Banks Dec08 Antique

December 18, 2008 Strictly confidential
Indian Banks - Bank on them!

NPA concerns overblown
¦ Non-Performing Assets will rise! Our estimates show that Gross NPAs will reach
to 4.7% of the total loans in FY10 from the current level of 2.3% and will
peak at 5.0% in FY11.
¦ Indian banks have all that it takes to withstand this crisis situation. Structural
changes in terms of NPA management will help banks in effectively managing
huge NPA accretion.
¦ Efficiency, Profitability, Growth and Asset Quality - Indian banks have shown
tremendous strength and improvement in all these respects. They will continue
the good show.
¦ Our report highlights the key structural aspects that will support the above.
¦ These are definitely testing times for everyone. But the banks that we
cover in this report are ‘men’ in business, not boys! They will withstand the
turmoil! Bank on them!
Ravi Sankar
+91 22 4031 3429
ravi.sankar@antiquelimited.com
Banking Sector
How much can NPAs rise to?

At the end of FY08, gross advances of Indian banks stood at INR25tn, gross NPAs at INR564bn
and net NPAs at INR247bn. While the gross NPA ratio was 2.3%, the net NPA ratio stood at 1.0%
of total advances. The current economic slowdown, coupled with the impact of global recessionary
trends on liquidity, has raised concerns of rising NPAs in the system.
Gross NPAs will jump to We conducted extensive discussions with various participants in the banking industry (top PSU
4.7% in FY10 from current
and private banks, a premier rating agency, financial experts, a leading asset reconstruction
levels and they will peak
company) on the level of NPAs that they expect, assuming that there is no change in the global
at 5.0% of total advances economic environment until the end of 1HFY10. Collating all the available information on the
in FY11 – double from the
probable future increase in the level of NPAs, our analysis shows that gross NPAs will jump to
current levels! 4.7% in FY10 from current levels and they will peak at 5.0% of total advances in FY11. We expect
that the NPA cycle will then show a decreasing trend, once the global scenario becomes favourable
to the Indian industry. This estimate has been arrived considering a slower GDP growth and,
consequently, a slower credit growth. The estimate considers severe deterioration of asset quality
across all major segments of the borrowing classes. Our specific bank valuations have also
considered high NPA accretions for future periods. The chart and the table below highlight the
above details.
NPA trend - Will peak in FY11

2500 Incremental GNPA: 50% 8.0%
in FY09, 100% in FY10
and 25% in FY11. 7.0%
2000
6.0%
Assumptions for bank
1500 5.0%
credit growth in FY09 and
4.0%
FY10 are 22% and 18%,
1000 3.0%
respectively, assuming the
GDP to slowdown to 7% in 2.0%
500
FY09 and 6% in FY10. 1.0%
0 0.0%
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
GNPA (INR bn) GNPA ratio (RHS) NNPA ratio (RHS)

Source: IBA, Capitaline, Antique Research
Our assumptions of bank credit growth for FY09 and FY10 are 22% and 18%, respectively, assuming
the GDP to slowdown to 7% and 6% in FY09 and FY10, respectively.
Gross NPAs, gross advances - Estimated changes in the next 3 years

Details FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
Gross Advances (INR bn) 7,394 8,539 11,503 15,167 19,812 24,770 30,220 35,659 42,078
Growth in gross advances 15% 35% 32% 31% 25% 22% 18% 18%
All Banks GNPA (INR bn) 673 627 588 511 505 564 847 1,693 2,117
Change in GNPA -7% -6% -13% -1% 12% 50% 100% 25%
All Banks NNPA (INR bn) 319 253 216 185 203 247 433 931 1,163
Change in NNPA -21% -15% -14% 9% 22% 75% 115% 25%
GNPA Ratio 7.3% 5.1% 3.4% 2.5% 2.3% 2.8% 4.7% 5.0%
NNPA Ratio 3.0% 1.9% 1.2% 1.0% 1.0% 1.4% 2.6% 2.8%
Antique Stock Broking Limited Banking Sector 2

Banking Sector
Why do we feel that markets’ expectation of a huge rise in NPAs from

current levels may be unreasonable?
¦ Bad loans are not concentrated in any single segment. The chart below shows the
distribution of gross NPAs of Indian banks as at the end of FY08. Non-concentration of low-
quality loans in any single borrowing segment will reduce the overall impact of the economic
slowdown, as segments like agriculture, among some others, would not add to the pain on
account of their non-dependence on the current economic slowdown.
Gross NPAs in banking system - FY08
Other priority Agriculture

24% 18%
Public Sector
1%
Small Scale
Industries
12% Non-priority sector
45%
Source: Antique, RBI
¦ The corporate sector of India has improved its financial soundness over the past few
years (industry segment borrows 40% of total loans). The debt-equity ratio of Indian companies
has fallen to less than 0.5 levels from highs of 1.2 times observed during the mid-1990s. Also,
the profitability of companies has substantially improved as is evident from the chart below,
which shows the growth in shareholders’ equity (capital + reserves) of BSE-500 companies.
These factors provide cushion to lenders on two fronts: one, borrower’s quality is good
(improved), and the other, there are sufficient reserves with the borrower to tide over the
slowdown pain for a while.
Networth growth - BSE-500 companies

35%
30%
25%
20%
15%
10%
5%
0%
2001 2002 2003 2004 2005 2006 2007 2008 1HFY09
Source: Antique, Capitaline
¦ Speedy legal/quasi-legal recourse in the form of Debt Recovery Tribunals, Lok Adalats,
Corporate Debt Restructuring (CDR) mechanism and One-time Settlements have yielded
positive results both in terms of time taken to recover the amount lent and also the success
rate. Under the CDR mechanism, cases involving INR830bn have been resolved that comprises
165 corporate accounts. Only 31 cases referred to the CDR failed.

Banking Sector
¦ Securitisation of sticky assets that was made easier for banks by the promulgation of
SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002) also provides a great impetus to the recovery procedures adopted
by banks. Balance sheets of banks would be much cleaner when they dispose of bad loans
to a securitisation company.
Loans totalling INR9.8bn and INR17.4bn have been sold in FY07 and FY08, respectively, to
ARCIL, the biggest asset securitisation company in India. The entry of ARCIL into the retail
loan segment, a segment that is currently experiencing high default rates, will benefit Indian
banks.
¦ CIBIL (Credit Information Bureau of India Ltd) was established in 2000, with SBI and
HDFC holding 40% stakes each, and Dun & Bradstreet and TransUnion holding 10% each of
the balance. The credit information bureau is a repository of information, which contains the
credit history of commercial and consumer borrowers. Member banks/institutions exchange
customer credit appraisal-related data, and thus accounts with a poor credit record are identified
for proper action. Currently, most banks are members of CIBIL.
Current shareholding of CIBIL
GE Strategic Invst Stan' Chart'

3% 5%
SBI
10% Central Bank of India
5%
BOB ICICI Bank
5% 10%
Trans Union Intl Citicrop Finance

10% 5%
Union Bank of India

5%
Dun & Bradstreet
10% PNB
5%
BOI HDFC
5% 10%
HSBC Sundaram Finance
5% IOB 2%
5%
Source: Antique, CIBIL
¦ Besides the above factors, we believe that the RBI will be proactive in modifying the
NPA-recognition norms, provisioning norms that will enable a wider window for banks to
deal with the NPA issue. Even though these measures might ‘cover’ bad quality loans for a
certain period of time, they support the idea to provide recovery time for borrowers to achieve
financial health helping banks, at the same time, to provide less to such accounts in the form
of NPAs.
¦ All these reasons, together with certain other parameters that we have explained in the following
paragraphs, make us believe that NPAs will not zoom up to such levels that could pose a
threat to the solvency of any banks, or even profitability for that matter! NPAs will rise, but
they will not go up to unreasonable levels.

Banking Sector
Given below is a chart depicting future GNPA levels that we have considered for banks covered in
this report. NPAs will show the maximum impact in FY10, though problems in the real economy
began to appear from the beginning of 2HFY09. This is due to the fact that NPA-recognition norms
prescribe a 90-day period before assigning a mandatory 'non-performing' tag to the asset head.
More details on other fundamentals relating to these banks are discussed in the ensuing paragraphs.
Gross NPA levels for select banks in the next 3 years
6.0
5.0
4.0
% 3.0
2.0
1.0
0.0
Axis Bank HDFC Bank ICICI Bank PNB SBI
FY2007 FY2008 FY2009 FY2010 FY2011
Source: Antique
In this context, we would like to revisit certain historical trends and developments that Indian
banking system has seen over the last decade and how banks collectively faced different situations.
What caused such high NPAs in the system until 1995?
Some key reasons for huge NPAs until mid-1990s are as follows:
¦ Absence of competition: The entire banking sector was state-owned; there was complete
absence of any kind of competition from the private sector.
¦ Lack of focus and control: The government-controlled operations of banks resulted in

favouritism in terms of lending, besides lack of focus on quality of lending. Managements of
banks lacked any control on operations of their banks, while directors largely were influenced
by the will of power-circles.
¦ Collateral-based lending and a dormant legal recourse system: Collateral was considered
king. Under the name of collateral, large sums of loans were disbursed, and in the absence of
an active legal recovery system, loan repayment and quality considerations took a back seat.
¦ Corruption and bureaucracy: Political interference and lack of supervision increased

corruption and red-tapism in the banking system. This resulted in complete dilution of credit
quality and control procedures.
¦ Inadequacy of capital and tools relating to asset quality monitoring: Banks suffered
from shortage of capital funds to pursue any meaningful investments in quality control, loan
monitoring, etc. This inadequacy of funds, together with the absence of independent
management, led to low focus on asset quality tracking and taking corrective actions.

Banking Sector
The situation changed after 1993, when the Reserve Bank of India (RBI) with the government's
support, came up with several decisions on managing Indian banks that had a salutary impact,
and the future never looked so much in control henceforth.
Post-1995 - Incredible improvement in loan quality
NPAs fall even when IIP falls!
18 40
16 35
14
30
12
10 25
% 8 20 %
6
15
4
2 10
0 5
FY97 FY98 FY99 FY2000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08
GNPA ratio NNPA ratio Credit Grow th (RHS) IIP grow th
GDP growth - US, UK and India
14%
12%
10%
IIP growth falls. GDP
8%
growth falls. So do NPAs!
6%
4%
2%
0%
Jun-96
-2% Sep-97 Dec-98 Mar-00 Jun-01 Sep-02 Dec-03 Mar-05 Jun-06 Sep-07
-4%
India USA UK
Source: RBI, IBA, Antique Research
The above picture is self-explanatory. Over the period of time, Indian commercial banks have
shown tremendous improvement in terms of quality of credit. NPAs, both at gross and net levels,
as a percentage of advances, have fallen consistently. The gross NPA/Advances ratio has fallen
from 16% in FY97 to less than 2.5% in FY08. Banks displayed great control over credit quality, as
even in times of falling IIP and GDP growth, they continued to show fewer NPAs. This is a very
impressive indicator that highlights the fact that Indian banking has shown substantial improvement
in terms of asset quality management even in adverse macro-economic conditions. FY99, FY01
and FY02 saw considerable fall in industrial production from the then existing levels. However, this
did not lead to any increase in bank NPAs. On the contrary, banks improved NPA ratios considerably
through the exercise of strong asset quality monitoring programmes. The current environment is
again indicating a decline in GDP, and IIP growth rates as slowdown hits demand and consumption
across all major sectors. However, we strongly believe that managements of top Indian banks
have put 'NPA Management and Control' as one of their top priorities, and that even though there
would be a jump in NPAs as a proportion of total assets, the banking sector has the ability to
withstand this jump and still emerge as a strong performer in these extremely difficult times.
Banking Sector
What changed the scenario of NPAs after 1995? Some can recur!
Some of the key factors that contributed to the fall in NPAs in the Indian banking
¦ Introduction of competition: The RBI opened up gates for the private sector participation in
the Indian banking industry. HDFC, the principal mortgage lender, got the first approval to start
a private bank in the reform-driven era. HDFC Bank was given permission to carry on commercial
banking operations. Many new private banks and foreign banks were allowed later, which
brought in the much-required competition in the Indian banking industry.
¦ Guidelines on NPAs, income recognition, capital adequacy: One of the key reasons for
such a drastic fall in system NPAs was the introduction of asset and capital quality guidelines.
These norms, introduced on the basis of the Narasimhan Committee report in 1993, had a
revolutionary impact on the way banks managed and controlled their asset book.
¦ Separation of control: Bank managements were given a free hand to run their businesses
as the Ministry of Finance and the RBI moved away from controlling positions to supervising
and regulating positions. This enabled boards of Indian banks to take uninfluenced calls as to
lending and asset control.
¦ Improvement of the legal recourse mechanism: This is another significant step. Through
Debt Recovery Tribunal (DRT), Lok Adalat mechanism for small loans, and One-Time Settlement
(OTS) mechanism for stressed loans in 1999, the central bank ensured that there is a quick
clean-up of sticky assets, so as to enable banks to start functioning with a clean slate. The
legal recourse for amounts lent has been an important contributor to asset quality improvement.
¦ Capital infusion: Public banks were allowed to bring down the government holding to 51%,
thereby enabling flow of fresh money for much-needed banks and also roping in investment
interest from market participants. Board of directors now became more independent, and a
mixed lot of individuals brought in experience from various segments of the financial world.
¦ Establishment of CIBIL: Credit Information Bureau of India Ltd was established in 2000. This
institution started to maintain a database of borrowers and their credit history. This served as
a very effective tool for loan sanctioning and asset quality maintenance. Banks use the database
to ensure credit does not fall in the hands of a borrower, with a bad credit record.
¦ Asset Reconstruction Company: ARCs were permitted to operate from 2002; these
institutions helped the removal of bank's focus on bad assets by acquiring their bad loans,
thereby strengthening their balance sheets.
¦ Corporate Debt Restructuring, SICA: The CDR mechanism, sick industries revival enactments
enabled addressing issues of troubled borrowers through effective hand-holding and bank
support. This prevented further slippage of asset quality.
¦ Exposure limits (sector-wise and borrower-wise): The RBI put in place strict exposure
limits for banks with respect to sensitive sectors like real estate and capital markets. In
addition, limits on amounts a bank can lend to a specific borrower, or a borrower group helped
in non-concentration of funds as loans in a few hands, thereby diversifying the risk of default.
¦ Risk management tools: The RBI ensured that banks have effective risk measurement,
management and control systems in place, so as to avoid credit shocks. Asset liability
management (ALM), value at risk (VAR), control on off-balance sheet exposures, credit risk
weightages, etc. are few concepts that enabled banks to effectively control NPAs.

Banking Sector
In this context of a highly improved, dynamic and competitive domestic banking environment, we
expect that Indian banks will exercise adequate caution in terms of the quality of their loan-books.
In addition, some of the steps (underlined) can be effectively used again by RBI and the government,
if the condition of NPAs worsens.
Have Indian banks achieved the best asset quality levels?

