Banking Error! Reference source not found.

04 April 2011

Quarterly Preview 04 April 2011

NII growth
Banking (%)
45
Expect another strong quarter 36
27
18
We expect a strong core operating performance from the banking sector driven
9
by high credit growth and robust margins. NII is likely to increase 28% YoY, 0
supported by the lower base of Q4FY10, particularly for PSU banks. We expect Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E
NIMs to have peaked for most players in Q3FY11; nonetheless, QoQ NIM
FY09 FY10 FY11
compression is likely to be limited, except for banks relying heavily on wholesale
deposits. Growth in pre-provision profit (PPOP) is projected to moderate to 15%
due to lower other income and higher employee expenses. Reported PAT, though, Growth in pre-provisioning profit
is likely to grow faster at 34%, supported by the lower base of State Bank of (%)
45
India, ICICI Bank, Canara Bank and Bank of India. Higher pension liability 36
provisioning on account of upfront provisions required for retired employees is a 27
18
key risk to our PAT estimates. However, we note that this would be one-off.
9
0
Credit growth strong; deposit mobilisation improves: Total advances of
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E
scheduled commercial banks (SCB) are likely to grow by ~5% QoQ and ~22%
YoY in Q4FY11. Deposit mobilisation has picked up during the quarter with total FY09 FY10 FY11
deposits increasing by ~6% QoQ. As a result, the incremental C/D ratio was
comfortable at ~60–65% and the system-wide ratio has declined to ~75%. PAT growth
(%)
NIM compression to be limited: The sharp rise in deposit rates would exert 60
50
pressure on margins, though NIM moderation should be marginal in Q4FY11 as 40
banks continue to benefit from lending rate hikes and faster asset re-pricing. 30
20
However, some players like Axis Bank, Punjab National Bank and Oriental Bank of 10
Commerce could show ~10–20bps compression in NIMs. While overall margins 0

would remain robust in Q4, we expect a gradual trend down on deposit re-pricing. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E

FY09 FY10 FY11

Slippages to remain in line with Q3: Slippages could remain at elevated levels
for some banks (particularly PNB, Union Bank of India), as was witnessed in
Relative valuations
Q3FY11. However, we do not expect any major surprises from our coverage
P/BV (x) P/E (x) RoE (%)
universe. Higher slippages on account of migration to system-based recognition Company Avg
FY12E FY13E FY12E FY13E
of NPLs remain a key risk on asset quality. Increased bond yields may lead to FY11-13
MTM losses as well; however, the quantum is unlikely to be significant as yields Banks
SBI 2.0 1.7 11.5 9.5 18.0
on 10-year G-Sec bonds have risen by ~7bps only.
SBI # 1.6 1.4 9.1 7.5 18.9
Provisions towards pension liability key risk to earnings estimates: As per RBI PNB 1.5 1.3 6.9 5.7 24.3
BOB 1.6 1.3 8.1 6.9 23.2
guidelines issued in February ‘11, PSU banks are required to provide for the
BOI 1.4 1.2 7.3 6.0 20.6
second pension liability related to retired employees in FY11 itself, while other
CBK 1.3 1.1 6.4 5.8 23.9
liabilities (pension and gratuity for existing employees) can be amortised for five DBNK 0.9 0.7 4.9 4.1 21.5
years. Till Q3FY11, PSU banks were amortising all pension liabilities over five UBI 1.3 1.1 6.6 5.7 21.8
years and were providing gratuity in FY11 itself. We are building slightly higher OBC 0.9 0.8 6.3 4.9 18.1
employee expenses in our estimates (compared to Q3FY11). While upfront CRPBK 1.1 0.9 5.6 4.6 21.9
provisions could significantly impact our Q4FY11 PAT numbers (although FY12- ICICIBC 2.1 1.9 18.9 15.1 11.4
FY13 estimates would be revised upward), we note that banks have requested the ICICIBC ## 2.1 1.9 15.1 12.0 14.4
RBI for an extension and are awaiting a final decision on the same. HDFCB 3.7 3.2 21.5 17.0 18.6
AXSB 2.6 2.2 13.6 11.2 20.2
View: We maintain our positive stance on the sector driven by our expectations YESB 2.4 2.0 12.4 9.6 21.4

of stable loan growth and improving asset quality, even as NIMs come under Speciality Finance
HDFC 5.3 4.2 24.9 21.1 22.1
some pressure due to higher funding costs and normalising C/D ratios. Our top
HDFC # 6.0 4.0 17.9 15.1 36.3
picks in the sector are AXSB and Yes Bank amongst private banks. Within PSUs
LICHF 2.3 1.9 10.8 8.6 22.5
our top picks are SBIN and OBC. We also recommend buying into some
DEWH 1.6 1.4 9.1 6.9 20.0
wholesale funded names (NBFCs) as easing liquidity conditions at the margin MGFL 2.3 1.9 11.0 9.1 22.0
bode well for these players—our top picks here are Shriram Transport Finance, SHTF 3.0 2.4 12.3 10.5 27.0
LIC Housing Finance and Manappuram General Finance & Leasing. # Adj. for valuation of subsidiaries

