Bernstein India Financials Best in The Decade Metrics Below Average

28 February 2023
India Financials
India Financials: Best in the decade metrics... below average
valuations
The banks' quarterly results were stellar on nearly all fronts - a healthy increase in margins,
Pranav Gundlapalle
+65 6230 4633 healthy loan growth and continued benign asset quality trends.The banks' earnings are
pranav.gundlapalle@bernstein.com indicative of a favorable operating environment, which is the best seen in the last decade.
Despite this, the banking stocks trade well below their decade's peaks and even below their
Sakshi Rana 10-year average PBx for some. And we see no major risks to our expectations of mid-teens
+91 226 842 1492
sakshi.rana@bernstein.com RoEs and credit growth that could justify this anomaly. The subdued valuations, despite
strong operating metrics make the risk-reward picture for the Indian banks rather compelling.
Stellar set of numbers: The credit growth for most banks was between 15-20% led by
a continued growth in consumer segments even as the corporate credit growth too saw
a healthy improvement. On the margins front too, all banks except HDFCB, saw a healthy
increase in NIM led by a quick pass through of rate hikes. Additionally, with credit costs
remaining benign, most banks' RoAs were near their decade-highs.
Valuations below average levels:The valuations remain subdued despite the strong
operating metrics - Three of the top four private sector banks trade well below their 10-
year average PBx multiples. Public sector banks too are trading well below their past peaks,
partly due to their exposure to the Adani group.
No risk to mid-teens growth and RoE: The sector credit growth remains healthy
(~16% YoY in January) and there are enough “growth buffers” to ensure healthy credit
growth for banks even in case of a modest slowdown in GDP growth and/or change in
rates environment (link). On the margin front too, we don’t see any risk of a sharp margin
compression and pencil in FY24E NIMs that are close to FY23E levels (link).
Updated forecasts: We update our forecasts to reflect marginal changes to our EPS
forecasts for the coverage banks (<3% change for FY23-FY25E EPS forecasts). We
estimate an average EPS CAGR of ~15% for the coverage banks between FY23E- FY25E.
See the Disclosure Appendix of this report for required disclosures, analyst certifications and other www.bernsteinresearch.com
important information.
First Published: 27 Feb 2023 21:30 UTC Completion Date: 27 Feb 2023 15:03 UTC
Pranav Gundlapalle +65 6230 4633 pranav.gundlapalle@bernstein.com 28 February 2023
BERNSTEIN TICKER TABLE

27 Feb TTM Reported EPS P/B (x)
2023
Closing Price Rel.
Ticker Rating Price Target Perf. 2022A 2023E 2024E 2022A 2023E 2024E
AXSB.IN O INR 854.35 1,000.00 28.8% INR 42.48 68.57 74.90 2.3 2.0 1.7
OLD 66.88 73.25
HDFCB.IN O INR 1,592.90 2,200.00 25.5% INR 66.80 81.21 95.51 3.7 3.2 2.7
OLD 81.79 94.84
ICICIBC.IN M INR 856.40 1,000.00 33.4% INR 33.66 44.01 50.46 3.5 3.0 2.6
OLD 42.72 49.11
KMB.IN M INR 1,725.95 2,100.00 9.1% INR 43.25 52.26 59.43 4.8 4.2 3.6
OLD 51.74 60.12
SBIN.IN O INR 527.70 700.00 25.4% INR 35.49 53.40 60.42 1.5 1.4 1.2
OLD 52.42 60.56
ASIAX 1,168.51 104.10 87.11 102.67 11.22 13.41 11.38
ESTIMATE CHANGE IN BOLD O - Outperform, M - Market-Perform, U - Underperform, N - Not Rated
Source: Bloomberg, Bernstein estimates and analysis.
INVESTMENT IMPLICATIONS
We maintain a very positive view on the Indian banking sector and see mid-teens credit growth in 2023 and see limited risk to
the current healthy ROE levels seen in the sector. We rate HDFCB, Axis and SBI Outperform while we rate KMB and ICICI as
Market-Perform.
Also see,
27 Feb 2023 - India Financials: India vs ThEM - How concentrated is the banking sector?
23 Feb 2023 - India Financials Chart of the week: When "more branches = faster deposit growth" stops working
22 Feb 2023 - Indian banks: The tech edge - Where to look and what to track?
14 Feb 2023 - Indian banks: On the edge of a NIM cliff?
7 Feb 2023 - India Financials: The perils of a 80-20 approach to deposit gathering
2 Feb 2023 - HDFC Bank - The investment thesis in 15 charts
30 Jan 2023 - HDFC Bank: The Merger Math (Part 2) - The liability switch and the merged entity
19 Jan 2023 - India Financials: Public Sector Banks — A comeback story?
9 Jan 2023 - India Financials 2023 Outlook: A clear compounding story in these uncertain times
2 Dec 2022 - HDFCB: Why we like the network expansion strategy
25 Nov 2022 - HDFC Bank: The Merger Math (Part 1) - The cost of conversion
21 Nov 2022 - India Financials: Initiation — Stars aligned
INDIA FINANCIALS BERNSTEIN 2

DETAILS
BEST IN THE DECADE METRICS BUT BELOW AVERAGE VALUATIONS

The operating environment for the banks remain the best it has ever been in the last decade. And hence our rather bullish view
on the sector. And the latest quarter's numbers validate that view with both growth and RoAs at near their decade best. (last
section has details on the latest quarterly earnings of the banks)
Decade-best metrics:
• The RoAs for the bank are at the highest level seen during the last decade (Exhibit 1) and significantly higher than the average
level seen since FY13 (Exhibit 2).
• The growth too is above average (Exhibit 3) and in fact close to the decade-highs for the PSBs (Exhibit 4).
• Even comparing across regional peers, the performance of Indian banks stand out (Exhibit 5, Exhibit 6).
But, below-average valuations: But the valuations remain significantly below the peaks (Exhibit 7) and in fact, for the large
PVBs (except ICICI), it remains even lower than the average levels seen during the decade (Exhibit 8).
No risks to growth or profitability: A big risk to growth/profitability could explain this anomaly, but we see no reason to
expect that for the banks.
• Credit growth remains strong (>15%) (Exhibit 9) and a nominal GDP growth of over 10% would be sufficient to ensure it
remains in the mid-teen levels
• We see no sharp drop in Net Interest Margins (NIM) as we see healthy room for increase in loan pricing (Exhibit 10) which
nearly offsets the likely increase in cost of term deposits (Exhibit 11)
• A sharp spike in credit costs is usually the biggest destroyer of earnings - however, the sector has just come out a prolonged
credit cycle and we see no signs of any asset quality woes in the medium term
See link for details on why we see sufficient growth and profitability buffers for the sector (link).
This exceptional operating environment combined with below-average valuations make the risk-reward picture quite
compelling.