In terms of global comparisons (table below), the performance of Indian banks over the years has
surely been exemplary, and with regard to further scope for improvement, there are many countries
where GNPA/advances ratio is much below levels at which Indian banks are currently positioned.
This shows there is further scope for quality improvements for banks in India.
Gross NPA/Advances ratio - India vs others

% FY02 FY03 FY04 FY05 FY06 FY07 FY08
India 10.4 8.8 7.2 5.2 3.1 2.4 2.3
Brazil 4.5 4.1 2.9 3.5 3.5 3.0 2.9
Russia 5.6 5.0 3.8 3.2 2.6 2.5 2.4
China 26.0 20.4 12.8 9.8 7.5 6.6 NA
Malaysia 15.9 13.9 11.7 9.6 8.5 6.6 NA
Singapore 7.7 6.7 5.0 3.8 2.8 1.8 NA
Korea 2.4 2.6 1.9 1.2 0.8 0.7 0.8
Japan 7.2 5.2 2.9 1.8 1.5 1.5 1.4
UK 2.6 2.5 1.9 1.0 0.9 0.9 NA
US 1.4 1.1 0.8 0.7 0.8 1.4 1.7
Efficiency and return parameters - Room for betterment?
Operating expenses/Total assets ratio
3.10
2.90
2.70
2.50
% 2.30
2.10
1.90
1.70
1.50
FY96 FY98 FY2000 FY02 FY04 FY06 FY08
Source: RBI, IBA, Antique Research
As can be observed from the above chart, Indian banks have kept their operating expenses under
check. From around 3% levels during 1996 and 1997, operating expenses/assets ratio has come
down to 1.8% levels by the end of FY2008. Though this is a good indicator reflecting the efficiency
of Indian banks, it is still higher as compared with banks in other countries such as China,
Malaysia, Korea and Thailand where the ratio is below 1.5%. In addition, one reason that might
have contributed positively to Indian banks is the fact that over the past 3-4 years there has been
a rapid increase in bank loans, and hence, the balance sheet size of banks. The higher base (as
advances and total assets) might have helped in the ratio falling to low levels.

Banking Sector
The return on assets ratio comparison table above shows that most other banks earn better
returns as compared with their Indian peers. Considering the fact that the loan quality is improving
and expenses are under control, Indian banks identified the need to improve the profitability.
Focus on fee income that is less sensitive to interest rate fluctuations (unlike NIMs and treasury
income) has been defined as one key area besides expenses control that Indian banks would
strive for in the future to improve the return generated over assets. Providing various value-added
financial services under one umbrella has also been aimed at to improve the bottom-line.
Banks of China and India Return on assets - India vs others

have lower ROA compared
% FY02 FY03 FY04 FY05 FY06 FY07 FY08
to other two BRIC nations. India 0.8 1.0 1.1 0.9 0.6 0.9 1.0
Brazil 2.1 2.0 2.2 2.9 2.7 2.9 2.8
Russia 2.6 2.6 2.9 3.2 3.2 3.0 0.7
China 0.1 0.3 0.5 0.6 0.7 1.0 NA
Malaysia 1.3 1.3 1.4 1.4 1.3 1.5 NA
Singapore 0.8 1.0 1.2 1.2 1.4 1.4 NA
Korea 0.6 0.2 0.9 1.3 1.1 1.1 0.9
Japan -0.7 -0.7 0.2 0.5 0.4 0.2 0.3
UK 0.4 0.6 0.7 0.8 0.5 0.4 NA
US 1.3 1.4 1.3 1.3 1.3 0.8 0.6
From the above paragraphs, it can be inferred that though Indian banking has shown tremendous
improvement over the years in terms of asset quality and efficiency, the comparison with global
peers in terms of these aspects and return on assets shows that there is still ample scope for
improvement.
Indian Banking - Internal dynamics - Changed circumstances

In terms of the domestic scenario, as shown in the chart below, bank credit in FY08 has been
growing at a slower pace than that observed over the past 4 years. The central bank tried to
ensure that the economy does not get overheated by raising the 'repo rate' regularly. Rates were
slashed from the period starting October 2008 to support liquidity in the domestic market that had
become extremely scarce due to global credit crisis. The average 3-year credit growth steadily
rose to 29% during 2005-08 from 14% levels observed between 1996 and 1999. Though the RBI's
target credit growth is in the vicinity of 20% for FY09, yearly credit growth as of November 2008
remained at 26%, above the level targeted by the central bank.
Future credit growth for Credit growth:

Indian banks is not an
14% 42%
issue as other sources of 13%
37%
funds to industry viz 12%
11% 32%
Capital Issues, ADR/GDR,
10% 27%
ECB etc dry up. More than 9%
8% 22%
30% of funds came from
7% 17%
such sources in FY07 and
6%
FY08. 12%
5%
4% 7%
Apr-96 Apr-98 Apr-00 Apr-02 Apr-04 Apr-06 Apr-08
Repo rate Credit Growth (RHS) 3-year avg Credit Growth (RHS)
Source: RBI, Antique Research

Banking Sector
In addition to the objective of slowing or moderating the pace of credit growth, the RBI had to
control the sudden spike in domestic inflation that rose to levels not seen at least for more than a
decade. Inflation shot up to above 12% during July 2008 due to a hike in fuel prices and increase
in commodity and food prices. However, inflation started to cool off from mid-September 2008, as
global crude and commodity prices crashed due to recession worries. Prices of primary articles,
representing food and agriculture products, still remain firm, but the overall inflation has fallen to
9% levels in November 2008. The chart below indicates how inflation, indicated by the wholesale
price index (WPI), shot up from around 4% levels in FY97 to 12% by 1HFY09.
Inflation no longer a Inflation (WPI)

concern! Even liquidity is
14
not a concern! Concern is
12
asset quality! Bank stocks
will become lead 10
indicators of recovery. 8
% 6
0
Apr-96 Oct-98 Apr-01 Oct-03 Apr-06 Oct-08
Source: Office of Economic Advisor, Antique
The impact of increasing inflation, rising interest rates (repo rate) and slowing credit growth on
Indian banks was seen in increasing cost of funds, increasing pressure on the asset quality and
squeezing of margins. The movement of BSE Bankex, the share-price index of banks, as shown
in the below chart, reflects the impact of all the above factors. An inverse correlation between
Inflation and the Bankex movement is clearly observed until September 2008, when global credit
crisis started to pull down prices of all bank stocks even when inflation cooled off significantly.
Today, the situation is vastly different! Inflation has colled off to 8% and high credit growth does not
pose a threat to RBI anytime soon!
Inflation and Bankex

14000 14
13
12000 12
11
10000 10
9 %
8000 8
7
6000 6
5
4000 4
3
2000 2
1
0 0
Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08
Bankex WPI - Inflation (RHS)
Source: Antique

Banking Sector
Credit composition - Diversified

In terms of composition of credit, the table below shows that Indian banks have exposed themselves
to a well-diversified portfolio containing agriculture, industry, and personal credit and services
segments. This 'lack of concentration' on one single segment acts as a good insulator against
slowdown trends in any particular segment.
Diversification – The key Gross bank credit deployment

factor that will be rewarded Segment % %
in times of uncertainty.
1 Agriculture and Allied Activities 11%
Indian banking stands on 2 Industry (Small, Med and Large) 40%
this principle! in which:
a Small Scale Industries 14%
3 Personal Loans 24%
in which:
a Housing 49%
b Advances against Fixed Deposits 8%
c Credit Cards 5%
d Education 4%
e Consumer Durables 1%
4 Services 25%
in which:
a Trade 23%
b Non-Banking Financial Companies 14%
c Real Estate Loans 12%
d Transport 7%
e Professional & Other Services 6%
TOTAL 100%
Source: RBI, Antique
In addition, the table below shows how the industry segment, the single largest section of gross
bank credit, is spread into exposures in various sub-industries, without undue overtones of any
single sub-industry. It can be also observed that infrastructure, construction and fuels segments
received increased credit over the years, indicating a clear-cut emphasis on core economic
development. This strategic approach of credit flow directed to key sectors will provide great
support for India as an economy to develop faster and in the right direction.
Bank credit deployment (%) – Industry segment

Sector FY97 FY98 FY99 FY2000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 Aug-08
Infrastructure NA 2.0 3.3 3.6 5.0 6.5 8.9 11.9 15.5 20.5 20.7 22.5
Metals 12.2 13.0 13.5 12.6 11.8 11.6 12.4 11.0 11.1 12.0 12.1 12.3
Textiles 13.2 13.1 13.0 12.8 12.0 11.3 10.7 10.9 10.3 10.6 11.3 10.4
Chemicals 11.1 11.3 11.1 11.8 11.0 11.3 10.8 9.8 9.2 8.8 8.0 7.5
Transport equip 3.0 3.4 2.8 2.0 2.0 1.9 1.9 1.7 2.8 3.4 3.0 3.6
Construction 1.8 1.6 1.4 1.4 1.5 1.7 1.7 1.9 2.0 2.4 2.8 3.3
Gems & Jewels 2.2 2.2 2.3 2.7 3.0 2.8 2.5 2.9 3.3 3.7 3.4 2.9
Petrol & fuels 2.4 3.8 3.1 4.5 5.3 4.9 5.0 3.9 3.6 4.6 5.1 6.7

Banking Sector
There is a reason why Market is diversified as well - Everything not in one basket!
private banks are
The table below explains another diversification that exists in the Indian banking system. There is
rewarded with higher
no concentration of advances or deposits in any single bank or bank-group. It also reflects that
valuations! Other banks public sector banks and foreign banks did not increase their shares over time as much as the
have realised this. newer set (private banks) did. This table clearly puts private banks on the top slot for continuously
improving their market shares.
Banks - Market share (%) - Deposits and advances

Fiscal year: FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
Deposits
Public sector banks 52 51 51 51 50 51 51
BOB 4.7 4.4 4.3 4.7 4.6
BOI 4.6 4.3 4.3 4.5 4.5
Canara 5.5 5.3 5.4 5.3 4.6
PNB 5.6 5.6 5.5 5.2 5.0
SBI & Associates 29 29 28 27 25 24 23
SBI 20 20 18 16 16
Private banks 14 15 16 17 20 20 20
Old private banks 7 7 7 7 6 5 5
Federal Bank 0.9 0.8 0.8 0.8 0.8
J&K Bank 1.2 1.2 1.1 0.9 0.9
New private banks 7 8 9 10 14 15 15
Axis Bank 1.3 1.7 1.9 2.2 2.6
HDFC Bank 2.0 2.0 2.6 2.6 3.0
ICICI Bank 4.4 5.4 7.6 8.6 7.4
Foreign banks 5 5 5 5 5 5 6
Citi 1.3 1.2 1.3 1.4 1.4
HSBC 1.0 0.9 1.2 1.3 1.3
Stan Chart 1.3 1.2 1.3 1.3 1.1
Total 100 100 100 100 100 100 100
Advances
Public sector banks 49 48 48 50 49 49 49
BOB 4.2 3.8 4.0 4.2 4.3
BOI 5.4 4.8 4.3 4.3 4.6
Canara 5.6 5.2 5.2 5.0 4.3
PNB 5.5 5.2 4.9 4.9 4.8
SBI & Associates 25 26 26 25 25 24 24
SBI 19 18 17 17 17
Private banks 18 19 19 19 20 21 21
Old private banks 7 7 7 6 5 5 5
Federal Bank 0.9 0.9 0.8 0.8 0.8
J&K Bank 1.1 1.1 1.0 0.9 0.8
New private banks 11 12 12 13 15 16 16
Axis Bank 1.1 1.4 1.5 1.9 2.4
HDFC Bank 2.1 2.2 2.3 2.4 2.6
ICICI Bank 7.6 7.9 9.6 9.9 9.1
Foreign banks 8 7 7 6 6 6 6
Citi 1.8 1.6 1.6 1.7 1.5
HSBC 1.1 1.1 1.1 1.2 1.2
Stan Chart’ 1.9 1.7 1.6 1.5 1.3
Total 100 100 100 100 100 100 100
Antique Stock Broking Limited Source: IBA, Antique Research

Banking Sector 12
Banking Sector
GDP and credit growth

An analysis of the relationship between GDP growth, credit growth and deposit growth, using data
as of the last 20 years, gives the following results.
A B B/A C C/A D D/A E E/A

Year GDP Deposit Demand Time Credit
grwth (%) grwth (%) Dep growth (%) Dep growth (%) growth (%)
FY1989 10.2 22.4 2.2 27.2 2.7 21.4 2.1 23.9 2.3
FY1990 6.1 20.6 3.4 32.3 5.3 18.1 2.9 21.5 3.5
FY1991 5.3 11.0 2.1 (0.7) (0.1) 13.8 2.6 10.3 1.9
The year 1992 is very FY1992 1.4 23.4 16.3 47.3 33.1 18.4 12.9 13.1 9.1
important to India not just FY1993 5.4 15.7 2.9 1.3 0.2 19.5 3.6 17.7 3.3
FY1994 5.7 16.2 2.9 17.3 3.0 16.0 2.8 7.4 1.3
because of a securities
FY1995 6.4 21.1 3.3 32.3 5.1 18.6 2.9 27.2 4.3
scandal. It was also a year
FY1996 7.3 12.1 1.7 4.8 0.7 14.0 1.9 20.1 2.8
when severe drought hit
FY1997 8.0 16.5 2.1 12.4 1.6 17.5 2.2 9.6 1.2
many states of the country FY1998 4.3 18.4 4.3 13.1 3.1 19.5 4.5 16.4 3.8
and broke the agricultural FY1999 6.7 19.3 2.9 14.5 2.2 20.3 3.0 13.8 2.1
sector. FY2000 6.4 19.3 3.0 23.7 3.7 18.4 2.9 23.1 3.6
FY2001 4.4 16.2 3.7 9.7 2.2 17.5 4.0 16.6 3.8
FY2002 5.8 11.5 2.0 (4.0) (0.7) 14.5 2.5 11.4 2.0
FY2003 3.8 18.9 4.9 22.7 5.9 18.3 4.8 26.6 6.9
FY2004 8.5 17.6 2.1 30.9 3.6 15.3 1.8 16.0 1.9
FY2005 7.5 10.8 1.4 3.6 0.5 12.1 1.6 26.2 3.5
FY2006 9.4 23.4 2.5 43.1 4.6 20.0 2.1 38.0 4.0
FY2007 9.6 23.8 2.5 17.9 1.9 25.1 2.6 28.1 2.9
FY2008 9.0 22.2 2.5 20.2 2.2 22.6 2.5 21.6 2.4
Average 3.4 4.0 3.3 3.3
Median 2.7 2.5 2.7 3.1
Correlation 0.20 0.04 0.30 0.44
Note: On removing FY1992 and FY2003 from the analysis as outliers, the average, median and correlation values will be:
Average 2.6 2.3 2.7 2.8
Median 2.5 2.2 2.6 2.8
Correlation 0.52 0.49 0.42 0.54
While GDP growth and credit growth seem to be related in a 1:2.8 ratio, GDP growth and deposit
growth appear to carry a 1:2.5 ratio relation. Though the correlation is not very strong initially,
removal of outliers (FY92 and FY03) improves the picture and hence the above values.
Considering the fact that the GDP for FY09 is expected to be around 7.0% and for FY10 about
6.0%, it is not unreasonable to expect credit growth to remain around 20% levels.
Our positive view on the future of Indian banking is also supported by the facts released by the
World Bank. The 'private sector credit to GDP ratio' has grown consistently over the years from
30% levels in FY95 to more than 50% in FY08. Though this is a good sign in itself, we are positive
also because there is still sufficient room to improve this ratio further when compared with the
situation in other countries.

