expect to see
asset quality in China to deteriorate significantly in 2016, alongside a slowdown in loan growth.
In Latin America, asset and loan growth will remain sluggish amid the global commodity bust and a
higher cost of capital. Though we see limited systemic risk given strong capital buffers in most banking
sectors, Brazil stands out as facing the most significant risk of asset quality deterioration.
Regional Outlooks
Developed States: The outlook for commercial banking sectors in developed states in 2016 is generally
positive. In the US, asset growth will remain in positive territory in 2016 as the expansion of consumer
borrowing more than offsets the tempered borrowing growth from the commercial space. Rising rates and
declining industrial production will limit opportunities for new lending, particularly to businesses, but we
still forecast loan growth of 3.0%.
Page 61
Only Modest US Asset Growth In 2016

US - Total Commercial Banking Assets, % chg y-o-y
Source: FRED, BMI
Meanwhile, we forecast the strongest pace of eurozone bank lending growth since 2008, as the economic
backdrop improves and the panoply of European Central Bank programmes helps ease credit conditions. It
will not be smooth sailing for developed states' banking sectors by any means, however, particularly due to
exposure to global factors. The UK banking sector, for instance, is highly exposed to China. UK banks have
more claims on China relative to Tier 1 capital than any other advanced economy. Although much of this
exposure is relatively low risk trade finance, this could still be at risk from a large devaluation of the yuan,
which, while not our core view, remains a risk.
Page 62
Just The Beginning For China's NPL Run-Up

China - Non-Performing Loan Ratio, %
Source: BMI, Bloomberg, PBoC
Emerging Asia: We hold a negative outlook for Asian banks in 2016, as headwinds continue to mount
amid a slowing regional economic growth outlook, a correction in the region's property markets and highly
indebted households. Indeed, 2016 will be a year fraught with risks for Asian banks as the Chinese
economic slowdown deepens while developed economies in the EU, along with Japan, are set for continued
mediocre economic growth. While high corporate debt levels are a concern for Chinese banks, banks in a
number of countries in the region, such as Australia and Thailand, face headwinds from elevated levels of
household indebtedness. Other than Australia's falling property prices, some of the region's other property
markets, notably in Singapore and Hong Kong, are also undergoing a correction, and we believe that this
will weigh on the lending prospects of banks in the two city states. Vietnam's banking sector will buck the
regional trend, and continue to improve over the coming years as ongoing financial reform efforts by the
government will gain traction.
Page 63
Only Mexico Will Outpace Its Previous Performance

Latin America - Average Loan Growth, % chg
Note: 2015 = BMI estimate, 2016-2020 = BMI forecasts; Source: Respective banking authorities, BMI
Latin America: Asset and loan growth will remain sluggish across the majority of Latin American
economies over the coming years. Colombia and Mexico face a deceleration in these metrics and while
Peru, Chile and Brazil are poised to see a modest rebound in loan growth in year-on-year terms, the pace of
credit expansion will be considerably below that seen during the last decade. Indeed, of the major Latin
American economies, only Mexico will see an acceleration in average loan growth in the coming five years
compared to the last decade. The commodity bust will weigh on economic growth and elevated inflation
will prompt further monetary tightening, raising the cost of capital. A weak external environment will
prompt a moderate deterioration in asset quality, though we see limited systemic risk given strong capital
buffers in most banking sectors. Brazil stands out as facing the most significant risk of asset quality
deterioration.
Page 64
Hungary And Slovenia Still At Risk Of Bad Loans

Europe - Banking Sector Non-Performing Loan (NPL) Ratios, % Of Total Loan Book
Source: Respective Central Banks, IMF, BMI. NB Q1-Q315 Data.
Emerging Europe: Central European (CE) banking sectors will benefit from accommodating macro
backdrops in 2016. An accelerating private consumption-led economic growth story will include an uptick
in credit demand and bank profits in Romania, the Czech Republic, and Slovakia. The loan growth outlook
remains solid in Poland, where we forecast a 10.5% expansion in credit in 2016, despite an increasingly
uncertain political environment. Slovenia and Hungary will miss out on the positive CE banks story. In
Hungary, the outlook remains relatively poor, in spite of the country's strong economic growth outlook,
with high NPLs holding back loan growth. The Slovenian banking sector's recovery will trail behind the
macroeconomic recovery, due to ongoing asset quality issues which have yet to be fully resolved. Poor
macroeconomic backdrops will weigh on the outlook for the Turkish and Russian banking sectors in 2016
and 2017.
Page 65
GCC Slowdown In Early Stages