EXHIBIT 1: Banks' profitability is at a decade-high... EXHIBIT 2: ... and significantly higher than the average
during the decade
Return on assets (%, annualized)
Return on assets (%, annualized)
3.0%
3.0%
5.0%
2.5%
2.5% 4.5%
2.0% 4.0%
2.0%
3.5%
1.5%
1.5% 3.0%
1.0% 2.5%
1.0%
0.5% 2.0%
0.5% 1.5%
0.0%
1.0%
0.0%
0.5%
0.0%
Q3FY23 Peak (Since Q1FY13) HDFCB
Q3FY23 Average (Since Q1FY13)
Source: Bank reports, Bloomberg, Bernstein analysis

EXHIBIT 3: Loan growth too is higher than the decade EXHIBIT 4: And close to the peak for the PSBs
average, especially for the PSBs
Loan growth (YoY,%)
Loan growth (YoY,%)
35%
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Q3FY23 Peak (Since Q1FY13)

Q3FY23 Average (Since Q1FY13)


EXHIBIT 5: The healthy metrics of the Indian banks is even more apparent when compared with their regional
peers- a 25% CAGR in earnings growth vs. pre-covid level ...
Change in EPS (Dec'19- Dec'22, annualized)

50%
40%
30%
25%
20%
9%
10%
0%
-10%
-20%
-30%
-40%
Source: Bloomberg, Bernstein analysis
EXHIBIT 6: ... with a higher asset growth explaining only a very small part of the outperformance
Change in Assets (Dec'19- Dec'22, annualized)

20%
18%
16% 14%
14%
12%
9%
10%
8%
6%
4%
2%
0%
Source: Bloomberg, Bernstein analysis

EXHIBIT 7: The valuation multiples however remain much EXHIBIT 8: ... and even lower than the average levels for
lower than the peak levels... the top PVBs (except ICICI)
Price to book ratio Price to book ratio

6.0 6.0
5.0 5.0
4.0 4.0
3.0 3.0
2.0 2.0
1.0 1.0
- -
Current Peak (Since Q1FY13) Current Average (Since Q1FY13)
Source: Bloomberg, Company reports, Bernstein analysis Source: Bloomberg, Company reports, Bernstein analysis
EXHIBIT 9: Bank credit growth remains healthy at ~16% - significantly higher than the past levels
30%
India: Growth in bank credit
(%, YoY)
25%
20%
16%
15%
12%
10%
5%
0%
Source: RBI data, Bernstein analysis

EXHIBIT 10: There still remains healthy room for loan EXHIBIT 11: ...which nearly offsets the likely increase in
repricing... cost of deposits
Loan yields expressed as spread over Term deposit pricing expressed as

Repo rate (%) spread over Repo rate(%)
6.0 5.76 2.5
2.12
5.5 2.0
5.0 4.53 126 bps 1.5
0.94 141 bps
4.5
1.0
4.0
0.5
3.5
3.27 0.0
3.0
2.5 -0.5
-0.47
2.0 -1.0
WALR(O) spread over repo rate WADTDR (O) spread over repo rate
Long term average Long term average
WALR(O) - Weighted average lending rate on outstanding loans WADTDR(O) - Weighted average domestic term deposit rate on outstanding
Source: RBI data, Bernstein analysis deposits
Source: RBI data, Bernstein analysis
STELLAR SET OF NUMBERS IN THE QUARTER

The banks' 3QFY23 results were stellar on nearly all fronts — a healthy increase in margins, healthy loan growth and continued
benign asset quality trends:
• Strong credit growth:
• Healthy loan growth for the sector with an average of 19% YoY for the set (Exhibit 12) of top 5 PVBs and PSBs (by market
cap). Kotak stood out with a sharp acceleration in credit growth (23% YoY) led by high yield retail segments.
• Overall, loan growth (YoY) led by high yielding retail segments, especially personal loans and credit cards (on a YoY basis)
even as corporate credit did see a sequential improvement (on a QoQ basis).
• Weak deposit growth, LDR levels at long-term average levels:
• Continuation of tepid growth in deposits — HDFCB the clear out-performer at 20% YoY (Exhibit 13) while most others saw
deposit growth rates closer to the system growth of ~10% YoY.
• Within deposits, CASA deposits growth was slower (~7% YoY for the set) (Exhibit 14), leading to a sharp decline in CASA
ratios.
• Strong credit growth and tepid deposit growth led to a sharp rise in LDR ratios (Exhibit 15), with the LDR for the sector
now back at ~75%, close to the long-term average while the top PVBs LDR is now ~90% for all the top 4 PVBs.
• The surprise positive of the quarter - Sharp spike in NIMs:
• Sharp rise in margins led by faster repricing of loans (linked to EBLR) and slower repricing of deposits (Exhibit 16) as
banks dipped into their excess liquidity.
• Top PVBs (ex-HDFCB) witnessing an average increase of >30 bps QoQ vs. ~14 bps for the top PSBs (Exhibit 17). KMB
and ICICI's NIM stood out at 5.47% and 4.65% respectively — much higher than peers both on absolute terms and in
terms of the YoY/QoQ change.

• Healthy growth in Non-interest income:
• Non-interest income line stopped being a drag (unlike the last few quarters) with healthy contribution from treasury gains
as bond yields softened during the quarter.
• Mixed Opex trends across the sector
• Operating expenditure growth was mixed (Exhibit 18), with a YoY rise for SBI (+6% QoQ, +17% YoY) driven by higher
employee expense, while HDFCB (+27% YoY, +11% QoQ) also saw a healthy rise given the acceleration in branch and
employee count.
• ICICI Bank's opex moderated to 16% YoY (+0.7% QoQ) after 20%+ YoY growth in recent quarters helped by a continued
gradual branch addition (+102 branches QoQ).
• Asset quality trends remain benign:
• Asset quality metrics continued to remain benign (Exhibit 19,Exhibit 20,Exhibit 21) and even improve with both GNPA and
NNPA ratios declining across the board, with PSBs recording large improvements (from higher values).
EXHIBIT 12: Healthy loan growth for the sector with an average of 19% YoY for the set
Loan growth in 3Q23 (%)

25%
23% 23%
22%
20% 20% 19%
20%
18% 18%
16%
15%
15%
10%
5.7% 6.2% 6.5%

3.8% 4.9% 4.0%
5% 4.3% 3.5% 3.5%
1.8%
0%
HDFCB ICICI Axis KMB IIB SBI BoB PNB Canara UBI
YoY QoQ
Source: Company reports, Bernstein analysis

EXHIBIT 13: Continuation of tepid deposit growth but HDFC Bank the clear outperformer at 20% YoY
Deposit growth in 3Q23 (%)

25%
20%
20%
18%
15% 14%
14%
13%
12%
10% 10% 10%
10%
7%
6.0% 5.4%
4.7%
5% 3.6% 2.9% 3.0% 2.6%
1.4% 2.1%
0.6%
0%
YoY QoQ
EXHIBIT 14: Slowdown in deposits led by a moderation in CASA growth
CASA Growth in 3Q23 (%)

16%
14%
14%
12%
12%
10%
10% 8%
8%
8%
6% 6%
6%
4% 3%
2.1% 1.9% 2%
2% 0.8% 1.2%
0.4% 0.2% 0.5% 0.2%
0.4%
0%
-2%
-1.5%
-2.2%
-4%
YoY QoQ

EXHIBIT 15: Strong credit growth and tepid deposit growth have led to a sharp rise in LDR ratios across the board...
LDR change in 3Q23 (pp)

8% 7.3%
6.8%
7%
6% 5.2%
5.1%
5% 4.7%
3.7% 3.9% 3.8%
4% 3.5%
3% 2.6%
2% 1.5% 1.3% 1.3%

0.7% 0.7% 0.6%
1%
0%
-1% -0.3% -0.4% -0.3%
-2% -1.5%
YoY change QoQ change
EXHIBIT 16: Strong NIM prints were witnessed across the banking sector led by faster repricing of loans and slower
repricing of deposits...
NIMs in 3Q23 (%)

6%
5.47%
5% 4.65%
4.30% 4.26% 4.27%
4%
3.50% 3.37%
3.16% 3.21%
3.05%
3%
2%
1%
0%

EXHIBIT 17: ...with top PVBs (ex-HDFCB) seeing an average increase of >30bps sequentially
Change in NIMs (bps)