Siddharth Teli Ishank Kumar Nikhil Rungta Religare Capital Markets ranked the No. 1 Brokerage House at the StarMine Awards
(91-22) 6766 3463 (91-22) 6766 3467 (91-22) 6766 3451 for 2010-11 | RCML Research is also available on Bloomberg FTIS <GO> and Thomson
1 First Call
siddharth.teli@religare.in ishank.kumar@religare.in nikhil.rungta@religare.in
 Banking Quarterly Preview 04 April 2011

Fig 1 - RCML Banking Universe: Q4FY11 preview

NII Pre-provision Profit PAT
(Rs mn)
Growth Growth Growth
Q4FY11E Q4FY11E Q4FY11E
YoY (%) QoQ (%) YoY (%) QoQ (%) YoY (%) QoQ (%)
PSU Banks
SBIN 91,234 35.7 0.8 64,875 24.9 (4.1) 29,694 59.0 5.0
PNB 31,857 27.5 (0.5) 23,085 2.6 (1.8) 11,084 (2.3) 1.7
BOB 23,315 33.6 1.7 18,422 19.1 (0.5) 10,555 16.5 (1.2)
BOI 20,124 29.7 1.3 13,636 6.9 (1.8) 6,927 61.9 6.0
CBK 21,742 36.1 2.6 15,842 10.7 4.7 10,082 100.4 (8.8)
DBNK 4,720 44.7 1.2 3,459 23.5 9.3 1,560 13.8 0.5
UNBK 16,376 17.3 1.3 11,872 3.5 (5.9) 6,010 1.3 3.7
CRPBK 8,757 36.9 4.0 7,687 41.0 4.3 3,652 16.9 (4.5)
OBC 9,804 (0.9) (4.8) 7,417 (4.5) (4.2) 3,603 13.7 (11.7)
Private Banks
ICICIBC 24,446 20.1 5.7 25,251 5.3 7.8 14,581 45.0 1.5
HDFCB 28,746 22.3 3.5 21,574 27.3 4.1 10,880 30.1 0.0
AXSB 17,765 21.7 2.5 16,797 21.4 1.3 9,450 23.6 6.0
YESB 3,347 37.1 3.6 3,126 21.4 0.4 1,882 34.4 (1.5)
Total – Banks 302,233 28.3 1.6 233,045 15.5 (0.2) 119,960 34.1 1.0
NBFCs
HDFC 12,421 10.1 20.9 14,476 12.9 17.9 10,458 12.9 17.4
LICHF 3,432 15.2 (2.6) 3,416 19.6 (3.1) 2,421 13.4 13.4
DEWH 1,304 39.3 5.4 860 52.1 6.0 627 50.3 1.6
MGFL 2,590 144.4 11.0 1,280 106.5 14.8 845 108.1 13.3
SHTF 8,794 32.2 3.0 6,394 24.2 0.7 3,396 28.4 12.7
Source: Company, RCML Research

Fig 2 - Strong advances growth to boost earnings

System-wide credit growth strong at (Rs bn) (%)
Bank credit YoY growth (R)
+23% YoY 40,000 35
38,000
36,000 30
34,000 25
32,000
30,000 20
28,000
26,000 15
24,000 10
22,000
20,000 5
May-09

May-10
Mar-09

Mar-10

Mar-11
Sep-08

Sep-09

Sep-10

Dec-10
Nov-08

Nov-09

Nov-10
Jul-09

Jul-10
Jan-09

Jan-10

Source: Bloomberg

2
 Banking Quarterly Preview 04 April 2011

Fig 3 - Deposit mobilization improved in Q4FY11

Deposit mobilization improves in (%) Deposit growth Loan to deposit ratio (R) (%)
Q4FY11 resulting in lower incremental 24 77
C/D ratio 76
22
75
20
74
18 73
16 72
71
14
70
12 69
10 68