Banking Sector
Private-sector credit to GDP ratio
60
50
40
30
%
20
10
0
FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08
Indian banking environment Private-sector credit to GDP ratio - Global comparison

never appeared so strong 250
and confident. Uncertainty is
200
very much in the air but bank
managements are getting 150
ready to face it, head on!
%100
50
Mexico
Egypt
Italy
Hungary
Turkey
USA
South Africa
Malaysia
Morocco
Czech
Argentina
Brazil
Germany
UK
Canada
Japan
Spain
China
Korea
France
Jordan
Thailand
Chile
India
Poland
Peru
Phillippines
Israel
Colombia
Pakistan
Indonesia
Russia
Source: IMF, Antique
In short, the following aspects are key arguments for our positive view on Indian banks in
the current environment:
¦ NPAs will rise to 5% at gross level as a percentage of advances, almost double from current
levels. However, considering the regulatory and systemic changes that have happened after
mid-1990s, Indian banks have become extremely conscious and strong in terms of managing
and maintaining credit quality.
¦ Credit growth has slowed as compared with previous years, but even assuming a slow GDP
growth due to global recession, Indian banks have adequate demand from the system to cater
to, and this will ensure decent growth in business.
¦ The bank credit is evenly diversified to all major sectors of the economy without undue reliance
on any single segment or industry.
¦ In terms of credit quality, the return on assets, operating expenses and the scope for private
sector credit growth, Indian banks have shown tremendous improvement over a period of time.
However, considering global examples, there is enough room to improve further in each of the
above parameters.
¦ Indian banks withstood the fall in economic growth observed during the periods of Asian
economic crisis (FY98-99), and also the global slump seen during FY01-02. Even when global
GDPs fell and domestic industrial production declined, NPAs were effectively controlled.
¦ The market share of advances and deposits is spread bewteen many banks across public
and private sector indicating ‘no concentration’ of NPA risks in one single bank.
Banking Sector
Banks covered
With this report, we initiate coverage on the following banks:
1) State Bank of India
2) ICICI Bank
3) Punjab National Bank
4) HDFC Bank
5) Axis Bank
Together, these five banks have a share of more than 40% in both the advances and deposits
market of India. In addition, these banks collectively carry a weight of close to 80% in each of the
indices - Bankex (BSE's bank index) and Bank Nifty (NSE's bank index).
Some basic information on these banks is given in the table below.

SBI is the world’s only SBI ICICI Bank PNB HDFC Bank Axis Bank
second bank after China’s No .of Offices
ICBC, to have a network of FY08 10,369 1,268 4,275 743 643
more than 10,000 FY07 9,632 716 4,168 666 501
branches. ICBC has more No. of Employees

FY08 179,205 40,686 56,025 37,836 14,739
than 16,000 branches!
FY07 185,388 33,321 57,316 21,477 9,980
Deposits (INRbn)
FY08 5,374 2,444 1,665 1,008 876
FY07 4,355 2,305 1,399 683 588
Advances (INRbn)
FY08 4,168 2,256 1,195 634 597
FY07 3,373 1,959 966 469 369
Net profit (INRbn)
FY08 67 42 20 16 11
FY07 45 31 15 11 7
CASA (%)
FY08 43 26 43 54 46
FY07 45 22 46 58 40
Business per employee (INRm)
FY08 45.6 100.8 50.5 50.6 111.7
FY07 35.7 102.7 40.7 60.7 102.4
Profit per employee (INR ‘000)
FY08 3.7 10.0 3.7 5.0 8.4
FY07 2.4 9.0 2.7 6.1 7.6
Source: IBA, Antique Research
Two key observations from the above table:

¦ ICICI Bank has the lowest CASA ratio as compared with other four banks.
¦ ICICI Bank undertook extensive branch expansion in FY08 as compared with others.

Banking Sector
Tally table - Comparison of banks on various parameters

We analysed the above banks on various parameters to find out how they are placed in terms of
business growth, efficiency and the comfort they provide in terms of their current financial standing
and business exposures.
The growth-related variables indicate the last 5-year CAGR banks achieved in advances and
deposits. It also carries a ranking of these banks in terms of their latest CASA ratio. Axis Bank
emerges as an out-performer in this category.
On efficiency-related parameters, the cost/income ratio, quality of advances and the extent of
loan loss-loss provision coverage have been reviewed, and banks have been accordingly ranked.
PNB leads the pack with high scores in each variable.
Overseas exposure In the next segment, certain comfort-related yardsticks have been compared. Capital-raising by
supposedly helped access of banks to bolster future growth, real estate exposure and overseas dependence for the business
funds at cheaper rates.
have been compared. Although PNB did not raise any fresh capital and ranks last on that metric,
it ranks as the best bank with lower real estate and foreign exposure, which is critical during a
Sudden global liquidity
global economic slowdown. Also, we analysed banks that generate the maximum core interest
squeeze has caused this
income as a proportion of total income. ICICI Bank and Axis Bank have greater proportions of their
advantage into a
income coming from 'other income' and these segments might have greater tendency to show
disadvantage.
slower growth in the current scenario. A detailed analysis of the above parameters is presented in
the ensuing paragraphs.
Metric Variable Axis Bank HDFC Bank ICICI Bank PNB SBI
Growth related Loan growth - 5-year CAGR 1 3 2 5 4
Deposit growth - 5-year CAGR 1 3 2 4 5
CASA - Latest 2 1 5 3 4
Efficiency related Cost / Income ratio - Latest 3 5 2 1 4
GNPA ratio - Latest 1 2 5 3 4
Provision coverage 4 2 3 1 5
Comfort related Capital raising 1 4 2 5 3
Real estate exposure 4 3 5 1 2
Core Interest Income / Total Income 4 2 5 1 3
Overseas dependence 3 2 5 1 4
Source: IBA, Company, Capitaline, Antique

Banking Sector
Growth metric - Loan growth comparison

The chart below shows that the last 5 years loan growth achieved by India's major banks. HDFC
Bank showed consistent growth over the last 3 years (even though it shows a slight falling trend in
the 5-year chart). Axis Bank achieved a high compounded annual growth during this period, followed
by ICICI Bank.
Loan growth over the past 5 years
70%
60%
50%
40%
30%
20%
10%
0%
Axis Bank BOB BOI HDFC Bank ICICI Bank PNB SBI
FY04 FY05 FY06 FY07 FY08
FY2006 was dominated by Loan growth CAGR (from FY04 to FY08)

the top private sector Axis Bank BOB BOI HDFC Bank ICICI Bank PNB SBI
banks. Both in terms of 59% 32% 25% 37% 38% 26% 27%
deposits and advances, Source: IBA, Company, Capitaline, Antique
these banks showed high

Growth metric - Deposit comparison
growth rates.
In terms of the deposit growth (CAGR) achieved by these banks during the last 5 years, Axis Bank
and ICICI Bank retain top two slots as seen in loan growth. ICICI Bank registered a deposit growth
of just 6% in FY08. This was in sharp contrast to the 40% growth the bank achieved in the 4 years
before FY08. PSU banks, on the other hand, grew at a much slower pace.
Deposits growth over the past 5 years

70%
60%
50%
40%
30%
20%
10%
0%
Deposits growth CAGR (from FY04 to FY08):

43% 20% 20% 35% 38% 17% 14%

Banking Sector
Efficiency comparison - Cost / Income ratios of banks

In terms of control over costs, the below table explains cost/income ratios of these banks over the
last 5 years. At the end of FY08, all banks have a similar cost/income ratio averaging between 48-
50%. However, Bank of India has substantially lower cost-to-income ratio of 42%.
Chinese banks operate Cost/Income ratios

with a Cost/Income ratio of
60%
less than 45%.
50%
40%
30%
20%
10%
0%
Loan book analysis - Unsecured loans and NPAs

Unsecured loans primarily include personal loans and credit card exposures, priority sector lending
in rural areas, education loans, credits to SMEs (small and medium entrepreneurs) up to Rs 5
lakh, etc. Exposure of Indian banks towards unsecured loans rose consistently over the years. As
shown in the chart below, HDFC Bank has the highest, with around 30% of its total loans exposed
to such loans.
According to RBI,
Unsecured loans as a % of total loans
‘unsecured exposure’ is
defined as an exposure 35%
where the realisable value 30%
of the security is not more 25%
than 10% of the
20%
outstanding exposure.
15%
10%
5%
0%
Though there is no direct correlation between loan losses and unsecured loan exposure, in an
economic slowdown scenario, such exposure will carry a greater stress, and hence, a higher
probability of default. Banks need to be extremely vigilant in terms of monitoring these loans
regularly, so that losses in the form of NPAs do not increase unreasonably and dent the quality of
the loan book.

Banking Sector
The loan loss slippage ratio, i.e., gross NPA additions as a percentage of total advances for all
major banks has shown a rising trend, and HDFC Bank reflects a higher slippage ratio, with an
increasing trend. Bank of Baroda, even with an increasing unsecured loan exposure, has shown
an impressive control on loan losses, thereby indicating a strong loan appraisal system.
Slippage ratio
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
SBI, ICICI Bank, HDFC However, a review of the gross NPA ratio, i.e., GNPA as a percentage of advances indicates that
Bank, Axis Bank and PNB HDFC Bank and other banks have ensured that the NPA increase is proportionate to that of the
together held 33% of the loan growth. In fact, PSU banks have shown tremendous improvement in terms of loan quality, as
GNPAs of the banking the GNPA ratio for these banks fell from average 8-9% levels to less than 3% levels in the last 5
system during FY04, FY05 years. Only ICICI Bank has shown deterioration of its loan quality as reflected in its increasing
and FY06. This proportion GNPA ratio. The main reason for this increase is that the bank has substantial exposure to the
jumped to 45% by FY08. retail segment, including huge exposure to the real estate segment at almost 36% of total loans
that includes close to 30% exposure in the form of housing loans. The retail segment constitutes
close to 75% of ICICI Bank's NPAs.
Gross NPAs as % of advances
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%

Banking Sector
Loan mix – As of FY08

Name Retail Corporate SME Agriculture Others Total Of which,
% % % % (priority) % % Home Loans %
Axis Bank 24 49 19 7 1 100 13
BOB 16 43 11 12 18 100 6
BOI 20 30 20 14 16 100 6
HDFC Bank 38 39 15 5 3 100 4
ICICI Bank 56 19 12 9 4 100 29
PNB 16 35 15 9 25 100 7
SBI 21 31 18 10 20 100 10
Source: Company, Antique
Real estate exposure as % of loans
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
A not-so-encouraging sign in terms of NPA management of Indian banks is the fact that the loan
loss coverage ratio for banks as a group has reduced over the last 2 years. From 60% levels, the
coverage ratio has fallen to around 55%.
Loan loss coverage ratio of Loan loss coverage ratio - Bank groups
banks in Korea stands at
180%. Australian banks 100%
carry 130% loan loss 90%
coverage, Russian banks 80%
145% whereas Japanese 70%

60%
banks have a loan loss
50%
coverage ratio of 26%.
40%
30%
20%
FY03 FY04 FY05 FY06 FY07 FY08
PSU Banks Private Banks All Banks

Banking Sector
In terms of provision coverage for specific banks, Axis Bank has a low coverage ratio in the private
bank group at around 50%, and the SBI has a ratio of 42%, the lowest in PSU banks in the
comparison chart below.
Provision coverage for specific banks
110%
100%
With the exception of PNB 90%
and BOB, all big banks 80%
have made capital issues 70%
60%
raising fresh equity.
50%
40%
30%
20%
Comfortable position due to capital raising – These banks “Made hay while…”
Change in Change in Capital Latest Latest

share share adequacy capital capital
Bank capital premium Details Month of issue before adequacy adequacy
(from FY06 (from FY06 the issue (Sep 08) - (Sep 08) -
to FY08) to FY08) Basel II Basel I
Axis Bank 28% 333% GDR issue, QIP and preferential Jul-07 11.5% 12.2% NA
allotment to promoters
(per share = INR 620, USD 15.43)
BOI 8% 253% Preferential allotment Feb-08 12.5% 12.3% 12.5%

(per share = INR 360)
HDFC Bank* 13% 173% ADS issue and preferential allotment Jun-07 13.1% 11.4% NA
(per share = INR 1,023, USD 92.10)
ICICI Bank 25% 164% ADS issue and public offer Jun-07 11.0% 14.0% NA
(June 2007 - Per Share = INR 940,
USD 49.25)
SBI 20% 473% Rights issue (per share = INR 1,590) Jan-08 12.3% 11.5% 12.1%
BOB 0% 0% No primary equity issue NA NA 12.6% 12.9%
PNB 0% 0% No primary equity issue NA NA 13.6% 12.4%
* HDFC Bank acquired CBOP in FY09. The change in capital does not include shares issued to CBoP shareholders. However, the latest capital
adequacy ratio includes the impact of the merger.