90 85
80 73
69
70
60
50
40 34 35
30 30
30 24 23 22 21
17 18 19
20 16
10 4 6
3
0 0
0
YoY change QoQ change
EXHIBIT 18: Opex growth saw mixed trends YoY, with ICICI's slowdown ascribed to a gradual branch addition while a
continued focus on branch expansion saw higher Opex for HDFCB
Opex growth in 3Q23 (%)

35%
30%
30%
27%
25%
25% 23%
20% 19%
17% 17%
16%
15%
15%
12%
11%
10%
10% 8%
6% 5% 6%
4% 4%
5% 3%
1%
0%
YoY QoQ

EXHIBIT 19: Asset quality metrics continued to remain benign...
GNPA and NNPA during 3Q23 (%)
12%
9.8%
10%
7.9%
8%
5.9%
6%
4.5%
4% 3.1% 3.3%
3.1%
2.4% 2.1%
1.9% 2.1% 2.0%
2% 1.2%
0.8% 1.0%
0.6% 0.5% 0.4% 0.6%
0.3%
0%
GNPA NNPA
EXHIBIT 20: ...with GNPA and NNPA ratios recording large improvements on a YoY basis...
YoY change in asset quality (bps)

0
-3 -4 -9
-50 -30
-44 -36 -42
-57
-100 -79 -81 -90
-106
-150 -126
-136
-160
-200
-191 -195
-250
-300 -272
-312
-350
-400 -369
GNPA NNPA

EXHIBIT 21: ...as well as sequentially
QoQ change in asset quality (bps)

10
0 0 1
0
-10 -4 -5 -3
-6
-20 -12 -12 -12
-18 -17
-30 -23
-40
-38
-50
-50 -48
-60 -52 -50
-70
-80 -72
-78
-90
GNPA NNPA
EXHIBIT 22: Overall, the healthy numbers during the quarter have led to an improvement in profitability for both
PVBs and PSBs as visible in their ROAs...
RoA (%)
3.0%
2.5%
2.5%
2.2% 2.2% 2.2%
2.0%
2.0% 1.9% 1.9% 1.9%
1.5% 1.3%
1.3%
1.1% 1.1%
1.0% 0.9%
0.7% 0.7% 0.7%
0.5%
0.5% 0.3% 0.4%
0.2%
0.0%
3Q22 3Q23

EXHIBIT 23: ...as well as the ROEs
RoE (%)
25.0%
21.1%
19.3%
20.0% 18.5% 18.8% 18.1% 18.4%
17.6%
15.4% 15.0% 15.2% 14.7%
15.0% 14.2% 14.4%
12.4% 12.4% 12.1%
10.9%
10.0%
7.3% 8.2%
5.0% 3.9%
0.0%
3Q22 3Q23
ESTIMATE CHANGES
We update our models for the latest quarters numbers and make modest changes to our forecacsts for FY23E-FY25E (less
than 3% change to EPS numbers for the period) .
Across banks, the key differences vs. consensus is a significantly higher NIM vs. consensus that is partly offset by higher credit
cost assumptions. Overall difference vs. consensus is -6 - +6%. (Exhibit 24)
EXHIBIT 24: Our difference vs. the consensus is marginal, with higher NIM estimates offset by higher credit cost
estimates
FY23E FY24E FY25E
EPS estimates
BernE Cons.E Delta BernE Cons.E Delta BernE Cons.E Delta
HDFC Bank 81.2 79.4 2.3% 95.5 89.9 6.2% 112.0 107.8 3.9%
ICICI Bank 44.0 44.9 -2.0% 50.5 51.3 -1.7% 57.3 59.2 -3.3%
Axis Bank 68.6 68.7 -0.3% 74.9 74.3 0.8% 87.7 88.8 -1.2%
Kotak Mahindra Bank 52.3 52.1 0.3% 59.4 58.6 1.4% 68.5 67.7 1.3%
State Bank of India 53.4 54.5 -2.1% 60.4 62.9 -4.0% 65.4 69.9 -6.5%
Source: Bloomberg, Bernstein analysis and estimates

APPENDIX - FINANCIAL FORECASTS
EXHIBIT 25: HDFCB Financial forecasts

HDFC Bank Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23E Mar-24E Mar-25E
INR Mn Act. Act. Act. Act. Act. Est. Est. Est.
STANDALONE INCOME STATEMENT
Net interest income 400,949 482,432 561,863 648,796 720,096 882,005 1,054,157 1,247,366
Non-interest income 152,202 176,259 232,611 252,049 295,099 310,302 382,101 453,483
Total income 553,151 658,691 794,474 900,845 1,015,195 1,192,308 1,436,258 1,700,849
Operating expenses (226,904) (261,194) (306,975) (327,226) (374,422) (470,962) (560,141) (663,331)
Pre-provision profits (PPOP) 326,247 397,498 487,498 573,618 640,773 721,346 876,117 1,037,518
Provisons & contingencies (59,275) (75,501) (121,424) (157,029) (150,618) (123,295) (171,297) (210,105)
o/w Provisions on Loans (55,079) (70,425) (98,793) (123,168) (113,772) (123,295) (171,297) (210,105)
PBT 266,972 321,997 366,074 416,590 490,155 598,051 704,821 827,413
Income taxes (92,106) (111,215) (103,498) (105,425) (120,541) (147,076) (173,333) (203,481)
PAT 174,866 210,782 262,576 311,165 369,614 450,976 531,488 623,931
Basic EPS 33.9 39.3 48.0 56.6 66.8 81.2 95.5 112.0
Diluted EPS 33.4 38.9 47.7 56.3 66.3 80.7 94.9 111.3
Dividend / share 13.0 15.0 - 6.5 15.5 15.4 15.3 15.7

Payout ratio 19% 19% 0% 12% 23% 19% 16% 14%
STANDALONE BALANCE SHEET
Total assets 10,639,343 12,445,407 15,305,113 17,468,705 20,685,351 24,571,234 29,335,009 35,036,514
Net loans 6,583,331 8,194,012 9,937,029 11,328,366 13,688,209 16,383,719 19,678,774 23,641,865
Investments 2,422,002 2,905,879 3,918,267 4,437,283 4,555,357 5,335,215 6,320,035 7,487,575
Deposits 7,887,706 9,231,409 11,475,023 13,350,602 15,592,174 18,854,024 22,773,010 27,478,841
Borrowings 1,045,201 987,695 1,417,686 1,255,813 1,750,970 1,919,482 2,121,696 2,364,352
CAPITAL
Shareholder's equity 1,062,950 1,492,063 1,709,860 2,037,208 2,400,929 2,780,021 3,233,770 3,774,211
BVPS 410 548 312 370 433 500 581 677
CET1 ratio 12.2% 14.9% 16.4% 16.9% 16.7% 16.3% 16.0% 15.7%
Tier 1 capital ratio 13.3% 15.8% 17.2% 17.6% 17.9% 17.3% 16.9% 16.4%
Total capital ratio 14.8% 17.1% 18.5% 18.8% 18.9% 18.3% 17.7% 17.2%
CONSOLIDATED DATA
Consol. attributable PAT 185,100 223,324 272,540 318,332 380,528 468,676 552,056 647,860
Consol. Shareholder's equity 1,095,991 1,536,727 1,763,587 2,098,102 2,473,262 2,870,054 3,344,370 3,908,740
-
Consol. Basic EPS 36 42 50 58 69 84 99 116
Consol. Diluted EPS 35 41 49 58 68 84 99 116
Consol. BVPS 422 564 322 381 446 516 601 702
Source: Bloomberg, Company reports, Bernstein analysis and estimates