Dec-10
Nov-08

Nov-09

Nov-10
Jan-09

May-09

Jan-10

May-10
Mar-09

Mar-10

Mar-11
Sep-08

Sep-09

Sep-10
Jul-09

Jul-10
Source: Bloomberg

Fig 4 - Update on Second pension liability

Banks have started providing for the Second Pension Liability provided
Bank (Rs mn) Liability p.a. Networth (FY11E)
liability till Q3FY11
second pension liability on a
proportionate basis PNB 36,000 7,200 198,351 4,900
BOB 21,000 4,200 169,595 3,100
BOI* 40,000 8,000 150,841 6,500
Canara Bank 22,000 4,400 158,615 3,400
UNBK 24,000 4,800 105,699 3,600
Dena 5,750 1,150 86,089 700
OBC 10,500 2,100 29,096 3,600
Source: Company, RCML Research Note: * Includes gratuity liability

Fig 5 - SBIN has aggressively raised their deposit rates since Q3FY11
Rates effective Rates effetive Rate Revised rate Revised rate Revised rate Change from
Tenor upto Aug 16, from Aug 17, w.e.f. Oct 1, w.e.f. Dec 7, w.e.f. Jan 3, w.e.f. Feb 14, Aug 16, 2010
2010 (%) 2010 (%) 2010 (%) 2010 (%) 2011 (%) 2011 (%) (bps)
7 days to 15 days 3.00 4.00 4.00
16 days to 45 days 2.50 4.00 4.00 4.50 5.00 5.00 250
46 days to 90 days 3.50 4.00 4.00 5.50 5.50 5.50 200
91 days to 180 days 4.75 4.75 5.50 6.00 6.00 6.00 125
181 days to <1 yr 5.25 6.00 6.00 7.25 7.75 7.75 250
1 yr to 554 days 6.00 6.75 7.00 7.75 8.25 8.25 225
555 days 6.00 7.25 7.50 8.50 9.00 9.25 325
556 days to <2 yr 6.00 6.75 7.25 7.75 8.25 8.25 225
2 yr to 999 days 6.50 7.00 7.50 8.25 8.75 8.75 225
1000 days 6.50 7.25 7.75 8.50 9.00 9.25 275
1001 days to <3 yr 6.50 7.00 7.25 8.25 8.75 8.75 225
3 yr to <5 yr 6.50 7.25 7.25 8.25 8.25 8.25 175
5 yr to <8 yr 7.25 7.50 7.50 8.50 8.50 8.50 125
8 yr to <10 yr 7.50 7.75 7.75 8.75 8.75 8.75 125
Source: Company, RCML Research

3
 Banking Quarterly Preview 04 April 2011

Fig 6 - Hike in lending rates to neutralize the impact of higher deposit rates
Q3FY11 Q4FY11
Hike in lending rate and faster re- Increase in Increase in Base Increase in Increase in Base
BPLR Rate BPLR Rate
pricing of assets to help margins in
Q4FY11 State Bank of India 25 bps 10 bps 50 bps 65 bps
Punjab National Bank 75 bps 100 bps 50 bps 50 bps
Bank of Baroda 75 bps 100 bps 50 bps 50 bps
Bank of India 75 bps 100 bps 50 bps 50 bps
Union Bank 50 bps 100 bps 50 bps 50 bps
ICICI Bank 50 bps 25 bps 75 bps 50 bps
Source: RCML Research