GCC - Client Loans % chg y-o-y
Source: BMI, respective central banks
Middle East and North Africa: The Gulf Cooperation Council (GCC)'s banking sector is facing the
strongest headwinds since the global financial crisis as a combination of drawdowns in government
deposits, reduction in capital expenditure projects, and the resultant tightening in liquidity take hold.
Overall, we forecast aggregate credit to expand by only 6.0% in 2016, which, while still significant, is well
below the annualised 11.4% recorded between 2011 and 2015. The removal of sanctions on Iran presents
perhaps the most exciting overseas opportunity for regional banks in years, although it will be primarily
limited to the UAE, Oman and Qatar for political reasons.
Page 66
The Downsides Of Cross-Border Activity In Africa

Selected South Africa Banks: Assets By Country, 2013, % of GDP
Source: IMF
Sub-Saharan Africa: A Chinese hard landing would result in bearish domestic fundamentals in South
Africa and Nigeria, which would weigh on the profit margins and deposit growth of South African and
Nigerian banks. Nigerian banks are less sensitive to global conditions than South African banks, but we
would expect them to be affected by the same developments, albeit to a lesser extent. Just as South African
banks are already coping with the risk of a sovereign downgrade to junk before any Chinese hard landing,
the Nigerian banking sector is facing challenges on multiple fronts, having to contend not only with a
slowing economy and a bleak outlook for the oil sector - the primary business for Nigerian banks - but also
unorthodox central bank policies and interference. The recent rise in the cross-border activity of South
African and Nigerian banks within Sub-Saharan Africa implies increased systemic risks for the region.
Page 67
Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only
is the total population of a country a key variable in consumer demand, but an understanding of
the demographic profile is essential to understanding issues ranging from future population trends to
productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2015, the change in the structure of
the population between 2015 and 2050 and the total population between 1990 and 2050. The tables show
indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split
and life expectancy.
Population
(1990-2050)
2,000
1,500
1,000
500
2050f
2045f
2040f
2035f
2030f
2025f
2020f
2015f
2010
2005
2000
1990
India - Population, mn
f = BMI forecast. Source: World Bank, UN, BMI
Page 68
India Population Pyramid

2015 (LHS) & 2015 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Table: Population Headline Indicators (India 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
870,601
1,053,481
1,144,326
1,230,984
1,311,050
1,388,858
1,461,625
na
1.8
1.6
1.4
1.2
1.1
1.0
Population, total, male, '000
450,559
545,690
593,103
638,354
679,548
719,387
756,312
Population, total, female, '000
420,041
507,790
551,222
592,629
631,502
669,471
705,312
Population ratio, male/female
1.07
1.07
1.08
1.08
1.08
1.07
1.07
Population, total, '000

Population, % y-o-y
na = not available; f = BMI forecast. Source: World Bank, UN, BMI
Table: Key Population Ratios (India 1990-2025)
1990
Active population, total, '000
Active population, % of total population
Dependent population, total, '000
Dependent ratio, % of total working age
2000
2005
2010
2015f
2020f
2025f
507,014 641,156 714,483 787,736 859,993 925,489 984,741

58.2
60.9
62.4
64.0
65.6
66.6
67.4
363,586 412,324 429,843 443,247 451,056 463,369 476,883

71.7
64.3
60.2
56.3
52.4
50.1
48.4
Page 69
Key Population Ratios (India 1990-2025) - Continued
1990
Youth population, total, '000
2000
2005
2010
2015f
2020f
2025f
330,215 365,901 375,166 380,303 377,426 372,831 367,793
Youth population, % of total working age