EXHIBIT 26: ICICI Financial forecasts

ICICI Bank Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23E Mar-24E Mar-25E
INR Mn Act. Act. Act. Act. Act. Est Est Est
STANDALONE INCOME STATEMENT
Net interest income 230,258 270,148 332,671 389,894 474,661 599,206 687,849 805,247
Total income 404,458 415,267 497,157 579,579 659,836 818,127 945,144 1,108,618
Pre-provision profits (PPOP) 247,419 234,377 281,013 363,971 392,503 486,786 567,087 665,171
PBT 74,349 37,765 140,480 201,827 306,089 410,680 472,482 538,318
Income taxes (6,571) (4,135) (61,172) (39,900) (72,694) (104,313) (120,010) (136,733)
PAT 67,778 33,631 79,308 161,927 233,395 306,368 352,471 401,585
Basic EPS 10.6 5.2 12.3 24.0 33.7 44.0 50.5 57.3
Diluted EPS 10.5 5.2 12.1 23.7 33.0 43.1 49.4 56.1
Dividend / share 1.5 1.0 - 2.0 5.0 7.5 7.9 8.3

Payout ratio 3% 19% 0% 9% 15% 17% 16% 15%
STANDALONE BALANCE SHEET
Total assets 8,791,892 9,644,591 10,983,651 12,304,327 14,112,977 16,254,462 19,345,237 22,703,888
Net Loans 5,123,953 5,866,466 6,452,900 7,337,291 8,590,204 10,342,972 12,405,229 14,836,571
Investments 2,029,942 2,077,327 2,495,315 2,812,865 3,102,410 3,322,332 3,902,186 4,626,887
Deposits 5,609,752 6,529,197 7,709,690 9,325,222 10,645,716 12,127,338 14,123,592 16,640,760
Borrowings 1,685,855 1,609,555 1,542,158 915,303 1,072,314 1,097,077 1,202,963 1,319,402
CAPITAL
BVPS 164 168 180 213 245 282 324 373
CET-1 Ratio 14.4% 13.6% 13.4% 16.8% 17.6% 17.0% 16.6% 16.2%
Tier 1 ratio 15.9% 15.1% 14.7% 18.1% 18.4% 17.7% 17.3% 16.8%
CONSOLIDATED DATA
Consol. Basic EPS 12 7 15 27 36 45 52 59

Consol. BVPS 172 177 190 228 262 300 343 394

EXHIBIT 27: Axis Financial forecasts

Axis Bank Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23E Mar-24E Mar-25E
INR in Million Act. Act. Act. Act. Act.
SUMMARY INCOME STATEMENT
Total income 295,848 348,382 407,428 440,773 483,522 605,837 697,388 806,831
PBT 1,216 69,737 49,042 88,058 173,820 281,271 308,481 362,603
Income taxes 1,541 (22,975) (32,770) (22,174) (43,571) (70,318) (77,120) (90,651)
PAT 2,757 46,763 16,272 65,885 130,249 210,953 231,360 271,952
Basic EPS 1.1 18.2 6.0 22.2 42.5 68.6 74.9 87.7
Diluted EPS 1.1 18.1 6.0 22.1 42.4 68.4 74.7 87.5
Dividend / share - 1.0 - - 1.0 10.3 11.2 13.1

Payout ratio 0% 5% 0% 0% 2% 15% 15% 15%
BALANCE SHEET
Total assets 6,913,296 8,009,965 9,151,648 9,961,184 11,751,781 12,544,566 14,644,119 17,005,512
Net Loans 4,396,503 4,947,980 5,714,242 6,237,202 7,076,960 8,300,250 9,737,439 11,312,506
Investments 1,538,761 1,749,693 1,567,343 2,261,196 2,755,972 2,681,976 3,141,553 3,694,338
Deposits 4,536,227 5,484,713 6,401,049 7,073,061 8,217,209 9,367,618 10,824,285 12,567,464
Borrowings 1,407,144 1,380,973 1,362,701 1,247,207 1,670,169 1,764,940 1,865,126 1,971,037
CAPITAL
Shareholder's equity 634,453 666,763 849,478 1,016,030 1,150,255 1,340,842 1,549,171 1,792,412
BVPS 247 259 301 332 375 435 501 577
CET-1 Ratio 11.7% 11.3% 13.3% 15.4% 15.2% 15.2% 14.9% 14.9%
Tier 1 ratio 13.0% 12.5% 14.5% 16.5% 16.3% 16.2% 15.8% 15.7%
CONSOLIDATED DATA
Consol. Shareholder's equity 642,074 678,026 863,404 1,035,937 1,181,099 1,380,932 1,599,442 1,853,600
Consol. Basic EPS 2 20 7 24 46 72 78 91

Consol. BVPS 250 264 306 338 385 448 517 597

EXHIBIT 28: KMB Financial forecasts

KMB Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23E Mar-24E Mar-25E
INR in Million Act. Act. Act. Act. Act.
Total income 135,839 158,630 188,718 203,462 231,723 295,771 348,190 403,029
PBT 62,182 73,858 78,047 88,503 113,661 139,501 158,859 183,331
Income taxes (21,339) (25,205) (18,575) (23,382) (27,886) (35,712) (40,668) (46,933)
Adj. PAT 41,382 48,653 59,472 65,122 85,775 103,788 118,191 136,398
Basic EPS 21.5 25.5 31.1 33.1 43.3 52.3 59.4 68.5
Diluted EPS 21.5 25.5 31.1 33.0 43.2 52.2 59.4 68.5
Dividend / share 0.7 0.8 - 0.9 1.1 1.8 2.0 2.3

Payout ratio 3% 3% 0% 3% 3% 3% 3% 3%
SUMMARY BALANCE SHEET
Total assets 2,649,335 3,121,723 3,602,515 3,834,886 4,294,284 5,201,567 6,152,258 7,268,794
Net loans 1,697,180 2,056,950 2,197,480 2,236,886 2,712,536 3,309,294 3,904,967 4,568,811
Investments 645,623 711,891 750,515 1,050,992 1,005,802 1,242,086 1,488,170 1,803,783
Deposits 1,926,433 2,258,804 2,628,205 2,801,000 3,116,841 3,517,783 4,128,792 4,917,689
Borrowings 201,265 229,665 171,834 147,247 154,719 193,398 241,748 302,185
CAPITAL
Shareholder's equity 374,838 424,005 485,182 632,291 719,878 823,798 942,002 1,077,559
BVPS 197 222 254 319 363 415 473 541
CET1 ratio 17.5% 16.7% 17.1% 21.2% 21.5% 20.6% 19.9% 19.3%
Tier 1 capital ratio 17.6% 16.9% 17.3% 21.4% 21.7% 20.7% 20.0% 19.4%
CONSOLIDATED DATA
Consol. Shareholder's equity 504,860 582,797 650,180 848,364 971,653 1,119,162 1,289,509 1,487,434
Consol. Basic EPS 33 38 45 51 61 74 86 100

Consol. BVPS 265 305 340 428 490 563 648 747

EXHIBIT 29: SBI Financial forecasts

SBI Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23E Mar-24E Mar-25E
INR in Million Act. Act. Act. Act. Act. Est. Est. Est.
Net interest income 748,537 883,489 980,848 1,107,100 1,207,076 1,388,446 1,578,622 1,727,392
Total income 1,140,195 1,251,239 1,433,058 1,542,070 1,612,716 1,734,397 2,045,140 2,264,573
Operating expenses (599,434) (696,877) (751,737) (826,522) (933,975) (953,919) (1,063,473) (1,154,932)
Pre-provision profits (PPOP) 540,761 554,361 681,321 715,548 678,741 780,479 981,667 1,109,641
PBT (155,269) 16,076 250,623 275,417 434,219 640,610 724,787 784,127
Income taxes 89,808 (7,453) (105,747) (71,307) (117,459) (163,996) (185,545) (200,736)
PAT (65,461) 8,623 144,876 204,111 316,761 476,614 539,241 583,390
Basic EPS (7.7) 1.0 16.2 22.9 35.5 53.4 60.4 65.4
Diluted EPS (7.7) 1.0 16.2 22.9 35.5 53.4 60.4 65.4
DPS - - - 4.0 7.1 10.7 12.1 13.1