Fig 7 - Comparative valuations

EPS growth Average Average
CMP MCAP P/BV (x) P/E (x) CASA Target
(%) RoE (%) RoA (%) Reco
(Rs) (Rs bn) (Rs)
FY12E FY13E FY12E FY13E FY11-13E FY11-13E FY11-13E FY10
PSU Banks
SBIN 2,720 1,727 2.0 1.7 11.5 9.5 25.6 18.0 1.1 47.3 3,500 BUY
SBIN # 2,088 1,326 1.6 1.4 9.1 7.5 26.0 18.9 1.1 47.3 2,867
PNB 1,180 372 1.5 1.3 6.9 5.7 21.8 24.3 1.4 40.8 1,475 BUY
BOB 946 345 1.6 1.3 8.1 6.9 12.5 23.2 1.3 29.6 1,130 BUY
BOI 480 252 1.4 1.2 7.3 6.0 22.9 20.6 1.0 27.8 520 HOLD
CBK 629 279 1.3 1.1 6.4 5.8 6.0 23.9 1.2 29.1 660 HOLD
DBNK 106 31 0.9 0.7 4.9 4.1 11.3 21.5 0.9 36.0 160 BUY
UNBK 344 174 1.3 1.1 6.6 5.7 20.0 21.8 1.1 31.7 410 BUY
OBC 385 96 0.9 0.8 6.3 4.9 13.7 18.1 1.1 25.0 445 BUY
CRPBK 635 91 1.1 0.9 5.6 4.6 19.4 21.9 1.1 31.3 745 BUY
Private Banks
ICICIBC 1,103 1,270 2.1 1.9 18.9 15.1 26.1 11.4 1.4 41.7 1,175 HOLD
ICICIBC # 862 993 2.1 1.9 15.1 12.0 26.7 14.4 1.8 41.7 934
HDFCB 2,334 1,085 3.7 3.2 21.5 17.0 27.5 18.6 1.7 52.0 2,390 HOLD
AXSB 1,408 578 2.6 2.2 13.6 11.2 24.3 20.2 1.7 46.7 1,650 BUY
YESB 312 108 2.4 2.0 12.4 9.6 27.2 21.4 1.4 10.5 380 BUY
Speciality Finance
HDFC 708 1,039 5.3 4.2 24.9 21.1 18.4 22.1 2.8 750 HOLD
HDFC # 476 698 6.0 4.0 17.9 15.1 18.1 36.3 2.8 518
LICHF 233 111 2.3 1.9 10.8 8.6 31.2 22.5 1.8 250 BUY
DEWH 273 29 1.6 1.4 9.1 6.9 34.3 20.0 1.9 370 BUY
SHTF 790 179 3.0 2.4 12.3 10.5 19.3 27.0 4.1 900 BUY
MGFL 131 55 2.3 1.9 11.0 9.1 51.4 22.0 5.1 180 BUY
Source: RCML Research #Adj. for subsidiaries

4
 Banking Quarterly Preview 04 April 2011

Companies
Fig 8 - Axis Bank
Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments

NII 17,765 14,601 21.7 17,331 2.5 Loan book growth likely to remain strong at 27%
YoY
Net revenues 29,434 23,936 23.0 28,808 2.2 Margins could decline from Q3FY11 levels due
to the sharp increase in wholesale rates
PPP 16,797 13,838 21.4 16,585 1.3 Improvement in asset quality is likely to
continue in the Q4FY11 resulting in lower credit
PAT 9,450 7,649 23.6 8,914 6.0
costs

Fig 9 - Bank of Baroda

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 23,315 17,450 33.6 22,923 1.7
NII growth to be supported by 24% YoY growth
Net revenues 30,515 25,118 21.5 29,684 2.8 in advances
PPP 18,422 15,473 19.1 18,512 (0.5) Margins likely to remain at Q3FY11 level
No major surprises expected on asset quality
PAT 10,555 9,063 16.5 10,689 (1.2)

Fig 10 - Bank of India

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 20,124 15,517 29.7 19,869 1.3
Expect advances to grow in line with industry
Net revenues 27,427 22,749 20.6 26,351 4.1
NIMs likely to remain stable
PPP 13,636 12,754 6.9 13,888 (1.8) No major surprises expected on asset quality
PAT 6,927 4,279 61.9 6,532 6.0

Fig 11 - Canara Bank

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 21,742 15,976 36.1 21,192 2.6 Advances to grow in line with industry
Net revenues 27,742 23,077 20.2 26,558 4.5 NII to grow by 3% QoQ as higher reliance on
wholesale deposits could put pressure on NIMs
PPP 15,842 14,305 10.7 15,130 4.7
YoY PAT growth strong due to lower base of
PAT 10,082 5,031 100.4 11,057 (8.8) Q4FY10

Fig 12 - Corporation Bank

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 8,757 6,398 36.9 8,424 4.0 Advances likely to grow by 21% YoY
Sharp increase in wholesale rates could put
Net revenues 11,534 9,124 26.4 11,069 4.2 pressure on NIMs; however, the bank has

PPP 7,687 5,450 41.0 7,369 4.3 aggressively increased its BPLR/base rate
Lower other income and higher operating
PAT 3,652 3,123 16.9 3,824 (4.5) expenses to restrict PAT growth