Banking Sector
The above table contains the details of capital raising that banks had undertaken during the last 2
years (between FY06 and FY08). The main intention behind capital issues was to have adequate
risk-weighted asset growth after implementing Basel-II norms. Indian banks having international
operations had to switch to Basel II reporting of capital adequacy from March 2008. For other
banks, i.e., banks with no international presence, the Basel-II implementation will be effective
from March 2009. With the exception of PNB and BOB, all other banks have made capital issues
raising fresh equity. As can be observed from the latest capital adequacy levels, ICICI Bank has
the highest capital adequacy, followed by PNB, while SBI and HDFC Bank (post-CBoP merger)
have low CRAR. Under these conditions of high cost of borrowings and an extremely non-conducive
equity environment, banks that have higher CRAR will be comfortably placed to achieve growth at
lower cost as compared with others.
Pricing power - Who has it?
2.25
2.00
1.75
Private banks pass on 1.50
FY07 25bps
1.25
FY08 150 bps
increasing costs to 1.00

customers more effectively % 0.75
0.50
than public banks.
0.25
0.00
-0.25 CRR change Axis BOB HDFC Bank ICICI Bank PNB SBI
-0.50
-0.75
NIM change - FY07 NIM change - FY08 Rate passed on in FY08
As can be observed from the above chart, private sector banks passed on the impact of increased
CRR rates in FY08 to their customers more than that done by their public sector peers. HDFC
Bank, ICICI Bank and Axis Bank improved their NIMs in FY08 by achieving better yield on their
advances as compared with FY07. The above analysis reflects the pricing power of each of the
banks, and shows the strength of each bank to pass on the rate hike impact to its customers. It
is to be noted that the increase in CRR indicates that incremental proportion of deposits that
yields zero return as it is held with the central bank as a reserve. In FY08, CRR increased from
6.0% of NDTL (net demand and time liabilities) to 7.5%.
Return on advances over cost of funds (Source: RBI)

8
% 5
1
Axis Bank HDFC Bank ICICI Bank PNB SBI

Banking Sector
Core banking Income - Cushion when other income falls
80%
75%
70%
65%
60%
55%
50%
45%
40%
35%
30%
The proportion of core banking income i.e. net interest income over total income determines a
bank's reliance on other income sources like treasury gains, fee income etc. that are sensitive to
overall business environment. In times of slowdown or recession, we believe that these other
sources of income might dry up causing a dent in the profitability of the total business. Banks that
have higher core income will be less prone to severe business slowdown as they would have
traditionally not based their business models on other sources. PNB and HDFC Bank have high
core income shares in total income while ICICI Bank has a low core income contribution in its total
income.
Overall, each of these 5 banks covered under this report have their own strengths and shortcomings.
Though the banking industry shows complete diversification of exposure, these banks have adopted
varying strategies to grow. The sector has become the focus of investors as concerns on slowing
manufacturing economy and emergence of recessionary trends have escalated fears of rise in
NPAs.
We, however, are confident that these are ‘men’ in the business of banking and not
‘boys’. They will prevail!

Banking Sector
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Axis Bank
Growth concerns exist, fundamentals intact
HOLD CMP: INR538 Target Price: INR570
Market Data Investment Rationale

Sector : Banking ¦ The bank outgrew all its peers in the last 5 years.
Market Cap (INRbn) : 193
Market Cap (USDbn) : 4.1
¦ The bank has the best (lowest) gross NPA ratio amongst
O/S shares (m) : 359
its peers. Even while carrying a corporate-heavy loan portfolio
Free Float (m) 341 (retail assets just 24%), the bank managed to keep its NPAs
52-wk HI/LO (INR) : 1,292/353 under check. More than 80% of corporate loan accounts
Avg Daily Vol (‘000) : 802 are rated ‘A’ or above, indicating strong fundamentals.
Face Value (INR) : 10
¦ The bank has a high CASA ratio (around 40%) in the sector,
Bloomberg : AXSB IN
which will enable it to maintain its net interest margins at high
Reuters : AXBK.BO
levels when the cost of funds increase due to liquidity tightness.
¦ Though the bank’s pace of growth would slow down due

to the high corporate exposure and the imminent industrial
Price Performance
slowdown, we believe that it has the ability to withstand
1m 3m 6m 12m turbulent times and maintain its asset quality.
Absolute 23 (21) (28) (44)
Relative 9 5 10 7 ¦ The stock is currently trading at 1.9x FY10 estimated price-
to-book. Our target price of INR570 is arrived at considering a
PBV multiple of 2x. The valuation is at a discount of 33% to
Shareholding Pattern that given to a more stable HDFC Bank.
LIC FII ¦ We believe that the discount is reasonable considering:

10% 26%
SUUTI
27% ¦ Higher risk of slowdown as the bank grew at a scorching
pace in all segments (advances, deposits and other
DR/NRI
9% income) as compared with peers.
¦ Riskier exposures to segments (metals, infrastructure,

Do mestic gems and jewellery, and financials), which could bear the
Institutio ns
and Others
brunt of the global and domestic economic slowdown.
28%
¦ Uncertainty on the SUUTI stake sale and CEO Nayak’s
Price Performance Vs NIFTY successor after his exit in July 2009.
450
400
350
300 Key financials
250
200 Year ended March 2008a 2009e 2010e 2011e
150 Net Interest Income 25,853 37,839 47,597 51,714
100 Other Income 17,955 23,457 27,103 34,460
50
Profit After Tax 10,710 14,239 16,037 17,514
0
Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08
PAT growth (%) 63 33 13 9
EPS (INR) 30 40 45 49
Axis Bank NIFTY
EPS growth (%) 28 33 13 9
P/E 18 13 12 11
Ravi Sankar Adj BVPS (INR) 238 260 285 313
+91 22 4031 3429 P/Adj BV 2.3 2.1 1.9 1.7
ravi.sankar@antiquelimited.com RoE (%) 17.6 15.3 15.4 15.2
Advances growth (%) 62 28 25 30
Axis Bank
Banking Sector
Loan mix
This new-age private sector bank has a loan mix that comprises close to half of total advances
lent to corporate accounts. Its retail assets constitute 24% of the loan book, with more than half
of the retail book being home loans. Unlike HDFC Bank and ICICI Bank, which have higher proportion
of their loan book invested in retail segment, Axis Bank adopts an exactly opposite model of a
corporate-centric loan book.
In times of an economic slowdown, we believe that growth in corporate accounts at a reasonable

pace can come only at a higher cost in the form of potential default. The effect of a slowdown in
the global economy and the impact of liquidity tightness, we believe, will be seen first in the
corporate sector and then, with a lag, in the retail segment. This causes us to believe that Axis
Bank might see its growth in loans slowing down in the current environment.
Axis Bank - Loan mix

Others (Priority etc.)
8%
Retail
24%
SME
19%
Corporate accounts would
show stress first in an
economic slowdown.
Retail assets crack with a
lag.
Corporate
49%
Source: Antique
Retail loan portfolio composition (%)

Home loans 57
Personal loans 16
Commercial vehicles 8
Auto loans 7
Credit cards 4
Others 8
Total retail 100
An analysis of top sector expenses of the bank, both fund-based and non-fund-based, indicates
that it has taken certain aggressive exposures in segments, which will bear the brunt of a global
economic slowdown: metals, gems, textiles, trade, real estate and financials. All top sectors of
banks have higher probability to crack in a situation like the current global outlook. Though the
quality of exposures offers a lot of respite (more than 80% are 'A' rated) the effectiveness of these
ratings in today's world needs to be looked at with caution (remember most sub-prime loans and
instruments were rated 'investment' grade before they actually turned junk!).

Axis Bank
Banking Sector
Top exposures of Axis Bank
Our discussions with Segment Total 1HFY09 Fund-based Non-Fund-based Total FY08
‘gems and jewellery’ Metals 8.5% 8.9% 7.9% 5.0%
traders indicated that large Infrastructure 8.2% 5.6% 13.0% 6.1%
sums of moneys were lost Gems and Jewellery 8.0% 2.5% 18.1% 9.6%
by many diamond traders Financials 7.0% 8.1% 4.9% 10.5%
Trade 6.4% 6.0% 7.1% 6.5%
in the share market fall and
Real Estate 6.1% 9.0% 0.8% 7.0%
this sudden development
Textiles 4.9% 6.6% 1.9% 5.9%
put stress on their liquidity
Source: Antique
conditions.
Off-balance sheet exposure - Impact on other income?
Growth in guarantees given by the bank
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
FY06 FY07 FY08
Source: Antique
An analysis of the bank's off-balance sheet exposures shows that it significantly increased its
non-fund-based support to its customers. While growth in guarantees provided by the bank jumped
by 170% in FY08, the growth remained flat for other banks. Even though such non-fund-based
exposures do not indicate any positive correlation with default or devolvement, these exposures
should be looked at in the context of the dramatic slowdown and volatility in currency markets and
business. In addition, exposures contribute to other income of the bank and the slowdown in
business per se would mean lower other income for Axis Bank if it adopts a cautious strategy.
As a percentage of total fund-based advances, the amount of guarantees of Axis Bank form 20%
at the end of FY08, which was 12% in FY07. A table comparing the exposure of a bank through
guarantees as a percentage of funded advances is given below:
Guarantees as a % of total loans

Bank FY08 FY07
Axis Bank 20% 12%
HDFC Bank 9% 9%
ICICI Bank 18% 15%
State Bank of India 12% 11%
Bank of Baroda 6% 7%
Bank of India 9% 10%

Axis Bank
Banking Sector
Guarantees - Gems and Jewellery

Loans to ‘Gems and Jewellery’ segment as a % of Total Loans
Bank Fund-based Non-Fund Based Total
Axis Bank 2.5 18.1 8.0
Bank of Baroda 1.2 0.0 1.0
Bank of India 2.4 0.6 2.1
Canara Bank 2.2 1.4 1.9
ICICI Bank 0.8 0.3 0.7
Punjab National Bank 0.5 0.2 0.4
State Bank of India 1.8 0.4 1.2
HDFC Bank Details not provided. Total < 2%
Source: Antique
We also observe a higher exposure of the bank to the gems and jewellery segment, largely
through the unfunded mechanism. During a period of slowdown of the gems segment exports
(October exports down by 16% and November exports expected to be down by 20%) exports, we
would definitely like to add a word of caution that the comparatively higher exposure of Axis Bank
to other banks might impact the other income growth in the future. In addition, it raises the risk of
default and devolvement.
Growth at a scorching pace - Sustainable?

The table below compares the rate of growth of major banks in terms of advances, deposits and
other income over the last 3 years. As can be seen, Axis Bank grew at a scorching pace as
compared with others. We feel that though a lower base helped the bank attain such high growth
rates, the current slowdown scenario will cause it to grow at a slower pace.
Last 3 years compounded growth rate
Bank Advances Deposits Other iIncome
Axis Bank 56% 40% 57%
Bank of Baroda 35% 23% 35%
Bank of India 27% 24% 34%
HDFC Bank 35% 40% 43%
ICICI Bank 35% 35% 45%
Punjab National Bank 26% 17% 25%
State Bank of India 27% 14% 8%
Strong 'other income' - Will growth slow?

‘Other Income’ contributes The bank has a high contribution of 'other income' in the total income. This segment has seen
close to 40% of Axis Bank’s robust growth over the last 3 years (as seen in the above table), and has contributed to 40% of the
‘Total Income’. The ratio is total income consistently during the last 3 years. It will be important for the bank to maintain
55% for ICICI Bank. growth in all segments under this head. The composition of 'other income' is explained in the table
below. Keeping up the momentum in corporate banking, retail banking and capital markets segments
in the current environment will be the key challenge for the bank.
Composition of ‘other income’

Description % of Other Income
Fee income 95%
- Corporate banking Fee income from servicing large and mid-corporates,
advisory services on structured products, etc. 39%
- Business banking Cash management services, collecting taxes for state
Governments and departments of the central government 11%
- Retail banking Savings accounts, fee income from personal loan portfolio
management, pay-roll accounts 32%
- Capital markets Placement and syndication of debt, advisory
services 18%
Trading profit 5%

Axis Bank
Banking Sector
Stake sale and successor issues persist

The uncertainty over SUUTI's 27% stake in the context of its proposed winding up by March 2009
and the failure of recent global road-shows by lead managers of a 17% stake of the bank are
factors that could impact the stock price depending on future developments.
Visibility on this front in terms of price and buyer will offer significant opportunities to rate the
stock upwards or downwards.
The exit of P. J. Nayak, the CEO of the bank, in July 2009 will also put pressure on its stock, as
No visibility on SUUTI stake a significant portion of credit for its tremendous growth has been attributed to the CEO. We,
disposal. Environment not however, do not see a great risk to the bank emerging out of a changed team-leader, as we believe
conducive to attract huge that it has a great board and top management group, which will run the show effectively even after
premium. Mr. Nayak's exit. The stock price might remain volatile on developments relating to potential future
successor.
Latest shareholding pattern

SUUTI
Others 27%
24%
LIC
FII 10%
26%
GDR GOI Insurance

8% 5%
Source: Antique
Valuation
Axis Bank - Price to adjusted BVPS
1,400
INR
4.5x
1,200
1,000 3.5x
800
2.5x
600
1.5x
400
200
0
Source: Antique

Axis Bank
Banking Sector
Currently, the bank is trading at 1.9x its adjusted price-to-book value. Ever since the FDI limit in
private sector banks was increased in FY04 to 74% from 49%, the stock price of the bank traded
above 2x the price-to-book.
Even though we have concerns relating to the pace and quality of the bank's future growth and its
uncertainty regarding the stake sale and management successor, we believe that the table below
(already presented in one of our earlier passages) will summarize why we still believe that it has
High CASA and low NPAs potential to outperform its peers. The bank occupies top slots in most parameters that are enlisted.
are the advantages of the These advantages (high CASA ratio and low NPA ratio) will certainly provide great comfort to the
bank. bank in the future.
Comparing banks on various performance parameters

Metric Variable Axis Bank HDFC Bank ICICI Bank PNB SBI
Growth related Loan growth - 5-year CAGR 1 3 2 5 4
Deposit growth - 5-year CAGR 1 3 2 4 5
CASA - Latest 2 1 5 3 4
Efficiency related Cost / Income ratio - Latest 3 5 2 1 4
GNPA ratio - Latest 1 2 5 3 4
Provision coverage 4 2 3 1 5
Comfort related Capital raising 1 4 2 5 3
Real estate exposure 4 3 5 1 2
Interest Income / Total Income 4 2 5 1 3
Overseas dependence 3 2 5 1 4
Source: Antique
With an estimated adjusted book value per share of INR 285, we expect the bank to trade at least
at 2x the price to book giving a target price of INR570 for the bank's share.
Company background
¦ Axis Bank Ltd (erstwhile UTI Bank Ltd) was the first of new private banks to have begun
operations in 1994, after the Government of India allowed new private banks to be established
in the Country. The bank was promoted jointly by the administrator of the specified undertaking
of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC) and other four PSU insurance companies: National Insurance
Company Ltd, The New India Assurance Company Ltd, The Oriental Insurance Company Ltd
and United India Insurance Company Ltd.
¦ The bank has strengths in both retail and corporate banking and is one of the most technology-
driven banks in the country. It collects Central government taxes on behalf of Central Board of
Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC), including through e-
payments. The bank collects state taxes on behalf of seven state governments and union
territories. It also does collections and payments for Central government ministries, namely,
the railways, urban development, and housing and urban poverty alleviation.
¦ Currently, the bank has a wide network of more than 729 branch offices.
¦ As at the end of September 2008, the capital adequacy of the bank was 12.2%. Its gross
NPAs as a percentage of total advances stood at 0.9%. Its net interest margin was 3.4%, and
its CASA ratio stood at 40%.