Payout ratio 0% 0% 0% 17% 20% 20% 20% 20%
BALANCE SHEET
Total assets 34,547,520 36,809,142 39,513,939 45,344,296 49,875,974 55,873,553 62,066,874 69,070,474
Net Loans 19,348,802 21,858,769 23,252,896 24,494,978 27,339,666 31,354,226 35,616,988 40,141,164
Investments 10,609,867 9,670,219 10,469,545 13,517,052 14,814,455 16,206,555 17,564,879 19,147,807
Deposits 27,063,433 29,113,860 32,416,207 36,812,771 40,515,341 44,425,905 48,730,133 53,810,570
Borrowings 2,662,862 3,084,381 2,810,827 3,923,047 4,010,874 4,033,316 4,451,973 4,919,001
CAPITAL
BVPS 246 248 260 284 314 357 405 457
CET-1 Ratio 9.7% 9.6% 9.8% 10.0% 9.9% 10.0% 10.2% 10.2%
Tier 1 ratio 10.4% 10.7% 11.0% 11.4% 11.4% 11.2% 11.3% 11.1%
CONSOLIDATED DATA
Consol. attributable PAT - 45,563 22,996 197,678 224,055 353,739 510,084 578,591 631,221
Consol. Basic EPS - 5 3 22 25 40 57 65 71

Consol. Diluted EPS - 5 3 22 25 40 57 65 71
Consol. BVPS 258 263 281 309 342 389 442 499

APPENDIX - EARNINGS SUMMARIES FOR THE TOP 5 PVBS AND PSBS (BY MARKETCAP)
EXHIBIT 30: Financial summary - HDFC Bank
HDFC Bank Difference vs

INR million 3Q23 2Q23 3Q22 QoQ YoY
Net Interest Income 229,878 210,212 184,435 9% 25%
Non-Interest Income 84,999 75,955 81,836 12% 4%
Fee income 60,526 58,029 50,751 4% 19%
Others 24,473 17,926 31,085 37% -21%
Total Income 314,877 286,167 266,271 10% 18%
Total Non-Interest Expense (124,636) (112,246) (98,511) 11% 27%
Personnel expenses (41,262) (35,238) (31,544) 17% 31%
Other expenses (83,374) (77,007) (66,967) 8% 25%
Operating Income 190,241 173,921 167,760 9% 13%
Provision expense (28,064) (32,401) (29,940) -13% -6%
Profit Before Tax 162,177 141,520 137,820 15% 18%
Net Profit After Tax 122,596 106,057 103,422 16% 19%
EPS 22 19 19 15% 18%
BVPS 480 456 414 5% 16%
Total Assets 22,953,053 22,278,934 19,382,860 3% 18%

Net Loans 15,068,093 14,798,732 12,608,628 2% 20%
Deposits 17,332,040 16,734,080 14,459,181 4% 20%
Current 2,277,450 2,299,510 2,101,950 -1% 8%
Savings 5,352,060 5,297,450 4,710,290 1% 14%
Term 9,702,530 9,137,120 7,646,930 6% 27%
CASA% 44% 45% 47% -1% -3%
NIM (On total assets) 4.10% 4.10% 4.10% 0.00% 0.00%
NIM (On interest earning assets) 4.30% 4.30% 4.30% 0.00% 0.00%
Cost to income ratio 39.6% 39.2% 37.0% 0.4% 2.6%
Credit cost 0.74% 0.87% 0.94% -0.13% -0.20%
NPL% (Gross) 1.2% 1.2% 1.3% 0.0% 0.0%
NPL% (net) 0.3% 0.3% 0.4% 0.0% 0.0%
LDR 87% 88% 87% -1.5% -0.3%
ROA 2.2% 2.0% 2.2% 0.2% 0.0%
CET 1 ratio 16.4% 16.3% 17.1% 0.1% -0.7%
Source: Company reports, Bloomberg, Bernstein analysis

EXHIBIT 31: Financial summary - ICICI Bank
ICICI Bank Difference vs

Non-Interest Income 50,236 50,549 49,871 -1% 1%
Fee income 44,480 44,800 42,910 -1% 4%
Others 5,756 5,749 6,961 0% -17%
Total Income 214,886 198,417 172,231 8% 25%
Other expenses (52,962) (52,728) (45,900) 0% 15%
Provision expense (22,574) (16,445) (20,073) 37% 12%
EPS 12 11 9 10% 34%
BVPS 274 262 235 5% 17%
Total Assets 15,217,460 14,886,740 13,541,960 2% 12%

Net Loans 9,740,475 9,385,628 8,139,920 4% 20%
Deposits 11,220,495 10,900,080 10,174,668 3% 10%
Current 1,456,260 1,453,560 1,460,430 0.2% -0.3%
Savings 3,632,160 3,624,840 3,346,130 0.2% 8.5%
Term 6,132,080 5,821,680 5,368,110 5% 14%
CASA% 45% 45% 45% -0.4% -0.3%
NIM 4.65% 4.31% 3.96% 0.34% 0.69%
Cost to income ratio 38.2% 41.1% 41.1% -2.9% -2.9%
NPL % (gross) 3.1% 3.2% 4.1% -0.1% -1.1%
NPL% (net) 0.6% 0.6% 0.9% -0.1% -0.3%
NPL Coverage % 82% 81% 80% 1.4% 2.1%
ROA 2.2% 2.1% 1.9% 0.1% 0.3%
CET 1 ratio 15.0% 15.6% 15.8% -0.6% -0.8%

EXHIBIT 32: Financial summary - Axis Bank
Axis Bank Difference vs

INR Million 3QFY23 2QFY23 3QFY22 QoQ YoY
Fee income 41,010 38,620 33,440 6% 23%
Others 5,644 792 4,964 613% 14%
Total Income 161,248 143,014 124,929 13% 29%
Other expenses (45,662) (44,186) (43,928) 3% 4%
Provision expense (14,377) (5,498) (13,348) 162% 8%
EPS 19 17 12 9% 60%
BVPS 426 406 361 5% 18%
Total Assets 12,235,089 11,852,725 11,130,655 3% 10%

Net Loans 7,620,755 7,308,748 6,648,656 4% 15%
Deposits 8,481,733 8,100,419 7,716,702 5% 10%
Current 1,263,210 1,223,940 1,167,120 3% 8%
Savings 2,513,920 2,522,440 2,281,660 0% 10%
Term 4,704,600 4,361,690 4,267,922 8% 10%
CASA% 45% 46% 44% -1.0% 1.0%
NIM 4.26% 3.96% 3.53% 0.30% 0.73%
Credit cost 0.65% 0.38% 0.44% 0.3% 0.2%
NPL% (Gross) 2.4% 2.5% 3.2% -0.1% -0.8%
NPL% (net) 0.5% 0.5% 0.9% 0.0% -0.4%
NPL Coverage % 81% 80% 72% 1.0% 9.0%
LDR 90% 90% 86% -0.4% 3.7%
ROA 1.9% 1.8% 1.3% 0.1% 0.6%
CET 1 ratio 15.6% 15.1% 15.3% 0.4% 0.2%

EXHIBIT 33: Financial summary - Kotak Mahindra Bank
Kotak Mahindra Bank Difference vs