Fig 13 - Dena Bank

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 4,720 3,261 44.7 4,664 1.2 Business likely to grow at 24% YoY
Net revenues 6,340 5,010 26.6 5,935 6.8 NIMs likely to remain stable
The bank could face some pressure on asset
PPP 3,459 2,801 23.5 3,164 9.3
quality; however, recoveries from written off
PAT 1,560 1,371 13.8 1,552 0.5 accounts to remain strong

5
 Banking Quarterly Preview 04 April 2011

Fig 14 - Dewan Housing Finance

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 1,304 936 39.3 1,237 5.4
Disbursements likely to grow by 44% YoY
Net revenues 4,173 942 342.8 1,244 235.6 Margins to remain stable at ~2.9-3% despite
PBT 860 565 52.1 811 6.0 sharp increase in wholesale rates
Asset quality to remain stable
PAT 627 418 50.3 618 1.6

Fig 15 - HDFC
Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 12,421 11,282 10.1 10,277 20.9
Disbursements and loan book to grow by +20%
Net revenues 15,276 13,397 14.0 13,282 15.0 YoY
PPP 14,476 12,818 12.9 12,279 17.9 Spread to remain at ~2.2%
No surprises excepted on asset quality
PAT 10,458 9,263 12.9 8,909 17.4

Fig 16 - HDFC Bank

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 28,746 23,514 22.3 27,767 3.5 Advances likely to grow at 28%+ YoY (much
ahead of the industry growth of ~22%)
Net revenues 40,734 32,549 25.1 39,045 4.3
Other income growth to remain strong at ~26%
PPP 21,574 16,944 27.3 20,727 4.1 YoY
PAT 10,880 8,366 30.1 10,878 0.0 Asset quality to remain stable

Fig 17 - ICICI Bank

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 24,446 20,349 20.1 23,117 5.7
Advances likely to grow in line with industry
Net revenues 44,522 39,258 13.4 40,605 9.6 NIMs to remain largely stable QoQ

PPP 25,251 23,989 5.3 23,426 7.8 Asset quality stable; Lower credit costs YoY
would be a key driver for profit growth
PAT 14,581 10,056 45.0 14,370 1.5

Fig 18 - LIC Housing Finance

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 3,432 2,980 15.2 3,522 (2.6) Retail disbursements to grow by 35%+ YoY;
Developer segment to witness sharp decline
Net revenues 4,056 3,469 16.9 4,084 (0.7) NIMs to decline by ~30bps to ~2.8%

PPP 3,416 2,856 19.6 3,524 (3.1) Gross NPA to improve from Q3FY11 levels
We are not factoring in provisions on loan
PAT 2,421 2,135 13.4 2,135 13.4
disbursed under dual rate schemes in Q4FY11

Fig 19 - Manappuram General Finance

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
AUM likely to touch Rs 75bn (up ~190% YoY
Net operating income 2,590 1,059 144.4 2,334 11.0
and ~15% QoQ)
PBT 1,280 620 106.5 1,115 14.8 Factoring in 150 bps decline in NIMs due to
sharp rise in wholesale rates and change in
PAT 845 406 108.1 745 13.3 regulation related to priority sector status on
gold loans

6
 Banking Quarterly Preview 04 April 2011

Fig 20 - Oriental Bank of Commerce

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments

NII 9,804 9,894 (0.9) 10,299 (4.8) NII growth to be muted YoY due to compression
in NIMs in H2FY11; Tepid loan growth likely at
Net revenues 12,500 12,548 (0.4) 12,613 (0.9) ~15% YoY
NIMs could decline further by 10bps in Q4FY11
PPP 7,417 7,769 (4.5) 7,739 (4.2) (from 3.1% level in Q3FY11) due to the sharp
rise in wholesale rates
PAT 3,603 3,170 13.7 4,082 (11.7)
Gross NPA to remain within 2% range

Fig 21 - Punjab National Bank

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 31,857 24,980 27.5 32,033 (0.5) Strong NII growth expected driven by 23%+
YoY advances growth
Net revenues 40,533 33,511 21.0 40,605 (0.2)
NIMs to decline by ~20bps QoQ from a peak
PPP 23,085 22,510 2.6 23,499 (1.8) level of 4.13%
Delinquencies to remain at elevated levels,
PAT 11,084 11,350 (2.3) 10,898 1.7
leading to higher provisions

Fig 22 - State Bank of India

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 91,234 67,216 35.7 90,498 0.8 Expect strong NII growth driven by ~21% YoY
advances growth and low base of Q4FY10
Net revenues 128,375 112,302 14.3 123,637 3.8
NIMs to remain largely stable
PPP 64,875 51,941 24.9 67,645 (4.1)
Asset quality likely to improve further; sharp
PAT 29,694 18,672 59.0 28,281 5.0 decline in provisions key driver for PAT growth