Financials (INR M) Axis Bank
Profit and Loss Account (In INR M) Ratios

Year Ended 31st March 2007 2008 2009e 2010e 2011e Year Ended 31st March 2007 2008 2009e 2010e 2011e
Interest Income 44,616 70,053 99,922 118,168 142,594 No. of Shares (M) 282 358 358 358 358
- Interest on advances 27,029 47,457 68,694 84,623 104,288 EPS (INR) 23 30 40 45 49
Total Interest Expense 29,933 44,200 62,082 70,572 90,880
BVPS (INR) 120 245 276 306 339
- Interest on deposits 24,809 37,425 53,767 60,488 78,115
Adjusted BVPS (INR) 111 238 260 285 313
Net Interest Income 14,683 25,853 37,839 47,597 51,714
Dividend Per Share (INR) 3.5 4.5 6.0 8.0 12.0
Other Income 10,101 17,955 23,457 27,103 34,460
- Fee Income 7,790 13,207 15,188 17,466 22,706
- Treasury Income 609 2,203 1,872 2,059 2,368
Valuation Ratios (x)
Total Income 24,784 43,808 61,296 74,700 86,175 Price/EPS 17.9 13.5 12.0 11.0
Operating Expenses 12,146 21,549 32,324 42,524 51,029 Price/Adjusted BVPS 2.3 2.1 1.8 1.7
- Employee Expenses 3,813 6,702 10,054 13,573 16,287 Dividend Yield (%) 0.8 1.1 1.5 2.2
Operating Profit 12,638 22,259 28,972 32,176 35,146
Provisions (excluding Tax) 2,674 5,794 7,560 8,060 8,810
Performance Ratios (%)
- Provision for loans 737 3,440 4,700 5,500 6,250
Average Yield on funds 7.64 8.04 8.64 8.46 8.35
- Provision for Investments 670 820 1,100 0 0
Average Cost of funds 5.34 5.38 5.77 5.30 5.50
Profit Before Tax 9,965 16,465 21,412 24,116 26,336
Interest Spread 2.29 2.66 2.86 3.17 2.86
Tax 3,375 5,755 7,173 8,079 8,823
Profit After Tax 6,590 10,710 14,239 16,037 17,514 Net Interest Margin 2.51 2.97 3.27 3.41 3.03
CASA 40 46 45 45 46
Yields (%)
Balance Sheet (In INR M) Avg Yield on Advances 9.13 9.83 10.10 9.85 9.50
Year Ended 31st March 2007 2008 2009e 2010e 2011e Avg Yield on Investments 6.74 6.94 7.40 7.00 7.00
Liabilities Avg Cost of Deposits 5.02 5.11 5.51 5.00 5.23
Capital 2,816 3,577 3,577 3,577 3,577

Reserves 31,116 84,108 94,999 106,015 117,669 Earnings Quality (%)
Net Worth 33,932 87,685 98,576 109,592 121,246 Net Int Income/Total Income 59 59 62 64 60
Deposits 587,856 876,262 1,075,349 1,344,186 1,642,999
Other Income/Total Income 41 41 38 36 40
Borrowings & Other Liabs 110,784 131,831 160,255 200,314 260,743
Cost/Income 49 49 53 57 59
Total Liabilities 732,572 1,095,778 1,334,180 1,654,092 2,024,988
Return on Avg Net Worth 21.0 17.6 15.3 15.4 15.2
Assets
Return on Avg Assets 1.07 1.17 1.17 1.07 0.95
Cash & Bal with RBI/Banks 69,183 125,042 139,795 154,581 164,300
Investments 268,972 337,051 377,825 426,218 503,113
Advances 368,765 596,611 763,663 954,578 1,240,952 Asset Quality (%)
Fixed & Other Assets 25,653 37,074 52,897 118,714 116,623 Gross NPA/Advances 1.14 0.83 1.42 1.69 1.57
Total Assets 732,572 1,095,778 1,334,180 1,654,092 2,024,988 Net NPA/Advances 0.72 0.42 0.75 0.80 0.75
Source: Antique Credit/Deposit Ratio 63 68 71 71 76
Incremental C/D Ratio 78 78 78 78 78

Shareholding changes (%) - FIIs, Domestic Institutions Investment/Assets 37 31 28 26 25
44 12
42
11 Growth Rates (%)
10 Advances 65 62 28 25 30
40
9
Deposits 47 49 23 25 22
38 8
Interest Income 54 57 43 18 21
36 7
Interest Expense 65 48 40 14 29
6
34
5 Net interest Income 36 76 46 26 9
32
4 Other Income 38 78 31 16 27
30 3 Operating Profit 27 76 30 11 9
M ar-07 Jun-07 Sep-07 Dec-07 M ar-08 Jun-08 Sep-08
EPS 34 28 33 13 9
FII Do m Inst (RHS)
Profit After Tax 36 63 33 13 9
Source: Antique

Banking Sector

HDFC Bank
Primus Inter Pares - First Among Equals!
BUY CMP: INR1,060 Target Price: INR1,250


Sector : Banking ¦ The bank’s loan composition is evenly balanced with no
Market Cap (INRbn) : 450 significant exposure to any single segment. This diversification
Market Cap (USDbn) : 9.5 reduces the risk of impact of non-performing assets (NPAs)
O/S shares (m) : 425 from one single industry.
Free Float (m) 352
52-wk HI/LO (INR) : 1,825/792 ¦ The transition relating to the CBOP merger has, so far, been
Avg Daily Vol (‘000) : 464 smooth with no major negative surprises. Gross NPAs
Face Value (INR) : 10 have jumped but this was expected as CBoP had a slightly
Bloomberg : HDFCB IN low-quality loan-book compared to the pre-merged HDFC Bank.
Reuters : HDBK.BO ¦ The bank has the highest CASA ratio (around 45%) in the
sector and the fact that CBoP branches carried a low CASA
ratio of just 25% gives scope for further improvement once the
teething issues of integration are addressed.
Price Performance
1m 3m 6m 12m ¦ The bank does not keep any home loans in its asset
Absolute 16 (13) (9) (36) portfolio as it writes all housing loans in its parent company’s
Relative 3 14 39 21 (HDFC) books. This insulates the bank against concerns
relating to major slowdown in this segment.
¦ We believe that the bank offers great comfort in times of crisis

due to its superior quality loan-book and an aggressive
Shareholding Pattern
management. We completely support the view that this
Do mestic
Institutio ns
HDFC bank demands premium valuations compared to its peers
Gro up
and Others
19% and, more so, in times of economic turbulence. Our target
30%
price of INR1,250 assumes conversion of warrants of the bank
by HDFC Group, issued at the time of CBoP merger, at
INR1,000.
FII
27%
Insurance ¦ Risks to our call include a dramatic deterioration of the asset
5%
DR/NRI quality, especially CBoP assets, which the bank admits to be
19%
of lower quality in addition to a significant economic downturn.
Price Performance Vs NIFTY Also, a downward valuation adjustment of the banking sector
300 might act as potential risk to our call.
250
200 Key financials

Net Interest Income 52,279 77,627 101,976 122,482
100
Other Income 22,832 27,839 33,116 39,766
50
Profit After Tax 15,902 19,196 23,441 28,922
0 PAT growth (%) 39 21 22 23
Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 EPS (INR) 45 45 52 64
HDFC Bank NIFTY EPS growth (%) 26 1 15 23
P/E 24 24 20 17
Adj BVPS (INR) 316 329 399 444
Ravi Sankar
P/Adj BV 3.4 3.2 2.7 2.4
+91 22 4031 3429
RoE (%) 17.7 13.6 13.8 14.3
ravi.sankar@antiquelimited.com
HDFC Bank
Banking Sector
Loan mix
The loan mix chart of HDFC Bank clearly spells out how well diversified the exposure of the bank
is vis-à-vis its segment peers such as ICICI Bank and Axis Bank. No major overtones of any
particular sector.
HDFC Bank Loan mix

10%
Retail
SME 36%
18%
Corporate
36%
Source: Antique

Car Loans 31
Personal Loans 24
CV Loans 18
Credit cards 9
2-Wheeler Loans 8
Others 10
Total Retail 100
The bank invested in Even in terms of the composition of retail sector loans, HDFC Bank has not put all its eggs in one
technology to effectively basket. The lack of concentration of advances in any particular segment will help the bank great
monitor its SME customer deal in the current economic slowdown.
base. Stress in these
The bank has an integrated SME lending strategy that includes not just the borrowing corporate/
assets will be captured at
business, but also includes vendors, dealers and customers of corporates. This integration, using
an early stage.
an advanced database monitoring system, helps the bank check the weakness in the entire chain
and take quick corrective actions. Therefore, NPAs are contained due to early stress identification.
Dealers
Vendors HDFC Bank Corporate HDFC Bank Distributors
OEM Customers

HDFC Bank
Banking Sector
What changed after CBoP?

In May 2008, HDFC Bank acquired Centurion Bank of Punjab (CBoP). The share swap ratio
decided was 1 HDFC Bank share for 29 shares of CBoP. This was considered to be expensive!
However, we feel that though the acquisition may not immediately result in any visible gains for
HDFC Bank, it gives it tremendous leverage to expand and grow further, as CBoP had around 400
branches as compared with the former's then existing network of about 760 branches. Given
below is a comparison of how the bank's performance changed after the merger.
CBoP had a loan book size

Details Post-merger (Sep-08) Pre-merger (Mar-08) Comments
of around INR150bn, out
CASA % 44 55 CBoP had a CASA ratio of 25%
of which corporate loans
NI M % 4.2 4.4 CBoP had NIM of 3.6%
accounted to only 15%. Branches 1400 760 CBoP had around 400 branches
Equity capital (INRm) 4,250 3,544 INR700m - share issue to CBoP
GNPA (% of loans) 1.6 1.3 Incremental NPAs from CBoP
GNPA (INRm) 16,760 9,070 Incremental NPAs from CBoP
NNPA (% of loans) 0.6 0.5 Charged CBoP NPAs to reserves
Cost / Income % 55 50 CBoP had a C/I ratio of 63%
Source: Antique
To give effect to the merger, HDFC Bank wrote off INR7bn from its reserves. This write-off was done
largely to harmonize the NPA recognition policies of CBoP with that of HDFC Bank. In addition,
around 30% of the write-off amount was spent as expenses relating to the merger. The visible
differences in terms of the merger on the bank emerge in the form of a lower CASA ratio, higher
cost/income ratio and an increase in gross NPAs. Considering the retail-skewed loan book of
CBoP, this is not a huge surprise, and the management had indicated that it would take about 18
months for complete seasoning of CBoP's loan book. CBoP had a loan book size of around
INR150bn, out of which corporate loans accounted to only 15%.
No home loans. All with the parent HDFC!

A key difference between all other Indian banks and HDFC Bank is the strategy it has adopted
with respect to mortgage loans. In FY04, HDFC Bank entered into an arrangement with its parent
HDFC, through which the bank sources mortgages for the parent. HDFC pays HDFC Bank for
credit appraisal operations and pays a fee for sourcing. This win-win strategy has helped the bank
keep a much cleaner loan book than most other banks. In addition, the bank also has found itself
a safe and assuring source of income. Currently, more than 25% of loans for HDFC are being
sourced through branches of HDFC Bank. We expect this strategy to be a 'boon in disguise' for
the bank, as the housing segment is expected to exhibit severe quality issues, due to higher
interest rates and the increasing unemployment rate on account of job losses.
HDFC pays HDFC Bank However, the bank has exposure to the real estate sector (commercial and residential housing) at
for credit appraisal around 15% of the total loan book, and most of this exposure is not through direct lending as
operations and pays a fee mortgage loans, but represents loans to other industries, where the primary collateral secured
for sourcing mortgage with the bank is property. Overall, the limited exposure of the bank to the real estate segment will
loans. provide great strength to the quality of its loan book.

HDFC Bank
Banking Sector
The table below reveals the fact that HDFC Bank's exposure to the real estate sector is lesser
than most other banks.
Real estate exposure of banks (as at the end of FY08)

Bank Commercial Residential
Axis Bank 10% 13%
BOB 4% 6%
BOI 5% 6%
HDFC Bank 10% 4%
ICICI Bank 6% 29%
PNB 5% 7%
SBI 3% 10%
Source: Antique
'Other income' can be a drag - CBoP-related issues

The table below shows the YoY growth of HDFC Bank for the quarter ended September 30, 2008.
Analysing the combined impact of CBoP merger, assuming that the merger already took place by
2QFY08, what comes out is the fact that there has been no growth in 'other income' of the bank.
A 33% YoY growth shown in 'other income,' without combining CBoP's financials, falls to just a flat
growth (1% YoY) when CBoP numbers are also added. This shows the fact that there has been no
incremental 'other income' from the merger.
YoY growth of HDFC Bank for 2QFY09

A 33% YoY growth shown
Details Without combining CBoP Combining CBoP
in ‘other income,’ without Net interest income 61% 40%
combining CBoP’s Other income 33% 1%
financials, falls to just a flat Operating expenses 69% 32%
growth (1% YoY) when Provisions 20% 8%
Net profit 43% 29%
CBoP numbers are
Source: Antique
added.
The bank management confirmed that due to certain legal/operational arrangement issues in
terms of CBoP's agreements for insurance distribution, the contribution from that source has
disappeared. CBoP distributed 'Aviva" insurance products, while HDFC Bank distributes insurance
products of its own group. It is mandatory that banks distribute products of just one insurance
company. Reportedly, this issue has been resolved. Growth in 'other income' for the bank might
remain muted until CBoP branches also begin contributing positively by way of distribution of
insurance products.
Gross NPA changes until 1HFY09
100%
80%
60%
40%
20%
0%
-20% FY04 FY05 FY06 FY07 FY08 1HFY09
-40%
-60%
Source: Antique

HDFC Bank
Banking Sector
Another risk in terms of HDFC Bank is the growing gross NPAs. The graph above shows that the
bank's gross non-performing assets have shown a higher increase as compared with all other
banks (Axis Bank also saw a significant increase). It is CBoP's bad loans that have caused this
up-move. However, we need to watch for signs that any jump in such low-quality assets is contained
soon. The bank management expects NPAs to peak in the next 2-3 quarters.
We believe that the bank High CASA favouring the bank

should trade at a premium
The bank has the highest CASA ratio (around 45%) in the sector. Considering the fact that CBoP
to other banks considering branches carry low CASA of just 25%, it gives scope for further improvement once teething issues
its superior business of integration are addressed.
model.
Concerns
¦ Smooth integration with CBoP needs to be watched. It has just been 6 months since the
merger with CBoP became effective. The management feels that it would take 2-3 quarters
(until Q4FY09) for synergies to be reflected in the bank's performance.
¦ CBoP had a cost/income ratio of about 63% prior to the merger. Pre-merger, HDFC Bank had
a CI ratio of around 50%. Post-merger, the CI ratio increased to 56%.
Valuation
The price-to-rolling adjusted book value chart below indicates that the bank is currently trading at
its lowest levels not seen at least during the last 6 years. Its stock underwent some selling
pressure after the CBoP merger news was announced, as market felt that the valuation was
stretched. However, considering the progress of the integration so far, we believe that concerns
over the underperformance of the bank are unduly high. In the current crisis situation, the bank
offers comfort in terms of asset quality issues, as the loan book is well diversified.
HDFC Bank - Price to adjusted BVPS

2,500
INR
5.5x
2,000
4.5x
1,500
3.5x
1,000 2.5x
500
0
Source: Antique
26m warrants were issued We believe that the bank has the potential to make the most of the merger, and emerge much
to HDFC Group, at the time stronger in the future. At current levels, the stock is attractive. We expect the bank should trade
of CBoP merger, at a at a premium to other banks, considering its superior business model. Expecting the adjusted
conversion price of book value per share for FY10, we value the stock at 3x price-to-book and arrive at a target price
INIR1,530 with a validity of INR 1,250.
until December 2009.
We have assumed that HDFC Ltd would convert the 26 million warrants issued to it at the time of
the CBoP merger at an altered price of INR1,000, instead of the earlier agreed INR1,530.