Pensionable population, '000
65.1
57.1
52.5
48.3
43.9
33,371
46,422
54,676
62,943
73,630
6.6
7.2
7.7
8.0
8.6
Pensionable population, % of total working age
40.3
37.3
90,538 109,089
9.8
11.1
Table: Urban/Rural Population & Life Expectancy (India 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
222,412.6
291,466.6
334,543.8
380,743.5
429,329.7
483,086.8
541,342.1
25.5
27.7
29.2
30.9
32.7
34.8
37.0
648,189.1
762,014.5
809,782.5
850,241.0
881,720.8
905,772.1
920,283.1
Rural population, % of total
74.5
72.3
70.8
69.1
67.3
65.2
63.0
Life expectancy at birth, male,

years
57.6
61.8
63.7
65.4
66.9
68.4
69.6
Life expectancy at birth, female,

years
58.3
63.5
65.4
67.7
69.9
71.4
72.8
Life expectancy at birth, average,

years
57.9
62.6
64.5
66.5
68.3
69.8
71.1
Urban population, '000

Urban population, % of total
Rural population, '000
Table: Population By Age Group (India 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
Population, 0-4 yrs, total, '000
121,482
127,648
129,592
128,485
123,711
123,938
122,777
110,874
121,455
125,165
127,619
126,965
122,563
122,989
97,858
116,797
120,409
124,198
126,750
126,329
122,027
87,891
108,767
115,769
119,397
123,347
126,041
125,709
78,255
95,770
107,344
114,298
118,192
122,258
125,067
70,137
85,474
94,267
105,719
112,815
116,925
121,109
61,939
75,866
84,075
92,782
104,214
111,542
115,764
54,266
67,807
74,499
82,607
91,289
102,821
110,228
Page 70
Population By Age Group (India 1990-2025) - Continued
1990
2000
2005
2010
2015f
2020f
2025f
41,686
59,513
66,351
72,947
81,019
89,744
101,272
35,385
51,498
57,835
64,556
71,118
79,179
87,895
31,379
38,652
49,406
55,624
62,295
68,822
76,819
25,944
31,543
36,312
46,627
52,777
59,317
65,742
20,128
26,260
28,619
33,174
42,922
48,836
55,132
14,436
19,629
22,542
24,784
29,038
37,848
43,342
9,534
13,165
15,547
18,039
20,109
23,809
31,308
5,490
7,736
9,328
11,157
13,195
14,921
17,879
2,671
3,859
4,694
5,755
7,111
8,576
9,836
930
1,506
1,886
2,340
3,016
3,827
4,692
261
436
552
704
934
1,242
1,605
41
78
111
142
197
272
368
Population, 100+ yrs, total, '000
10
13
19
27
40
57
Table: Population By Age Group % (India 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
Population, 0-4 yrs, % total
13.95
12.12
11.32
10.44
9.44
8.92
8.40
12.74
11.53
10.94
10.37
9.68
8.82
8.41
11.24
11.09
10.52
10.09
9.67
9.10
8.35
10.10
10.32
10.12
9.70
9.41
9.08
8.60
8.99
9.09
9.38
9.29
9.02
8.80
8.56
8.06
8.11
8.24
8.59
8.61
8.42
8.29
7.11
7.20
7.35
7.54
7.95
8.03
7.92
6.23
6.44
6.51
6.71
6.96
7.40
7.54
4.79
5.65
5.80
5.93
6.18
6.46
6.93
4.06
4.89
5.05
5.24
5.42
5.70
6.01
3.60
3.67
4.32
4.52
4.75
4.96
5.26
2.98
2.99
3.17
3.79
4.03
4.27
4.50
2.31
2.49
2.50
2.69
3.27
3.52
3.77
1.66
1.86
1.97
2.01
2.21
2.73
2.97
1.10
1.25
1.36
1.47
1.53
1.71
2.14
Page 71
Population By Age Group % (India 1990-2025) - Continued
1990
2000
2005
2010
2015f
2020f
2025f
0.63
0.73
0.82
0.91
1.01
1.07
1.22
0.31
0.37
0.41
0.47
0.54
0.62
0.67
0.11
0.14
0.16
0.19
0.23
0.28
0.32
0.03
0.04
0.05
0.06
0.07
0.09
0.11
0.00
0.01
0.01
0.01
0.02
0.02
0.03
Population, 100+ yrs, % total
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Page 72
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry is the use of vector autoregressions, which allow us to forecast a
variable using more than the variable's own history as explanatory information. For example, when
forecasting oil prices, we can include information about oil consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