Fig 23 - Shriram Transport Finance

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments

Net operating income 8,794 6,653 32.2 8,537 3.0 Disbursements to remain at Q3FY11 levels;
AUM to grow by 23% to Rs 357bn
PPP 6,394 5,149 24.2 6,351 0.7 Higher securitisation during the quarter to help
in maintaining margins
PAT 3,396 2,644 28.4 3,014 12.7
Provisioning expenses at ~0.4% of AUM

Fig 24 - Union Bank of India

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 16,376 13,961 17.3 16,158 1.3
Business to grow in line with industry
Net revenues 20,864 18,887 10.5 21,094 (1.1) Delinquencies to remain at elevated levels;
PPP 11,872 11,475 3.5 12,611 (5.9) however, slippages could come down from
Q3FY11
PAT 6,010 5,935 1.3 5,796 3.7

Fig 25 - Yes Bank

Y/E March (Rs mn) Q4FY11E Q4FY10 % YoY Q3FY11 % QoQ Comments
NII 3,347 2,442 37.1 3,232 3.6
Business growth to remain much above industry
Net revenues 4,957 4,043 22.6 4,848 2.2 level

PPP 3,126 2,576 21.4 3,113 0.4 Asset quality to remain stable, leading to lower
provisions YoY
PAT 1,882 1,400 34.4 1,911 (1.5)

7
 Banking Quarterly Preview 04 April 2011

Important Global Disclosures

This report was produced by a member company of Religare Capital Markets Limited and its affiliates worldwide (“RCM”) excluding Religare Capital
Market Inc and Religare Capital Market (USA) LLC.

Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyzes, that (1) the views
expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation
was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report.

Analysts’ stock ratings are defined as follows:

Recommendation Interpretation
Expected absolute returns (%) over 12
Recommendation
months

Buy More than 15%

Hold Between 15% and –5%

Sell Less than –5%

Recommendation structure changed with effect from March 1, 2009

Expected absolute returns are based on share price at market close unless otherwise stated. Stock recommendations are based on absolute upside
(downside) and have a 12-month horizon. Our target price represents the fair value of the stock based upon the analyst’s discretion. We note that
future price fluctuations could lead to a temporary mismatch between upside/downside for a stock and our recommendation.

Global Rating Distribution

As of 1 April 2011, out of 229 rated stocks in the RCM coverage universe, 156 have BUY ratings, 56 are rated HOLD and 17 are rated SELL. During
the previous quarter, Religare Capital Markets Plc in the UK has published 36 independent research notes, 34 of which contained research
recommendations, none of which related to corporate broking clients of the firm. The 34 recommendations were broken down into 26 buy, 2 sell,
and 6 hold.

RCM’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that
may have a material impact on the research views or opinions stated herein.

RCM's policy is to publish both investment research and marketing communications. Investment research is impartial, independent, clear, fair and
not misleading. Marketing communications cannot be seen as objective and are not prepared in accordance with legal requirements designed to
promote the independence of Investment Research. In some instances, RCM may have, or be seeking, a business relationship with the company
which is the subject of the research. For more information on RCM's Conflict of Interest Policy and its use of Independent and Non-Independent
research please refer to http://www.religarecm.com/

Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors,
including the quality and accuracy of research, client feedback, competitive factors, and RCM’s total revenues, which include revenues from, among
other business units, Equities and Investment Banking.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of
RCM, are not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of RCM, and may not be subject to
FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a
research analyst account.

Important Regional Disclosures

United Kingdom: This material has been prepared by Religare Capital Markets in accordance with the legal requirements for producing investment
research. Notwithstanding anything to the contrary contained herein, the following applies where the publication/communication is distributed in
and/or into the United Kingdom. This publication/communication is only for distribution and/or is only directed at persons ("permitted recipients")
who are (i) persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (the "FPO") having
professional experience in matters relating to investments or high net worth companies, unincorporated associations etc. falling within Article 49 of
the FPO, and (ii) where an unregulated collective investment scheme (an "unregulated CIS") is the subject of the publication/communication, also
persons of a kind to whom the unregulated CIS may lawfully be promoted by a person authorized under the Financial Services and Markets Act 2000
("FSMA") by virtue of Section 238(5) of the FSMA. The investments or services to which this publication/communication relates to are available only
to permitted recipients and persons of any other description should not rely on it. This publication/ communication have been produced to meet the
requirement of the Conduct of Business Sourcebook (COBS) 12 under the FSA Rules, please refer to our Conflict of Interest Policy as mentioned
above in connection with Investment Research.