Fee income 18,470 17,600 14,960 5% 23%
Others 2,530 1,942 (1,323) 30% -
Total Income 77,529 70,536 56,980 10% 36%
Other expenses (24,253) (20,714) (17,971) 17% 35%
Provision expense (1,488) (1,370) 1,317 9% -
EPS 14 13 11 8% 31%
BVPS 402 388 351 4% 15%
Total Assets 4,647,840 4,419,951 4,181,470 5% 11%

Net Loans 3,107,340 2,940,230 2,529,350 6% 23%
Deposits 3,446,660 3,252,032 3,052,860 6% 13%
Current 636,010 601,620 570,970 6% 11%
Savings 1,199,780 1,224,480 1,258,220 -2% -5%
Term 1,610,870 1,425,930 1,223,670 13% 32%
CASA% 53% 56% 60% -2.9% -6.6%
NIM 5.47% 5.17% 4.62% 0.30% 0.85%
Cost to income ratio 50.3% 49.4% 52.6% 0.9% -2.3%
Credit cost 0.27% 0.26% 0.35% 0.01% -0.08%
NPL% (Gross) 1.9% 2.1% 2.7% -0.2% -0.8%
NPL% (net) 0.4% 0.6% 0.8% -0.1% -0.4%
NPL Coverage % 78% 74% 71% 3.9% 6.3%
LDR 90% 90% 83% -0.3% 7.3%
ROA 2.5% 2.4% 2.0% 0.1% 0.4%
CET 1 ratio 20.7% 21.5% 22.2% -0.8% -1.5%

EXHIBIT 34: Financial summary - IndusInd Bank (not covered)
IndusInd Bank Difference vs

Interest Income 94,574 87,080 77,375 9% 22%
Interest Expense 49,621 44,060 39,439 13% 26%
Fee income 19,410 18,720 15,190 4% 28%
Others 1,355 1,388 3,579 -2% -62%
Total Income 65,718 63,129 56,705 4% 16%
Other expenses (20,921) (20,585) (18,453) 2% 13%
Provision expense (10,647) (11,411) (16,542) -7% -36%
EPS 25 23 15 10% 69%
Total Assets 4,444,851 4,265,752 3,905,635 4% 14%

Net Loans 2,727,540 2,601,288 2,285,830 5% 19%
Deposits 3,252,780 3,159,205 2,844,840 3% 14%
Current 500,070 441,570 332,790 13% 50%
Savings 863,720 893,680 866,150 -3% 0%
CASA 1,363,790 1,335,250 1,198,940 2% 14%
Term 1,888,990 1,823,955 1,645,900 4% 15%
CASA% 41.9% 42.3% 42.0% -0.3% -0.1%
NIM 4.27% 4.24% 4.10% 0.03% 0.17%
NPL% (Gross) 2.1% 2.1% 2.5% 0.0% -0.4%
NPL% (net) 0.6% 0.6% 0.7% 0.0% -0.1%
NPL Coverage % 71% 72% 72% -1.0% -1.0%
LDR 84% 82% 80% 1.5% 3.5%
ROA 1.9% 1.8% 1.4% 0.1% 0.5%
CET 1 ratio 16% 16% 15% 0.0% 0.9%

EXHIBIT 35: Financial summary - State Bank of India
State Bank of India Difference vs

Interest Income 866,160 798,600 696,781 8% 24%
Fee income 59,280 59,420 57,470 0% 3%
Others 55,397 29,323 29,261 89% 89%
Total Income 495,364 440,583 393,608 12% 26%
Other expenses (95,604) (100,703) (83,677) -5% 14%
Provision expense (57,606) (30,387) (69,740) 90% -17%
EPS 16 15 9 7% 68%
BVPS 360 342 310 5% 16%
Total Assets 53,241,229 51,998,020 48,218,690 2% 10%

Net Loans 31,335,650 29,512,875 26,646,020 6% 18%
Deposits 42,135,571 41,902,549 38,477,940 0.6% 10%
Current 2,277,100 2,325,770 2,271,820 -2% 0%
Savings 15,729,670 15,651,740 14,735,060 0% 7%
Term 22,474,720 22,302,600 20,178,230 1% 11%
CASA% 44% 45% 46% -0.2% -1.3%
NIM 3.50% 3.32% 3.15% 0.18% 0.35%
Credit cost 0.21% 0.28% 0.49% -0.07% -0.28%
NPL % (gross) 3.1% 3.5% 4.5% -0.4% -1.4%
NPL% (net) 0.8% 0.8% 1.3% 0.0% -0.6%
NPL Coverage % 76% 78% 71% -1.8% 4.9%
LDR 74% 70% 69% 3.9% 5.1%
ROA 1.1% 1.0% 0.7% 0.0% 0.4%
CET 1 ratio 9.3% 9.5% 9.4% -0.3% -0.1%

EXHIBIT 36: Financial summary - Bank of Baroda (not covered)
Bank of Baroda Difference vs

Interest Income 235,401 212,542 179,630 11% 31%
Fee income 15,390 15,150 14,070 2% 9%
Others 20,130 3,100 11,123 549% 81%
Total Income 143,703 119,995 110,713 20% 30%
Other expenses (27,911) (27,859) (24,853) 0% 12%
Provision expense (24,039) (16,275) (25,070) 48% -4%
EPS 7 6 4 16% 75%
BVPS 177 171 156 4% 14%
Total Assets 13,927,672 13,363,803 11,970,537 4% 16%

Net Loans 8,906,823 8,365,914 7,321,638 6% 22%
Deposits 11,495,070 10,901,720 9,780,343 5% 18%
Current 651,920 648,730 652,600 0% 0%
Savings 3,526,200 3,452,780 3,229,090 2% 9%
CASA 4,178,120 4,101,510 3,881,690 2% 8%
Term 5,859,250 5,488,160 4,883,860 7% 20%
CASA% (Domestic) 42% 43% 44% -1.1% -2.7%
NIM (global) 3.37% 3.33% 3.13% 0.04% 0.24%
Credit cost 0.37% 0.79% 2.33% -0.42% -1.96%
NPL% (Gross) 4.5% 5.3% 7.3% -0.8% -2.7%
NPL% (net) 1.0% 1.2% 2.3% -0.2% -1.3%
NPL Coverage % 92% 92% 86% 0.6% 6.4%
LDR 77% 77% 75% 0.7% 2.6%
ROA 1.1% 1.0% 0.7% 0.1% 0.4%
CET 1 ratio 10.8% 11.0% 11.3% -0.1% -0.5%

EXHIBIT 37: Financial summary - Punjab National Bank (Not covered)
PNB Difference vs
Interest Income 223,844 201,540 193,254 11% 16%
Interest expense 132,051 118,833 115,222 11% 15%
Fee income 13,310 13,070 12,240 2% 9%
Others 20,070 15,410 14,766 30% 36%
Total Income 125,173 111,187 105,038 13% 19%
Other expenses (23,414) (23,182) (21,168) 1% 11%
Provision expense (47,133) (49,064) (33,536) -4% 41%
Profit Before Tax 10,026 6,616 17,228 52% -42%
Net Profit After Tax 6,289 4,113 11,268 53% -44%
EPS 0.57 0.37 1.02 54% -44%
BVPS 90 90 88 1% 2%
Total Assets 14,017,967 13,762,579 13,048,490 2% 7%