We mainly use OLS estimators, and, in order to avoid relying on subjective views and encourage the use of
objective views, we use a 'general-to-specific' method. BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account;
Testing the directional movement and magnitude of coefficients;
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); and
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity.
Page 73
Human intervention plays a necessary and desirable role in all of our industry forecasting. Experience,
expertise and knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data,
turning points and seasonal features where a purely mechanical forecasting process would not.
Sector-Specific Methodology
BMI's Commercial Banking Report series is closely integrated with our analysis of country risk,
macroeconomic trends and financial markets. The reports draw heavily on our extensive economic dataset,
which includes up to 550 indicators per country, as well as our in-depth view of each local market. We
collate our commercial banking databank from official sources (including central banks and regulators)
wherever possible, and only fall back on secondary sources where all attempts to secure primary data have
failed. Company data is sourced, in the first instance, from company reports, with central bank, regulator or
trade association data only used as a backup.
The reports focus on total assets, client loans and client deposits.
Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular
country. They do not incorporate the balance sheet of the central bank of the country in question.
Client loans are loans to non-bank clients. They include loans to public sector and state-owned
enterprises. However, they generally do not include loans to governments, government (or nongovernment) bonds held or loans to central banks.
Client deposits are deposits from the non-bank public. They generally include deposits from public sector
and state-owned enterprises. However, they only include government deposits if these are significant.
We take into account capital items and bond portfolios. The former include shareholders funds, and
subordinated debt that may be counted as capital. The latter includes government and non-government
bonds.
In quantifying the collective balance sheets of a particular country, we assume that three equations hold
true:
Total assets = total liabilities and capital;
Total assets = client loans + bond portfolio + other assets;
Total liabilities and capital = capital items + client deposits + other liabilities.
In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and
three can be reconciled with equation one. In practice, other assets and other liabilities are analogous to
inter-bank transactions. In some cases, such transactions are generally with foreign banks.
In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of
the banking landscape, and we do not include them in our figures. The US is the main exception to this.
Page 74
In some cases, total assets and client loans include significant amounts that are owned or that have been lent
to customers in another country. In some cases, client deposits include significant amounts that have been
deposited by residents of another country. Such cross-border business is particularly important in major
financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in
Central and Eastern Europe.
Risk/Reward Index Methodology