Singapore: This publication/communication is distributed for and on behalf of RCM in Singapore through Religare Capital Markets (Singapore) Pte
Limited solely to persons who qualify as ”institutional investors”, ”accredited investors” or ”expert investors, as defined in section 4A(1) of the
Securities and Futures Act, Chapter 289 of Singapore (the “SFA”). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations
(the “FAR”), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to Religare Capital Markets (Singapore)
Pte Limited when providing any financial advisory service to an accredited investor, expert investor or “overseas investor” (as defined in regulation

8
 Banking Quarterly Preview 04 April 2011

36 of the FAR). Please contact Religare Capital Markets (Singapore) Pte Limited in respect of any matters arising from, or in connection with this
publication/communication.

Canada: Neither this publication/communication nor any copy hereof may be distributed in Canada or to any individual outside Canada who is a
resident of Canada except in compliance with applicable Canadian securities laws.

India: This publication does not constitute an offer or invitation or solicitation to subscribe for or buy or sell securities. This report is intended for
information purpose only to the intended recipient and should not be reproduced or redistributed to any other person.

Hong Kong: In Hong Kong, this publication/communication must not be sent to anyone other than (1) to “Professional Investors” as defined in the
Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that ordinance; or (2) in other circumstances which would not
result in this publication/communication being a “Prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not
constitute an offer to the public within the meaning of that ordinance.

United States: Neither this publication/communication nor any copy hereof may be taken or distributed into the United States.

Dubai: This publication/communication is intended for professional clients only and is not for onward distribution within the United Arab Emirates.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by law or regulation, this publication/communication is only for
distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Other Research Disclosures

The analyst(s) named in this report may have investments in securities or derivatives of securities of the companies mentioned in this report, and may
make investment decisions that are inconsistent with the recommendations or views expressed in this research.

Disclaimers

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality,
state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would
subject Religare Capital Markets Limited or its affiliates (“RCM”) to any registration or licensing requirement within such jurisdiction(s). All material
presented in this report, unless specifically indicated otherwise, is under copyright to RCM. None of the material, its content, or any copy of such
material or content, may be altered in any way, transmitted to, copied or reproduced (in whole or in part) or redistributed in any form to any other
party, without the prior express written permission of RCM. All trademarks, service marks and logos used in this report are trademarks or service
marks or registered trademarks or service marks of RCM or its affiliates, unless specifically mentioned otherwise.

The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered
as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. RCM may not have taken any steps
to ensure that the securities referred to in this report are suitable for any particular investor. RCM will not treat recipients as its customers by virtue of
their receiving the report. The investments or services contained or referred to in this report may not be suitable for you and it is recommended that
you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes
investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual
circumstances or otherwise constitutes a personal recommendation to you. RCM does not offer advice on the tax consequences of investment and
you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Accordingly, you
are recommended to seek your own legal, tax or other advice as you may find appropriate and should rely solely on your own judgment, review and
analysis in evaluating the information contained in this report.

Subject to any applicable laws and regulations at any given time, RCM, its affiliates or companies or individuals connected with RCM may have used
the information contained herein before publication and may have positions in, may from time to time purchase or sell or have a material interest in
any of the securities mentioned or related securities or may currently or in future have or have had a business or financial relationship with, or may
provide or have provided investment banking, capital markets and/or other services to, the entities referred to herein, their advisors and/or any other
connected parties. As a result, investors should be aware that RCM and/or such individuals may have one or more conflicts of interests that could
affect the objectivity of this report.

RCM believes that the information and opinions in the Important Regional Disclosure Section of this report are accurate and complete and are
provided in good faith. Information and opinions presented in the other sections of the report were obtained or derived from sources that RCM
believes to be reliable, but RCM makes no representations or warranty, express or implied, as to their accuracy or completeness or correctness.
Additional information may be available upon request. RCM accepts no liability for loss arising from the use of the material presented in this report,
except that this exclusion of liability does not apply to the extent that liability arises under specific statutes or regulations applicable to RCM. This
report is not to be relied upon in substitution for the exercise of independent judgment. RCM may have issued, and may in the future issue, a trading
call regarding this security. Trading calls are short term trading opportunities based on market events and catalysts, while stock ratings reflect
investment recommendations based on expected absolute return over a 12-month period as defined in the disclosure section. Because trading calls
and stock ratings reflect different assumptions and analytical methods, trading calls may differ directionally from the stock rating. In addition, RCM
may have issued, or may in the future issue other reports that may be inconsistent with, and may reach different conclusions from, the information
presented in this report. The other reports may reflect different assumptions, views and analytical methods of the analysts’ who prepared them and
RCM is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. RCM is involved in many
businesses that relate to companies mentioned in this report. These businesses include specialized trading, risk arbitrage, market making, and other
proprietary trading.