Net Loans 8,004,121 7,734,028 6,928,075 3% 16%
Deposits 12,103,589 11,935,010 11,273,169 1% 7%
Current 645,890 727,410 715,640 -11% -10%
Savings 4,519,450 4,517,070 4,343,940 0% 4%
CASA 5,165,340 5,244,480 5,059,580 -2% 2%
Term 6,938,250 6,690,530 6,213,590 4% 12%
CASA% 44% 45% 46% -1.2% -1.9%
NIM(global) 3.16% 3.00% 2.93% 0.16% 0.23%
Credit cost 1.87% 1.76% 1.97% 0.11% -0.10%
NPL% (Gross) 9.8% 10.5% 12.9% -0.7% -3.1%
NPL% (net) 3.3% 3.8% 4.9% -0.5% -1.6%
NPL Coverage % 85% 84% 82% 1.2% 3.3%
LDR 66% 65% 61% 1.3% 4.7%
ROA 0.2% 0.1% 0.3% 0.1% -0.2%
CET 1 ratio 10.8% 10.9% 11.0% 0.0% -0.2%

EXHIBIT 38: Financial summary - Canara Bank (Not covered)
Canara Bank Difference vs

Interest Income 222,314 201,069 177,006 11% 26%
Non-Interest Income 39,860 48,250 36,120 -17% 10%
Fee income 16,060 17,260 14,210 -7% 13%
Others 23,800 30,990 21,910 -23% 9%
Total Income 125,860 122,588 105,570 3% 19%
Other expenses (21,528) (22,341) (17,817) -4% 21%
EPS 16 14 8 14% 92%
BVPS 400 389 360 3% 11%
Total Assets
Net Loans 8,164,137 7,885,015 6,921,677 4% 18%
Deposits 11,634,702 11,339,640 10,433,507 3% 12%
Current
Savings
CASA (domestic) 3,514,900 3,594,600 3,420,350 -2% 3%
Term (domestic) 7,282,100 6,970,590 6,466,240 4% 13%
CASA% (domestic) 33% 34% 35% -1.5% -2.1%
NIM 3.05% 2.86% 2.83% 0.19% 0.22%
Credit cost 1.21% 1.31% 1.75% -0.10% -0.54%
NPL% (Gross) 5.9% 6.4% 7.8% -0.5% -1.9%
NPL% (net) 2.0% 2.2% 2.9% -0.2% -0.9%
NPL Coverage % 86% 85% 83% 1.0% 3.1%
LDR 70% 70% 66% 0.6% 3.8%
ROA 0.9% 0.8% 0.5% 0.1% 0.4%
CET 1 ratio 11.5% 11.1% 10.1% 0.3% 1.3%

EXHIBIT 39: Financial summary - Union Bank of India (not covered)
Union Bank of India Difference vs

Interest Income 208,829 196,817 169,297 6% 23%
Fee income 17,100 16,020 13,160 7% 30%
Others 15,608 16,740 12,081 -7% 29%
Total Income 118,989 115,810 96,985 3% 23%
Other expenses (24,315) (22,580) (22,248) 8% 9%
EPS 3 3 2 21% 106%
BVPS 112 108 103 3% 8%
Total Assets 12,366,541 12,047,450 10,957,330 3% 13%

Net Loans 7,564,404 7,274,920 6,168,127 4% 23%
Deposits 10,650,271 10,432,651 9,374,545 2% 14%
Current 671,840 654,120 596,450 3% 13%
Savings 3,087,970 3,062,850 2,871,090 1% 8%
CASA 3,759,810 3,716,970 3,467,540 1% 8%
Term 6,890,461 6,715,681 5,907,005 3% 17%
CASA% 35% 36% 37% -0.3% -1.7%
NIM 3.2% 3.2% 3.0% 0.06% 0.21%
Credit cost 1.24% 1.50% 1.40% -0.26% -0.16%
NPL% (Gross) 7.9% 8.5% 11.6% -0.5% -3.7%
NPL% (net) 2.1% 2.6% 4.1% -0.5% -2.0%
NPL Coverage % 89% 87% 83% 1.9% 5.7%
LDR 71% 70% 66% 1.3% 5.2%
ROA 0.7% 0.6% 0.4% 0.1% 0.3%
CET 1 ratio 10.7% 10.7% 10.2% 0.0% 0.5%

DISCLOSURE APPENDIX
I. REQUIRED DISCLOSURES
Autonomous Research US is a unit within Sanford C. Bernstein & Co., LLC , a broker-dealer registered with the U.S. Securities
and Exchange Commission and a member of the Financial Industry Regulatory Authority (www.finra.org) and the Securities
Investor Protection Corporation (see www.sipc.org). When this report contains an analysis of debt securities, such report is
intended for institutional investors and is not subject to all the independence and disclosure standards applicable to debt
research for retail investors under the FINRA rules.
An associate contributing to this report holds a position in HDFC Bank Ltd.

VALUATION METHODOLOGY
India Financials
India is a growth market and investors generally seek growth-based returns in India. We believe all lenders in India trade on
what the market believes to be the sustainable earnings growth momentum. Lenders that have sustained cross-cycle earnings
growth despite sector asset quality concerns trade at a premium. On the other hand, lenders that have been inconsistent in
earnings growth get penalized by the market until they build investor confidence again. We value our coverage on a target P/
B multiple (using the Gordon growth framework) based on one-year forward book value and a PBX multiple that is calibrated
by trading history, our expectation of Sustainable RoE and long-term growth. We use a one-year forward book value based on
average of FY23E and FY24E book value to arrive at 1H24E end target price. We believe the market can be brutal with growth
stocks if the growth story shows any structural weakness and thus, we constantly stress-test for structural growth weakness
across our industry and company investment thesis.
Axis Bank Ltd
See Valuation Methodology for India Financials.
HDFC Bank Ltd
ICICI Bank Ltd
Kotak Mahindra Bank Ltd
State Bank of India
RISKS
India Financials
Key risks to our sector thesis
+ Rising rates and price competition on the liability side puts pressure on margins
+ Banks counter net interest margin pressures by going up the risk curve sharply, boosting earnings in the near term but being
exposed to asset quality risks
+ Tighter global and local monetary policy leads to an economic slowdown in India

Axis Bank Ltd
Downside risks
+ Trends of margins improvement reverse
+ Poor execution of Citi acquisiton
+ Operating costs don't remain under control as an investment in digital initiatives and new branches outpace the benefits
therefrom
HDFC Bank Ltd
Downside risks to our target price
+ Asset quality on unsecured portfolio and post-merger developer finance portfolio deteriorates more than expected
+ Leadership change across verticals plays out adversely hurting growth and profitability outlook
ICICI Bank Ltd
Upside risks:
+ The bank manages to create a significant and sustainable gap vs. peers on growth and/or profitability
+ Retail growth is driven by compromising on risk-adjusted yields
+ Sharp increase in opex as bank catches up on network expansion
Kotak Mahindra Bank Ltd
Upside risks:
+ A sharp pickup in deposit growth rates, through an acquisition or otherwise
+ KMB is unable to scale its loan book per guidance and market expectations
+ KMB faces margin pressures as liability growth is lower than the required level to meet the asset growth guidance
+ Key man risk from an impending change in top leadership
State Bank of India
+ SBI witnesses higher than expected stress and elevated credit costs especially in the rapidly growing retail loan segment
+ SBI starts to lose significant market share across customer segments
+ SBI is unable to control employee costs and other operating expenses
RATINGS DEFINITIONS, BENCHMARKS AND DISTRIBUTION
Bernstein brand
The Bernstein brand rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500
for stocks listed on the U.S. and Canadian exchanges, versus the Bloomberg Europe Developed Markets Large & Mid Cap