BMI's Risk/Reward Index (RRI) provides a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market. The RRI system is divided into two distinct areas:
Rewards: Evaluation of a sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
Industry Rewards. This is an industry-specific category that takes into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors.
Country Rewards. This is a country-specific category, and the score factors in favourable political and
economic conditions for the industry.
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is further broken down into two sub categories:
Industry Risks. This is an industry-specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry, and the relative maturity of a market.
Industry Risks. This is a country-specific category in which political and economic instability, legislation
and overall business environment are evaluated to provide an overall score.
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Index, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
risk/reward index score a weighted average of the total score. Importantly, as most of the countries and
territories evaluated are considered by BMI to be 'emerging markets', our score is revised on a quarterly
basis. This ensures that the score draws on the latest information and data across our broad range of sources,
and the expertise of our analysts.
Page 75
In constructing these index scores, the following indicators have been used. Almost all indicators are
objectively based.
Table: Commercial Banking Risk/Reward Index Indicators
Rationale
Industry Rewards
Estimated total assets, 2015
Indication of overall sector attractiveness. Large markets are considered more

attractive than small ones.
Estimated growth in total assets,

2015-2019
Indication of growth potential. The greater the likely absolute growth in total assets,
the higher the score.
Estimated growth in client loans,

2015-2019
Indication of the scope for expansion in profits through intermediation.
Country Rewards
GDP per capita
A proxy for wealth. High-income states receive better scores than low-income
states.
Active population
Those aged 16-64 in each state, as a % of total population. A high proportion

suggests that the market is comparatively more attractive.
Corporate tax
A measure of the general fiscal drag on profits.
GDP volatility
Standard deviation of growth over seven-year economic cycle. A proxy for

economic stability.
Risks
Industry risks
Regulatory framework and industry
development
Subjective evaluation of de facto/de jure regulations on overall development of the

banking sector.
Regulatory framework and

competitive environment
Subjective evaluation of the impact of the regulatory environment on the

competitive landscape.
Country Risks
Short-term financial risk
Rating from BMI's Country Risk Ratings (CRR), evaluating currency volatility.
Policy continuity
Rating from CRR, evaluating the risk of a sharp change in the broad direction of
government policy.
Legal framework
Rating from CRR, to denote strength of legal institutions in each state. Security of
investment can be a key risk in some emerging markets.
Bureaucracy
Rating from CRR to denote ease of conducting business in the state.
Source: BMI
Page 76
Weighting
Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal
weight. Consequently, the following weights have been adopted:
Table: Weighting Of Indicators
Component
Rewards
Weighting, %
70, of which
Industry Rewards
60
Country Rewards
40
Risks
30, of which
Industry Risks
40
Country Risks
60
Source: BMI
Page 77
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Q2 2016

Published by:BMI Research

India Commercial Banking Report Q2 2016

Part of BMIs Industry Report & Forecasts Series

2016 Business Monitor International Ltd

India Commercial Banking Report Q2 2016

Industry Forecast .............................................................................................................. 17

Commercial Banking Risk/Reward Index ....................................................................... 22

Market Overview ............................................................................................................... 24

Economic Analysis ................................................................................................................................... 27

Competitive Landscape .................................................................................................... 32

Definition Of The Commercial Banking Universe ......................................................................................... 32

Company Profile ................................................................................................................ 36

Business Monitor International Ltd

India Commercial Banking Report Q2 2016

HDFC Bank ........................................................................................................................................... 39

ICICI Bank ............................................................................................................................................. 43

Punjab National Bank .............................................................................................................................. 47

State Bank of India ................................................................................................................................... 51

Regional Overview ............................................................................................................ 55

Global Industry Overview .................................................................................................. 61

Demographic Forecast ..................................................................................................... 68

Business Monitor International Ltd

India Commercial Banking Report Q2 2016

BMI Industry View

November 2013, INRbn

November 2014, INRbn

November 2013, USDbn

November 2014, USDbn

Source: BMI; Central banks; Regulators

Table: Commercial Banking Sector Key Ratios, November 2014

GDP Per Capita, USD

Deposits per capita, USD

Source: BMI; Central banks; Regulators

Table: Annual Growth Rate Projections 2015-2020 (%)

Annual Growth Rate

Source: BMI; Central banks; Regulators

Business Monitor International Ltd

India Commercial Banking Report Q2 2016

Table: Ranking Out Of 75 Countries Reviewed In 2016

Local currency asset growth

Local currency loan growth

Local currency deposit growth

Source: BMI; Central banks; Regulators

Table: Commercial Banking Sector Indicators, 2013-2020

Total assets, INRbn

Total assets, USDbn

Client loans, INRbn

Client loans, USDbn

Client deposits, USDbn

137,675.3 162,456.9 191,699.1

91,519.6 107,993.2 127,432.0

149,786.3 179,743.5 215,692.2

e/f = estimate/forecast. Source: BMI; Central banks; Regulators

Business Monitor International Ltd

India Commercial Banking Report Q2 2016

In macroeconomic terms, India is set to be a global growth outperformer in the

A legacy of the protection of the commercial banking sector, which remains

India's banking industry is progressively being opened up to competition from foreign

Business Monitor International Ltd

India Commercial Banking Report Q2 2016

India Commercial Banking SWOT - Continued

The government's progressive sale of public banks to private sector participants

The development of particular products - such as mortgages - is hampered by