HDFC Bank
Banking Sector
Company background
¦ HDFC Bank, promoted by HDFC Ltd, is amongst the first private sector banks that were
permitted by the RBI, during the 'Reform Era' of early 1990s, to undertake banking activities.
The bank commenced operations in 1995. Currently, it operates through 1,400 branches.
¦ The balance sheet size of the bank stood at INR1,332bn as at the end of March 2008, with
retail assets comprising 55% of the total loan bank and the Current Account Savings Account
(CASA) ratio of 55%.
¦ HDFC Bank completed the acquisition of Centurion Bank of Punjab (CBoP) in May 2008 by
offering one share of its own bank (HDFC Bank) for every 29 shares of CBoP. At the time of
merger, CBoP had a balance sheet size of INR254bn, representing 20% of HDFC Bank.
¦ At the end of September 2008, HDFC Bank's capital adequacy ratio stood at 13.1%. Its gross
NPAs constituted 1.6% of total advances. Its net interest margin was 4.2%. The CASA ratio
of the bank stood at 44%.

Financials (INR M)
HDFC Bank
BVPS (INR) 201 324 348 424 472
Dividend Per Share (INR) 7.0 8.5 10 12 14
Other Income 15,162 22,832 27,839 33,116 39,766
- Fee Income 12,924 17,145 22,289 26,746 32,095
- Treasury Income (684) 2,418 1,813 1,904 2,094
- Provision for loans 8,610 12,160 17,595 24,566 27,097
- Provision for Investments 0 0 1,215 800 0
Interest Spread 3.82 4.17 3.86 4.22 4.32
Tax 4,977 6,909 9,455 11,546 14,245
CASA 58 54 45 46 47
Balance Sheet (In INR M) Yields (%)

Year Ended 31st March 2007 2008 2009e 2010e 2011e Avg Yield on Advances 10.57 12.62 13.00 12.75 12.65
Liabilities Avg Yield on Investments 6.98 7.18 7.50 7.50 7.00
Capital 3,194 3,544 4,246 4,508 4,508 Avg Cost of Deposits 4.34 5.18 6.50 6.25 6.00
Reserves 61,138 111,428 143,416 186,528 208,066

Net Worth 64,332 114,972 147,662 191,037 212,574 Earnings Quality (%)
Deposits 682,979 1,007,686 1,505,550 1,840,535 2,250,986
Net Int Income/Total Income 70 70 74 75 75
Borrowings & Other Liabs 165,045 209,108 292,812 285,392 303,892
Total Liabilities 912,356 1,331,766 1,946,024 2,316,964 2,767,452
Cost/Income 49 50 55 55 57
Assets
Return on Avg Net Worth 19.5 17.7 13.6 13.8 14.3
Investments 305,648 493,935 512,849 605,162 665,678 Return on Avg Assets 1.39 1.42 1.09 1.10 1.14
Advances 469,448 634,269 1,161,954 1,417,584 1,757,804

Fixed & Other Assets 46,794 55,778 84,204 75,033 95,335 Asset Quality (%)
Total Assets 912,356 1,331,766 1,946,024 2,316,964 2,767,452 Gross NPA/Advances 1.40 1.43 1.81 1.90 1.71
Net NPA/Advances 0.43 0.47 0.69 0.78 0.71
Credit/Deposit Ratio 69 63 77 77 78

55 12
11 Growth Rates (%)
50 10 Advances 34 35 83 22 24
9 Deposits 22 48 49 22 22
45
8
7
40 Interest Expense 65 54 94 17 17
6
5
Net interest Income 36 51 48 31 20
35
4 Other Income 35 51 22 19 20
EPS 29 26 1 15 23
FII Do m Inst (RHS) Profit After Tax 31 39 21 22 23
Source: Antique

Banking Sector

ICICI Bank
Back to Basics!
BUY CMP: INR471 Target Price: INR590


Sector : Banking ¦ The bank improved its CASA ratio from 22% in FY07 to
30% by the end of 1HFY09. Improvement in the CASA ratio is
a positive aspect for the bank’s cost of funds.
O/S shares (m) : 1,113
Free Float (m) 1,024 ¦ The bank has revised its strategy from a retail-centric
52-wk HI/LO (INR) : 1,465/282 growth to corporate-focused loan book improvement. This
Avg Daily Vol (‘000) : 2,669 approach will contain sudden spikes in terms of accretion of
Face Value (INR) : 10 NPAs, as more than 70% its NPAs are from the retail segment.
Bloomberg : ICICIBC IN
Reuters : ICBK.BO
¦ The bank expanded its branch network by more than 500
branches over the last 1 year, and new branches will start
contributing positively to the bank’s low-cost deposit-base.
Price Performance ¦ The stock has been punished for its high overseas
dependence, asset-liability mismatch and exposure to the
1m 3m 6m 12m
Absolute 31 (18) (40) (59) risky credit derivatives market. With improvement in the
Relative 16 8 (8) (21) liquidity situation, the bank’s short-term problems seem to
have been addressed. In addition, adequate capital and a
renewed strategy would support the performance of the bank.
Shareholding Pattern ¦ The stock is currently trading at 1.2x FY10 estimated

standalone price-to-book. Our SOTP target price of INR590 is
Others FII
24% 36% arrived at considering very reasonable growth estimates and
considerable deterioration of the loan book. The bank is
returning to the basics of banking business. Other
businesses will contribute positively.
Insurance
DR/NRI 12%
¦ Key risks to our call include a significant deterioration of the
28% loan book much above levels we anticipate, and a de-rating of
the entire financial sector on the back of the global slowdown.
Any moves on reforms with respect to the insurance sector
Price Performance Vs NIFTY
FDI cap release will be positive for the bank.
300
250
200 Key financials

50 Other Income 88,108 95,573 107,975 122,096

Profit After Tax 41,578 44,936 52,466 58,614
0
PAT growth (%) 34 8 17 12
EPS (INR) 37 40 47 53
ICICI Bank NIFTY
EPS growth (%) 8 8 17 12
P/E 13 12 10 9
+91 22 4031 3429 P/Adj BV 1.2 1.2 1.2 1.1
ICICI Bank
Banking Sector
Loan mix
Management already ICICI Bank - Loan mix
indicated its shift of future
Others (Priority etc.),
loan growth focus from the 13%
retail segment to the
corporate/wholesale
segment. SME, 12%
Corporate, 19% Retail, 56%
Source: Antique
ICICI Bank's loan mix is indicative of its heavy exposure to the retail segment. More than half of its
loans are retail in nature, and nearly half of such advances are made to the housing sector. Among
other sectors in retail, the bank has higher exposures to the commercial (trade) business, auto
loans and personal loans.

Home loans 49
Commercial business 15
Auto loans 13
Personal loans 11
Credit cards 7
Others 5
Total retail 100
Source: Antique
In times of a slowdown like the one we are witnessing today, a highly skewed loan exposure would
negate advantages of diversification, resulting in chances of a higher risk in terms of growth and
asset quality. The bank management has already indicated that it has shifted its focus on future
loan growth from the retail segment to the corporate/wholesale segment. Over the past 2 years,
NPAs from the retail segment have risen. We believe that after its shift in its focus, the bank's
retail segment business would stabilise better, as the loan book seasons out and also because
the infant credit default rate is higher in such segments. The effect of this shift in management
strategy is already visible, with the 1HFY09 loan growth remaining flat as against the average
growth of around 10% in case of other banks.
NPAs from retail loans - Will season out gradually

The table below shows the growth trajectory of retail loans over the past years, and how we expect
them to grow in the future. In addition, the chart also depicts the movement of bank's gross NPAs.

ICICI Bank
Banking Sector
Infant credit default rate is Retail loan growth and gross NPA movement
higher in retail segment.
ICICI Bank is bearing the 1800 180
1600 160
brunt.
140
1400
120
1200 100
1000 80
60
800
40
600 20
400 0
FY05 FY06 FY07 FY08 FY09 FY10 FY11
Retail Loans ICICI Bank GNPA
Source: Antique
As can be observed, NPAs of the bank shot up with the disproportionate increase in its retail loan
exposure in FY06 and FY07. We believe that more NPAs will accrue from this portfolio, and the
same will season out and peak in FY10. The bank has already slowed down its retail growth
considerably; we expect this strategy to pay off in terms of lower NPAs beginning only after FY10.
The 'infant credit-default rate' is observed to be high in retail loans, which will filter out most low-
quality assets originating from the retail book.
Increase in overseas dependence - Environment non-conducive!

Liquidity squeeze puts Borrowings from outside India as % of total interest bearing liabilities
pressure on overseas fund
availability for the bank. 18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Source: Antique
Interest-bearing liabilities O/S India as % of total interest-bearing liabilities

25%
20%
15%
10%
5%
0%

Antique Stock Broking Limited Source: Antique Banking Sector 43
ICICI Bank
Banking Sector
Our analysis of ICICI Bank's financials in comparison with other banks, as reflected in these
charts, indicates that its borrowing profile is much more overseas exposed than its peers. As at
the end of FY08, the bank had more than 15% of its total interest bearing-liabilities overseas
based. Even though less than 5% of total deposits are foreign in nature, it has a significant
position of borrowings from outstanding India. In addition, it has more than 20% of its loans
advanced outside India. A chart with details is given below.
Advances (loans) outside India as % of total loans

25%
20%
15%
10%
5%
0%
Source: Antique
In times of a global economic slowdown, especially a slowdown much more pronounced in

economies other than India, we believe this dependence on global markets for both advances and
deposits/borrowings has been one of the reasons for the negative outlook on the bank's future
growth. However, as mentioned in the earlier part of the report, ICICI Bank has already raised
capital for future growth and also has moderated its future loan growth targets. These steps will
largely mitigate likely risks of a shortage of funds or avenues for future growth. The bank's latest
capital adequacy ratio is comfortably placed at 14%.
Off-balance sheet - Hidden risk!

At the end of FY08, off- Another key reason for concerns over the bank is the growth of off -balance sheet exposures,
balance sheet exposure of especially in the foreign exchange derivatives front. As can be seen from above charts, the bank in
new private banks is 302% FY08 had significantly increased (130%) its outstanding foreign derivative exposure. The same
of their total assets while it scenario was observed even in the case of interest rate swap agreements.
is 62% in case of public
sector banks. Growth in Forward Exchange contracts
140%
120%
100%
80%
60%
40%
20%
0%
-20% Axis Bank BOB BOI HDFC Bank ICICI Bank PNB SBI
-40%
FY06 FY07 FY08
Source: Antique

ICICI Bank
Banking Sector
Growth in IRS deals - Interest rate swaps
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
FY06 FY07 FY08
Source: Antique
Although these off-balance-sheet exposures do not signify a credit risk due to devolvement, in
times of extremely volatile currency and financial conditions, the risk of potential default rises.
These exposures add to the uncertainty prevailing in the current liquidity crunch scenario. This is
another cause for the prevailing negative sentiment.
Asset-liability maturity patterns - A mismatch?

About INR1,583bn would As can be observed from the table below, more than 65% of deposits of ICICI Bank would mature
be due for payment, but in less than a year. But only 31% of its total advances would mature during this time. In absolute
only INR694bn would be terms, about INR1,583bn would be due for payment, but only INR694bn would be receivables.
receivables. Under conditions of extreme liquidity tightness, this imbalance in asset-liability maturity profile
has added lot of uncertainty as to the source of funds for the bank to meet this gap, and also the
cost of such funds that it needs to raise in order to honour payment obligations.
Asset-liability maturity analysis

Maturing in less than 1 year
Bank Advances Deposits Adv-Dep maturity gap Forex assets Forex liabs
Axis Bank 25% 53% -28% 29% 57%
Bank of Baroda 51% 60% -9% 71% NA
Bank of India 54% 50% 4% 57% 67%
HDFC Bank 41% 35% 6% 96% 85%
ICICI Bank 31% 65% -34% 36% 46%
Punjab National Bank 29% 32% -3% 75% 80%
State Bank of India 31% 30% 1% 66% 80%
However, a slew of liquid infusion measures undertaken by the RBI, including cutting cost of funds
(CRR cut), has helped ICICI Bank greatly to tide over the issue. Return of normalcy in terms of
liquidity will bring relief to the bank. On the other hand, a negative asset-liability-maturity gap, that
is, more liabilities maturing than assets in the short-term, will help the bank in case of a falling
interest rate environment. A significant portion of deposits can now be raised at lower costs than
earlier. It is a key positive for the bank, considering the fact that interest rates are expected to
remain lower going forward.
Factors favouring ICICI Bank

¦ Biggest branch expansion in FY08 as compared with other banks (addition of more than 500
branches in FY08 and 1QFY09, taking the number of branches from around 700 to about
1,200). The gestation period for these branches is 3-4 quarters, which means these branches
will contribute to the bank's growth from FY10 in terms of a high CASA ratio.
ICICI Bank
Banking Sector
¦ The bank has invested in many subsidiaries like asset management and insurance (life and
non-life). Reforms on insurance that include more foreign equity participation will help these
businesses to deliver stronger performance that will add value to the Bank. Additionally, such
reforms imply that the bank need not reserve more capital to infuse into these operations.
¦ The bank management has reportedly reduced its exposure drastically to risky exotic derivatives
by more than 85-90%. It has also provided for most of the existing exposures. Reportedly, the
bank has an exposure of USD1.5bn to credit derivatives. Other banks with exposure to such
products include SBI (USD1bn), Bank of India (USD300m) and Bank of Baroda (USD150m).
Considering the bank's balance sheet size (USD90bn) and the reduction of exposures in
these instruments, the impact of future potential losses might not be significant.
Valuation
Return to core banking will Current valuations, as reflected by the chart below, show that the bank is presently trading at
be key for ICICI Bank’s levels that it has not seen during the last 5-6 years, that is, since the merger of the DFI with the
future growth. bank. The share price reflects the pessimism of investors in terms of factors discussed above:
skewed loan mix, high overseas dependence, asset-liability mismatch, off-balance sheet and
credit derivative exposures.
ICICI Bank – Price to adjusted BVPS

1,600
INR
1,400
1,200
1,000
800 2x
600 1.5x
400 1x
200 0.5x
0
Source: Antique
Our positive call on the company's share price, delivering positive returns,
is based on the underlying factors:
¦ Global credit spreads have moderated from levels seen during 1HFY09.
¦ The RBI has ensured that liquidity is infused swiftly and in abundance into Indian banks.
¦ The bank realises the importance of having a higher CASA ratio, and a lower proportion of
retail assets in its total loan portfolio. It has expanded its branch network by more than 50%
during the last 12 months. The positive impact of these new branches will be seen from FY10.
¦ The bank, reportedly, reduced its exposure to risky credit derivative contracts.
¦ The bank has strategic investments in various other businesses that will contribute positively
in terms of value unlocking and profitability.