Price Return Index (EDM) for stocks listed on the European exchanges (except for Russian companies), versus the Bloomberg
Emerging Markets Large & Mid Cap Price Return Index (EM) for Russian companies and stocks listed on emerging markets
exchanges outside of the Asia Pacific region, versus the Bloomberg Japan Large & Mid Cap Price Return Index USD (JP) for
stocks listed on the Japanese exchanges, and versus the Bloomberg Asia ex-Japan Large & Mid Cap Price Return Index (ASIAX)
for stocks listed on the Asian (ex-Japan) exchanges -unless otherwise specified.
The Bernstein brand has three categories of ratings:
• Outperform: Stock will outpace the market index by more than 15 pp
• Market-Perform: Stock will perform in line with the market index to within +/-15 pp
• Underperform: Stock will trail the performance of the market index by more than 15 pp
Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.
Autonomous brand
The Autonomous brand rates stocks as indicated below. As our benchmarks we use the SX7P and SXFP index for European
banks, the SXIP for European insurers, the S&P 500 and S&P Financials for US banks coverage, S5LIFE for US Insurance, the
SPSIINS for US Non-Life Insurers coverage, and IBOV for Brazil and H-FIN index for China banks and insurers. Ratings are
stated relative to the sector (not the market).
The Autonomous brand has three categories of ratings:
• Outperform (OP): Stock will outpace the relevant index by more than 10 pp
• Neutral (N): Stock will perform in line with the relevant index to within +/-10 pp
• Underperform (UP): Stock will trail the performance of the relevant index by more than 10 pp
• Coverage Suspended (CS) applies when coverage of a company under the Autonomous research brand has been
suspended. Ratings and price targets are suspended temporarily. Previously issued ratings and price targets are no longer
current and should therefore not be relied upon.
Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.
Those denoted as ‘Feature’ (e.g., Feature Outperform FOP, Feature Under Outperform FUP) are our core ideas. Not Rated (NR)
is applied to companies that are not under formal coverage.
For both brands, recommendations are based on a 12-month time horizon.
DISTRIBUTION OF RATINGS/INVESTMENT BANKING SERVICES

Rating Market Abuse Regulation (MAR) and Count Percent Count* Percent*
FINRA Rule 2241 classification
Outperform BUY 381 49.74% 0 0.00%
Market-Perform (Bernstein Brand)

HOLD 252 32.90% 1 0.40%
Neutral (Autonomous Brand)
Underperform SELL 127 16.58% 0 0.00%
Not Rated (Bernstein Brand)

NOT RATED 6 0.78% 0 0.00%
Coverage Suspended (Autonomous Brand)
* These figures represent the number and percentage of companies in each category to whom Bernstein and Autonomous
provided investment banking services.
As of Feb 27 2023. All figures are updated quarterly and represent the cumulative ratings over the previous 12 months.

PRICE CHARTS/ RATINGS AND PRICE TARGET HISTORY
Axis Bank Ltd (AXSB.IN) Rating History for Bernstein as of 02/24/2023

M:INR430.00 M:INR530.00 M:INR810.00 I:O:INR1,000.00
04/02/2020 10/28/2020 07/27/2021 11/21/2022
INR1,100
INR1,000
INR900
INR800
INR700
INR600
INR500
INR400
INR300
Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22 Jul 22 Oct 22 Jan 23
Closing Price Price Target
Outperform (O); Market-Perform (M); Underperform (U); Not rated (N)
HDFC Bank Ltd (HDFCB.IN) Rating History for Bernstein as of 02/24/2023

U:INR750.00 M:INR960.00 O:INR1,350.00 O:INR1,890.00 I:O:INR2,200.00
03/19/2020 07/14/2020 10/08/2020 08/30/2021 11/21/2022
INR2,500
INR2,000
INR1,500
INR1,000
INR500
ICICI Bank Ltd (ICICIBC.IN) Rating History for Bernstein as of 02/24/2023

M:INR360.00 O:INR430.00 O:INR610.00 O:INR790.00 I:M:INR1,000.00
04/02/2020 07/14/2020 12/07/2020 07/14/2021 11/21/2022
INR1,200
INR1,000
INR800
INR600
INR400
INR200

Kotak Mahindra Bank Ltd (KMB.IN) Rating History for Bernstein as of 02/24/2023
O:INR1,190.00 O:INR1,540.00 O:INR1,970.00 I:M:INR2,100.00
04/02/2020 10/26/2020 05/19/2022 11/21/2022
INR2,400
INR2,200
INR2,000
INR1,800
INR1,600
INR1,400
INR1,200
INR1,000
State Bank of India (SBIN.IN) Rating History for Bernstein as of 02/24/2023

O:INR660.00 I:O:INR700.00
05/19/2022 11/21/2022
INR800
INR700
INR600
INR500
INR400
INR300
INR200
INR100
CONFLICTS OF INTEREST
Bernstein provided non-investment banking-securities related services and received compensation for such services during the
past twelve months for the following clients: Axis Bank Ltd, HDFC Bank Ltd, ICICI Bank Ltd and Kotak Mahindra Bank Ltd.
OTHER MATTERS
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Bernstein India Financials Best in The Decade Metrics Below Average

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Bernstein India Financials Best in The Decade Metrics Below Average

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28 February 2023

BERNSTEIN TICKER TABLE

14 Feb 2023 - Indian banks: On the edge of a NIM cliff?

2 Feb 2023 - HDFC Bank - The investment thesis in 15 charts

19 Jan 2023 - India Financials: Public Sector Banks — A comeback story?

2 Dec 2022 - HDFCB: Why we like the network expansion strategy

21 Nov 2022 - India Financials: Initiation — Stars aligned

INDIA FINANCIALS BERNSTEIN 2

BEST IN THE DECADE METRICS BUT BELOW AVERAGE VALUATIONS

INDIA FINANCIALS BERNSTEIN 3

Source: Bank reports, Bloomberg, Bernstein analysis

Q3FY23 Peak (Since Q1FY13)

Source: Bank reports, Bloomberg, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 4

Change in EPS (Dec'19- Dec'22, annualized)

Source: Bloomberg, Bernstein analysis

Change in Assets (Dec'19- Dec'22, annualized)

Source: Bloomberg, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 5

Price to book ratio Price to book ratio

Current Peak (Since Q1FY13) Current Average (Since Q1FY13)

Source: RBI data, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 6

Loan yields expressed as spread over Term deposit pricing expressed as

STELLAR SET OF NUMBERS IN THE QUARTER

• Strong credit growth:

• Weak deposit growth, LDR levels at long-term average levels:

• The surprise positive of the quarter - Sharp spike in NIMs:

INDIA FINANCIALS BERNSTEIN 7

• Healthy growth in Non-interest income:

• Mixed Opex trends across the sector

• Asset quality trends remain benign:

Loan growth in 3Q23 (%)

5.7% 6.2% 6.5%

Source: Company reports, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 8

Deposit growth in 3Q23 (%)

Source: Company reports, Bernstein analysis

EXHIBIT 14: Slowdown in deposits led by a moderation in CASA growth

CASA Growth in 3Q23 (%)

Source: Company reports, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 9

LDR change in 3Q23 (pp)

2% 1.5% 1.3% 1.3%

YoY change QoQ change

Source: Company reports, Bernstein analysis

NIMs in 3Q23 (%)

Source: Company reports, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 10

Change in NIMs (bps)

YoY change QoQ change

Source: Company reports, Bernstein analysis

Opex growth in 3Q23 (%)

Source: Company reports, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 11

EXHIBIT 19: Asset quality metrics continued to remain benign...

GNPA and NNPA during 3Q23 (%)

Source: Company reports, Bernstein analysis

YoY change in asset quality (bps)

Source: Company reports, Bernstein analysis

INDIA FINANCIALS BERNSTEIN 12

EXHIBIT 21: ...as well as sequentially

QoQ change in asset quality (bps)