RCM, its officers, employees, representatives and agents accept no liability whatsoever for any loss or damage whether direct, indirect, consequential
or otherwise howsoever arising (whether in negligence or otherwise) out of or in connection with or from any use of or reliance on the contents of

9
 Banking Quarterly Preview 04 April 2011

and/or omissions from this document. Consequently RCM expressly disclaims any and all liability for, or based on or relating to any such information
contained in or errors or omissions in this report. The data contained in this report is subject to change without any prior notice. RCM reserves its
right to modify this report as maybe required from time to time. RCM is committed to providing independent recommendations to its clients and
would be happy to provide any information in response to any query received from anyone who was an intended recipient. This report is strictly
confidential and is being furnished to you solely for your information. The views expressed in the report reflect the analyst’s personal views about the
securities and issuers that are subject of this report, and that no part of the analyst’s compensation was, is or will be directly or indirectly, related to
the recommendations or views expressed in this report.

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is
made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment of its original date of publication
by RCM and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in
this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or
adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR’s, the values of which are
influenced by currency volatility, effectively assume this risk.

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are
capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic,
financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and
volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own
investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase.

Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large increases
or decreases in their value, causing profits or losses when that investment is realized. Those losses may equal your original investment or may exceed
the amount of initial investment itself. In such circumstances, you may be required to pay more money to support those losses. Income yields from
investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some
investments may not be readily realizable and it may be difficult to sell or realize those investments. Similarly, it may prove difficult to obtain reliable
information about the value, or risks, to which such an investment is exposed.

This report may provide the addresses of, or contain hyperlinks to websites. Except to the extent to which the report refers to website material of
RCM, RCM has not reviewed the linked site and takes no responsibility whatsoever, for the contents therein. Such addresses or hyperlinks (including
addresses or hyperlinks to RCM’s own website material) is provided solely for your convenience and information and the content of the linked site
does not in any way form part of this report. Accessing such website or following such link through this report or RCM’s website shall be at your own
risk.

This report is issued by RCM. This report is distributed in India by Religare Capital Markets Limited, which is a registered Intermediary regulated by
the Securities and Exchange Board of India. This report is being distributed in the United Kingdom and European Economic Area countries by
Religare Capital Markets Plc and Religare Capital Markets (EMEA) Ltd, which are both authorised and regulated in the United Kingdom by the
Financial Services Authority (“FSA”). In Dubai, it is being distributed by Religare Capital Markets Plc (Dubai Branch) which is licensed and regulated
by the Dubai Financial Services Authority (License number F001188). In Singapore, it is being distributed by Religare Capital Markets (Singapore)
Pte Limited which is a holder of a capital markets services licence and an exempt financial adviser in Singapore. In Hong Kong, it is being distributed
by Religare Capital Markets (Hong Kong) Limited, which is licensed and regulated by the Securities and Futures Commission, Hong Kong.

In jurisdictions where RCM is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable
securities legislation in the respective jurisdiction, which may vary from one jurisdiction to another and may require that the trade be made in
accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should
contact a RCM entity in their local jurisdiction unless governing law permits otherwise.

Please note that this report is prepared and issued by RCM for distribution to their market professional and institutional investor customers’.
Recipients who are not market professional or institutional investor customers of RCM should seek the advice of their independent financial advisor
prior to taking any investment decision based on this report or for any necessary explanation of its contents.

Any reference to a third party research material or any other report contained in this report represents the respective research organization's estimates
and views and does not represent the views of RCM and RCM, its officers, employees do not accept any liability or responsibility whatsoever with
respect to its accuracy or correctness and RCM has included such reports or made reference to such reports in good faith.

If this report is being distributed by a financial institution other than RCM, or its affiliates, that financial institution is solely responsible for
distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further
information. This report does not constitute investment advice by RCM to the clients of the distributing financial institution, and neither RCM, its
affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their
use of this report or its content.

10