ICICI Bank
Banking Sector
We believe that the bank will bear the brunt of the current economic slowdown and liquidity
crunch. Its NPAs will increase and loan growth will slow down. We expect the bank to bring down
its exposure to the retail segment to moderate the accretion of NPAs from this segment. Currently,
more than 75% of gross non-performing assets of the bank originate from the retail segment. The
chart below depicts our assumptions in terms of future loan growth of the bank and the potential
movement of gross NPAs.

Share of retail loans in total loans 61% 63% 65% 59% 55% 53% 51%
Change in loan mix and accretion of gross NPAs
3400 180
160
2900
140
2400 120
100
1900
80
1400 60
40
900
20
400 0
Retail Loans Non-retail Loans ICICI Bank GNPA
Source: Antique
We have valued the bank's share price using the SOTP model. While doing so, we have considered
only its most key subsidiaries and have also assumed very reasonable (bearish) growth estimates
for future years. The summary table is given below:
Robeco – Canara Bank ICICI-Prudential AMC
AMC – 10% of AUM, IDFC AUM as of Mar 08 INR 543 bn
– Standard Chartered AMC Average AUM (as of Nov 2008) INR 370 bn
– 6% of AUM, Eton Park – AUM for valuation (~20% fall from Nov 08) INR 300 bn
Reliance AMC – 13% of Valuation 5% of AUM
AUM Value per share (51% stake of ICICI Bank) INR 7
ICICI-Prudential Life Insurance
APE (Annualised Premium Equivalent) Mar 08 INR 65 bn
APE for valuation (15% growth from Mar 08) INR 75 bn
NBAP margin (Currently ~19%) 15%
New business achieved profit (NBAP) INR 11.25 bn
Valuation 15 times NBAP
Value per share (74% stake of ICICI Bank) INR 112
ICICI Ventures
AUM as of Mar 08 INR 95 bn
AUM for valuation (~20% fall in Mar 08 value) INR 76 bn
Valuation 5% of AUM
Value per share (100% stake of ICICI Bank) INR 4
Total value in key subsidiaries INR 123
Adj BV of ICICI Bank (standalone) FY10e at 1.2 times price-to-book INR 465
Valuation of ICICI Bank share INR 588

ICICI Bank
Banking Sector
In recent times, the mutual fund industry saw deals being struck between 5% and 13% of the
AUM. Robeco bought Canara Bank AMC valued at 10% of AUM, IDFC bought Standard Chartered
AMC at 6% of AUM, Reliance AMC placed shares to a private investor (Eton Park) valuing each
share at 13% of its AUM. Considering the brand value of ICICI and its top-5 rank in the Indian
mutual fund industry, we believe that 5% valuation of AUM is a fairly conservative estimate. Even
in terms of the life insurance division, we have considered a very normal 15% growth in APE, while
the bank is currently growing at over 30%. We also moderated the NBAP margin at 15%, while
the bank currently reports a margin of 19%.
Company background:
¦ ICICI Bank was originally promoted in 1994 by ICICI Ltd, an Indian financial institution, and
was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%
through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs
listed on the NYSE in fiscal 2000. In a move towards universal banking, the managements of
ICICI and ICICI Bank decided that the merger of ICICI with ICICI Bank would be the optimal
strategic alternative for both entities. In October 2001, directors of ICICI and ICICI Bank approved
the merger. Today, ICICI Bank is India's second-largest bank.
¦ As per the latest share-holding report, FIIs hold a 39% stake in the bank. It has ADRs
representing 29% of the share capital. A 17% stake is held by MFs and insurance companies.
¦ Important subsidiaries of the bank include ICICI Securities (100%), ICICI Venture Funds (100%),
ICICI-Prudential Life Insurance (74%), ICICI-Lombard General Insurance (74%), and ICICI
Prudential AMC (51%). The bank also has wholly-owned overseas banking subsidiaries in the
UK and Canada.
¦ The bank has a network of around 1,400 branches.
¦ As at the end of September 2008, the capital adequacy ratio of the bank stood at 14.0%.
Gross NPAs as a percentage of advances stood at 4.2%. The net interest margin was 2.4%.
The CASA ratio was 30%.
Comparison of profits of various entities under the group

INRbn FY08 FY07 1HFY09 1HFY08
ICICI Bank 41.6 31.1 17.4 17.8
ICICI Securities 1.5 0.6 0.2 0.4
ICICI Securities Primary Dealership 1.4 1.3 0.2 1.0
ICICI Prudential Life Insurance (NBP) 12.5 8.8 5.2 4.3
ICICI Lombard General Insurance 1.0 0.7 NA 0.8
ICICI Venture Funds 0.9 0.7 1.4 0.3
ICICI Home Finance 0.7 0.5 0.4 0.3
ICICI Prudential AMC 0.8 0.5 0.4 0.5
ICICI Bank UK (1H in USD mn) 1.6 1.8 (35.5) 36.0
ICICI Bank Canada (1H in CAD mn) -0.6 -0.1 21.7 NA
ICICI Bank group 34.0 27.6 12.7 16.4

Source: Company, Antique

Financials (INR M) ICICI Bank
BVPS (INR) 270 418 440 468 497
Dividend Per Share (INR) 10.0 11.0 15.0 17.0 20.0
Other Income 69,279 88,108 95,573 107,975 122,096
- Fee Income 43,309 56,053 67,264 77,353 88,956
- Treasury Income 10,802 18,121 17,215 18,937 20,831
- Provision for Investments 419 623 2,900 1,050 0
Interest Spread 1.56 1.44 1.40 1.52 1.70
Tax 5,378 8,984 9,854 11,024 12,073
CASA 22 26 26 28 28
Yields (%)
Capital 8,993 11,127 11,127 11,127 11,127
Deposits 2,305,102 2,444,310 2,818,156 3,160,459 3,662,673
Borrowings & Other Liabs 894,847 1,085,438 1,025,014 1,161,617 1,269,139
Cost/Income 53 51 52 51 53
Total Liabilities 3,446,581 3,997,951 4,336,782 4,846,024 5,488,337
Return on Average Net Worth13.4 11.7 9.4 10.4 10.9
Assets
Return on Average Assets 1.04 1.12 1.08 1.14 1.13
Investments 912,578 1,114,543 1,243,763 1,352,729 1,469,252
Advances 1,958,656 2,256,161 2,409,490 2,731,148 3,133,161 Asset Quality (%)
Total Assets 3,446,581 3,997,951 4,336,782 4,846,024 5,488,337 Net NPA/Advances 1.02 1.55 2.28 2.56 1.76
74 24
72 22 Growth Rates (%)

70 Advances 34 15 7 13 15
20
68
Deposits 40 6 15 12 16
18 Interest Income 54 40 23 8 9
66
64
Net interest Income 20 30 22 12 13
62 14
Other Income 66 27 8 13 13
60 12
Operating Profit 51 36 13 15 8
EPS 21 8 8 17 12
FII Dom Inst (RHS) Profit After Tax 22 34 8 17 12
Source: Antique

State Bank of India
The elephant is ‘indeed’ dancing!
BUY CMP: INR1,295 Target Price: INR1,500


Sector : Banking ¦ The bank has a diversified portfolio of loans that provides
Market Cap (INRbn) : 823 comfort in terms of non-concentration of NPAs. This is of a
Market Cap (USDbn) : 17.6 greater importance in times of the current economic turmoil.
¦ The bank has a high CASA ratio (40% at the end of 2QFY09).
Free Float (m) 258
Being a government-owned entity, it will continue to attract
52-wk HI/LO (INR) : 2,429/966
public deposits.
Avg Daily Vol (‘000) : 1,080
Face Value (INR) : 10 ¦ Though the performance of the associate banks has not
Bloomberg : SBIN IN
been as strong as the parent bank, the banking business of
the group has around 25% of the total market share of the
Reuters : SBI.BO
country. The pervasive network brings great access benefits
to the bank in terms of deposit-raising.
¦ The group operates in many segments like AMC, insurance,

Price Performance investment banking, factoring etc. and almost all of these
1m 3m 6m 12m businesses are performing significantly well. Improvement
Absolute 17 (17) (4) (40) of performance of other businesses including any
Relative 4 9 47 13 regulatory reforms in these segments will provide significant
fillip to the stock price.
¦ The stock is currently trading at 1.7x FY10 estimated price-

to-book on a standalone basis. Our target price of INR1,500 is
Shareholding Pattern arrived at considering reasonable assumptions relating to
Others
Insurance
growth of the parent bank and its key subsidiaries. The life
18%
5% insurance business and associate businesses contribute close
to 20% of the target price.
GOI ¦ Risks to our call include the following factors:
59%
¦ Significant deterioration of asset quality owing to its higher

DR/NRI
6%
aggregate exposure to the ailing SME segment.
FII
12%
¦ Government intervention in a way to force the bank to
conduct banking through riskier/less-return-based
Price Performance Vs NIFTY exposures.
300 ¦ Negative macro-economic environment
250
200 Key financials

50
Other Income 86,949 105,014 118,225 140,151
Profit After Tax 67,291 71,842 78,735 90,437
0
PAT growth (%) 48 7 10 15
EPS (INR) 107 113 124 142
SBI NIFTY
EPS growth (%) 23 6 10 15
P/E 12 11 10 9
+91 22 4031 3429 P/Adj BV 2.0 1.8 1.7 1.5
Punjab National Bank
Emerging stronger! Rerating in the horizon
HOLD CMP: INR503 Target Price: INR500

December 18 2008 Strictly confidential

Sector : Banking ¦ The bank does not have significant exposure to any single
segment of the economy. The diversified loan mix provides
cushion during periods of economic stress. The bank has high
loan loss provision coverage ratio to ensure that significant
Free Float (m) 133
asset quality deterioration does not impact the profitability.
52-wk HI/LO (INR) : 721/330
Avg Daily Vol (‘000) : 150 ¦ The bank always maintained a high CASA ratio (around 40%
Face Value (INR) : 10 at the end of 2QFY09). The safety offered by public sector
Bloomberg : PNB IN banks due to their ownership structure will prevent any erosion
Reuters : PNBK.BO of this advantage.
¦ The management of the bank is aggressive. It has a focused

strategy to conduct its business. Investments in technology,
Price Performance
organisational efficiency by de-layering the workforce
1m 3m 6m 12m and NPA-control have been taken up as key performance
Absolute 11 (3) 10 (21)
drivers by the bank and these have yielded returns. Continued
Relative (1) 29 68 50
emphasis on these initiatives will keep the bank in good stead.
¦ The stock is currently trading at 1.2x FY10 estimated price-

to-book value. At these levels, we believe that the stock is
Shareholding Pattern
fairly valued. A high core income component in the total income
Others is a positive factor for the bank.
11%
Insurance
12% ¦ Changes in management might negatively impact the stock
price as the current CMD has delivered a good performance in
terms of growth and asset quality. He is, reportedly, one of the
main contenders to the post of Deputy Governor of RBI.
FII GOI ¦ Sale of a subsidiary PNB Gilts has not materialized after many
19% 58%
attempts due to pricing issues. Also, the insurance JV with
Principal group has run into rough weather. Any favourable
Price Performance Vs NIFTY
developments on these fronts would be positive for the stock!
250
200
150 Key financials

Year ended March 2008a 2009e 2010e 2011e
100
Net Interest Income 55,342 64,249 75,176 89,571
50 Other Income 19,976 18,935 21,023 26,091
Profit After Tax 20,488 22,928 28,564 36,622
0
Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 PAT growth (%) 33 12 25 28
PNB NIFTY EPS (INR) 65 73 91 116

EPS growth (%) 33 12 25 28
P/E 8 7 6 4
+91 22 4031 3429 P/Adj BV 1.6 1.4 1.2 1.0
SBI and PNB
Banking Sector
Loan mix
SBI - Loan mix
Retail
21%
30%
Corporate
SME 31%
18%
Source: Antique
Retail lending forms

SBI and PNB, the top two public sector banks in terms of market share of advances and deposits,
around 20% and 16% of
have almost a similar kind of loan mix. The key difference between other private sectors banks
SBI and PNB’s portfolios,
discussed in this report and these PSU banks is the extent of priority sector lending that comprises
respectively.
a major portion of the loan book. Retail lending forms around 20% and 16% of SBI and PNB's
portfolios, respectively. The fair mix of all kinds of loans, which these banks carry, acts as a great
cushion in these difficult times when economy is slowing down, and most segments are
experiencing growth and liquidity-related issues.
PNB - Loan mix
Retail
Others (Priority
16%
etc.)
34%
Corporate
35%
SME
15%
Source: Antique
In addition, SBI and PNB do not have any skewed exposure to the real estate segment.
SBI and PNB have achieved commendable improvement in terms of quality of assets. Both banks
have reduced their NPAs consistently even while growing their loan book on a compounded basis
at above 25%.
The charts comparing SBI and PNB’s standing vis-a-vis other banks in these respects are given
below.

SBI and PNB
Banking Sector
Real estate exposure

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Source: Antique
GNPAs – PNB and SBI show consistent improvement
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
A xis Bank BOB BOI HDFC Bank ICICI Bank PNB SBI
FY 04 FY 05 FY06 FY07 FY 08
Source: Antique
During FY09, State Bank SBI - Subsidiaries and Associate Banks showing weakness?
of Saurashtra, one of the
The table below summarises the performance of the SBI group. It has major investments in
smaller associate banks
businesses, including banking through associates, insurance, mutual fund, etc.
has been merged with
SBI. What can be observed from the above table is the fact that the parent bank is increasing its
contributing to the group's net profits. In 1HFY09, the bank's share in profits shot up to 95% of the
total group profit. This is mainly because of a tepid performance of associate banks.
Subsidiary % SBI Holding Business FY08 FY07 1HFY09 1HFY08

SBI NA Banking 67.3 45.4 22.6 16.1
SBBJ 75 Banking 3.2 3.1
SBH 100 Banking 5.6 5.1
SB-Indore 98 Banking 1.9 2.3 9.8 9.7
SBM 92 Banking 3.2 2.5
SBP 100 Banking 4.1 3.7
SBT 75 Banking 3.9 3.3
SBI AMC 63 Mutual Fund 0.7 0.4 0.5 0.3
SBI BNP Life 74 Insurance 0.3 0.0 NA NA
SBI Capital Markets 86 NBFC 1.4 0.7 1.2 0.9
SBI Group 89.6 63.6 23.8 21.5
% Share of profits of the parent bank 75% 71% 95% 75%

SBI and PNB
Banking Sector
As seen in the charts below, the net interest income in many of the associate banks has declined
or remained flat during last fiscal year. Many of these banks are not showing a convincing increasing
trend of NII growth.
Even in terms of the CASA ratio, associate banks have not been able to keep up the low-cost
deposit ratio at high levels. This is one reason why their NII has seen a declining trend. It could be
a matter of concern for SBI, if the performance of associate banks does not improve in the future.
SBBJ – State Bank of SBI - Associate banks - NII growth

Bikaner and Jaipur, SBH –
35%
State Bank of Hyderabad,
30%
SBId – State Bank of
25%
Indore, SBM – State Bank
20%
of Mysore, SBP – State 15%
Bank of Patiala, SBS – 10%
State Bank of Saurashtra, 5%
SBT – State Bank of 0%

-5% SBBJ SBH SBId SBM SBP SBS SBT
Travancore.
-10%
-15%
Source: Antique
In such a situation, developments in respect to consolidation of associate banks should be looked

at with caution, whether it will be beneficial for the parent bank or would be a drag on its own
performance. The consolidation process has already been kick-started as a test by merging State
Bank of Saurashtra with the parent bank. This is one of the smallest associate banks, and SBI
would like to use this consolidation as a learning experience for the overall consolidation process.
However, in the current economic and political environment, we do not foresee any major
improvement with regard to consolidation with other associate banks.
Another reason why the performance of associate banks is a matter of concern for the parent
bank is that they have been seeing the loan growth falling.
SBI - Associate banks - CASA ratios
45%
40%
35%
30%
25%
20%
SBBJ SBH SBId SBM SBP SBS SBT
Source: Antique

SBI and PNB
Banking Sector
SBI - Associate banks – Loan growth

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
SBBJ SBH SBId SBM SBP SBS SBT
Source: Antique
SBI Group, today, has SBI - Associate banks - Branches

more than 15,000
1200
branches and offices
spread out across the 1000
country. The next biggest 800

network is that of PNB with
600
over 4,500 branches.
400
200
0
SBT SBS SBP SBM SBId SBH SBBJ
Source: Antique
SBI - Parent bank - Branches
10600
10400
10200
10000
9800
9600
9400
9200
9000
8800
8600
8400
Source: Antique
However, one positive aspect in respect of associate banks has been that they have controlled
their NPAs.

SBI and PNB
Banking Sector
SBI – Associate banks NPA control
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
SBBJ SBH SBId SBM SBP SBS SBT SBI
Source: Antique
PNB - Fundamentals strong

PNB has the highest loan
Besides having a fair mix of loans and advances, PNB also has a high CASA ratio in the PSU
loss coverage ratio (>75%) space. Compared with an average PSU bank's CASA ratio of 35%, PNB has always maintained a
in the universe of banks
higher CASA ratio above 40%. Aggressive marketing by private banks saw this ratio slide during
that we covered in this
recent years, though low-cost deposits still form a good part of total deposits for this bank.
report.
PNB - CASA ratio
60%
50%
40%
30%
20%
10%
0%
FY04 FY05 FY06 FY07 FY08 1HFY09
Source: Antique
Loan loss coverage ratio
120%
100%
80%
60%
40%
20%
0%
FY04 FY05 FY06 FY07 FY08 1HFY09
Source: Antique
SBI and PNB
Banking Sector
In terms of NPA management, as shown in one of the earlier charts, the GNPA ratio of the bank
has consistently come down. Even in terms of the cover for the low-quality assets, PNB always
maintained a high loan loss coverage ratio, well above 70% levels.
At a time when the rise in NPAs is a major concern, a high NPA provision coverage ratio will
provide a great comfort in terms of the bank being able to maintain its profitability.
PSU bank valuations SBI valuations converging with private bank valuations
show an inverse An analysis of the valuation of top public banks and private banks in terms of levels at which they
relationship with the 10- traded (price-to-adjusted book value) over the last few years has shown certain interesting results.
year G-Sec bond yield.
Private banks always traded at valuations greater than other banks. Greater autonomy in operations,
aggressive managements, technological economies, high growth visibility and great marketing
muscle are the primary reasons for this.
PSU banks (ex-SBI) traded at lower valuations due to high levels of government ownership causing
intervention fears, change of bank heads at regular intervals causing changes in focus and approach,
higher NPAs mostly due to legacy issues, restricted capital raising environment, etc.
On the other hand, SBI received better valuations than other PSU banks, due to huge size
benefits that it gets in terms of number of branches and their geographic spread supported by
associate banks, the market share in advances and deposits, consistent growth and the control
it exercised on its loan-book maintaining it at a high quality.
Of late, valuations of private banks received a beating due to the high level of NPAs that they
started showing, and also because of their movement into riskier and non-core banking businesses,
exposing them to many sensitive segments.
An interesting fact that emerged out of our analysis is that PSU banks show a clear inverse
relationship with the 10-year G-Sec bond yield. One of the reasons could be the fact that PSU
banks held a high proportion of their investments under the AFS and HFT category for high durations,
and this would cause high mark-to-market losses for the bank. Another reason for this pattern
could be the efficiency and bargaining-power, that is, in a rising interest rate scenario, PSU banks
are less likely to be as aggressive as private banks to achieve business growth. Therefore, a
falling interest rate scenario in the current environment would offer a good case to argue that the
valuation gap between public sector banks and private sector banks should reduce.
Valuation comparison of SBI, private banks and PSU banks

4.0 9.0
3.5 8.0
3.0 7.0
6.0
2.5
5.0
2.0
4.0
1.5
3.0
1.0 2.0
0.5 1.0
0.0 0.0
FY03 FY04 FY05 FY06 FY07 FY08
SBI PSU-X-SBI Pvt 10-yr-GSec_Yld (RHS)
Source: Antique

SBI and PNB
Banking Sector
Valuation
SBI's share price movement chart given below (price to adjusted BVPS of the standalone bank)
indicates that it is currently trading at 1.7x. However, what is interesting to note is the fact that
this graph does not carry the value of any of its associates or subsidiaries. Associate banks,
insurance business and AMC are all profit-making entities. In fact, the life insurance business of
SBI is growing at a scorching pace, reporting the highest growth rate in the entire domestic life
insurance industry. The business has grown at 177% in 1HFY09 as compared with the previous
year. This is extremely positive as compared with the 35% growth of ICICI Prudential Life, or a
51% growth of HDFC Standard Life.
SBI – Price to adjusted standalone BVPS

2,500
INR
3x
2,000
2.25x
1,500
1.5x
1,000
500 0.75x
0
Source: Antique
Our SOTP valuation of SBI, considering reasonable growth assumptions and an increase in NPAs,
gives a per share value of INR1,500.
SBI Mutual Fund

Average AUM as of Nov 08 INR 230 bn
AUM for valuation (~20% fall from Nov 08) INR 185 bn
Valuation 5% of AUM
Value per share (63% stake of SBI) INR 10
SBI Life Insurance
APE (Annualized Premium Equivalent) Mar 08 INR 35 bn
APE for valuation (25% growth from Mar 08) INR 44 bn
NBAP Margin 15%
New Business Achieved Profit (NBAP) INR 6.3 bn
Valuation 15 times NBAP
Value per share (74% stake of SBI) INR 115
Associate Banks - 1 time adjusted BVPS INR 175
SBI (standalone) at 1.6 times Price-to-Adj BVPS of FY10e INR 1,200
Valuation of SBI share INR 1,500

SBI and PNB
Banking Sector
PNB's valuation chart indicates that whenever the share price touched one-time price to adjusted
BVPS, the share moved up to higher levels. The 5-year average PBV multiple of PNB is 1.7. The
diversified loan portfolio gives comfort, and this is supported by a strong NPA management history.
In addition, the high loan loss coverage ratio is a positive factor supporting these valuations for the
bank.
The bank has a 74% stake in PNB Gilts, a primary dealer that has business interests in trading
government securities, this subsidiary has posted losses during 1HFY09 due to the adverse
interest rate situation. The bank has been trying to sell its stake in this company, but its efforts
could not materialise. A favourable interest rate scenario will help PNB Gilts to post gains in the
second half of FY09. However, we feel that the current environment is not supportive of the stake
sale happening, unless the acquirer gets an interesting offer. Another potential development, which
might not materialise soon, but can offer upside potential to PNB's stock, is the listing or stake
sale of UTI Mutual Fund, wherein PNB, along with SBI, Bank of Baroda and LIC, hold a 25% stake
each. Should these developments happen, they will give a fillip to the stock price.
At the current price and an adjusted BVPS for FY10 estimated at INR 435, the share is fairly
valued. However, at levels between 430-440, the share would trade at 1 time price-to-book and will
be a good ‘buy’. We would want to see more control on NPAs as the chart underneath shows that
quarterly NPAs have been high for PNB and have just eased.
PNB – Price to adjusted BVPS
900
INR 2x
800
700
1.5x
600
500
400 1x
300
200 0.5x
100
0
May-02 May-03 May-04 May-05 May-06 May-07 May-08
Source: Antique
GNPA Ratio - Quarterly

5.0
4.5
4.0
3.5
(%) 3.0
2.5
2.0
1.5
1.0
3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09
PNB ICICI Bank SBI

Source: Antique
Financials (INR M)
State Bank of India
BVPS (INR) 595 776 860 958 1,072
Dividend Per Share (INR) 14.0 21.5 22 22 24
Other Income 67,653 86,949 105,014 118,225 140,151
- Fee Income 48,045 59,143 73,928 85,017 102,021
- Treasury Income (729) 9,463 11,356 12,492 15,615
- Provision for Investments 3,792 (887) (2,600) (1,500) 0
Interest Spread 2.54 2.32 2.11 2.18 1.96
Tax 30,838 37,098 55,966 68,816 77,717
CASA 45 43 42 42 41
Yields (%)
Capital 5,263 6,315 6,349 6,349 6,349

Deposits 4,355,211 5,374,039 6,277,225 7,468,465 8,806,026
Borrowings & Other Liabs 997,456 1,350,897 1,512,628 1,797,967 2,103,284
Cost/Income 54 49 47 45 46
Total Liabilities 5,665,652 7,215,263 8,335,715 9,874,689 11,590,178
Return on Average Net Worth 15.4 16.8 13.9 13.6 14.0
Assets
Return on Average Assets 0.86 1.04 0.92 0.86 0.84
Investments 1,491,489 1,895,013 1,985,421 2,325,853 2,728,061
Advances 3,373,365 4,167,682 5,084,572 6,152,332 7,321,275 Asset Quality (%)

21 15
20
Growth Rates (%)
14
Advances 29 24 22 21 19
19
13 Deposits 15 23 17 19 18
18 Interest Income 4 31 32 17 15
12
11 Net interest Income -3 13 16 22 11

16
Other Income -9 29 21 13 19
15 10
Operating Profit -11 31 22 23 13
EPS 3 23 6 10 15
Source: Antique

Financials (INR M)
Punjab National Bank
Total Interest Expense 60,229 87,309 117,019 135,219 157,671 BVPS (INR) 331 391 445 518 615
- Interest on deposits 56,175 82,652 109,906 127,985 149,457 Adjusted BVPS (INR) 299 318 365 436 529
Net Interest Income 52,132 55,342 64,249 75,176 89,571 Dividend Per Share (INR) 10.0 13.0 13.5 13.5 14.5
Other Income 17,304 19,976 18,935 21,023 26,091
- Fee Income 9,700 11,062 10,121 11,939 16,561
- Treasury Income 3,729 4,419 4,198 4,282 4,496
Price/EPS 7.7 6.9 5.5 4.3
Total Income 69,436 75,317 83,184 96,198 115,662
Price/Adjusted BVPS 1.6 1.4 1.2 1.0
Operating Expenses 33,262 35,255 41,242 46,843 54,924
Dividend Yield (%) 2.6 2.7 2.7 2.9
- Employee Expenses 23,525 24,615 29,538 33,969 40,763
Provisions (excluding Tax) 14,483 7,103 7,722 7,350 6,882 Performance Ratios (%)
- Provision for loans 7,518 5,160 5,682 6,485 6,882 Average Yield on funds 7.59 8.21 8.68 8.54 8.51
- Provision for Investments 6,749 1,042 2,040 865 0 Average Cost of funds 4.10 5.40 6.11 6.06 6.01
Interest Spread 3.48 2.82 2.57 2.48 2.50
Tax 6,291 12,472 11,293 13,442 17,234
Net Interest Margin 3.52 3.19 3.08 3.05 3.08
Profit After Tax 15,401 20,488 22,928 28,564 36,622
CASA 46 43 41 40 39
Yields (%)
Avg Yield on Investments 7.63 7.28 7.75 7.75 7.25

Year Ended 31st March 2007 2008 2009e 2010e 2011e
Avg Cost of Deposits 4.33 5.40 6.12 6.09 6.03
Liabilities
Capital 3,153 3,153 3,153 3,153 3,153
Deposits 1,398,597 1,664,572 1,927,784 2,273,276 2,684,296 Other Income/Total Income 25 27 23 22 23

Borrowings & Other Liabs 121,274 202,448 289,269 329,655 398,532 Cost/Income 48 47 50 49 47
Total Liabilities 1,624,225 1,990,204 2,357,416 2,766,148 3,276,626 Return on Average Net Worth 15.5 18.0 17.4 18.8 20.5
Assets Return on Average Assets 1.00 1.13 1.05 1.12 1.21
Investments 451,898 539,917 620,905 714,040 821,146
Asset Quality (%)
Advances 965,965 1,195,016 1,445,969 1,706,243 2,047,492
Gross NPA/Advances 3.41 2.72 3.15 3.10 3.00
Fixed & Other Assets 49,906 66,963 72,703 88,984 104,662
Source: Antique
Credit/Deposit Ratio 69 72 75 75 76
21 20
19 Growth Rates (%)
20 18 Advances 29 24 21 18 20
19 17 Deposits 17 19 16 18 18
16
18 15
17 13 Net interest Income 12 6 16 17 19
12
16 Other Income 36 15 -5 11 24
11
Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 EPS 7 33 12 25 28
Source: Antique

Banking Sector
Equity Sales
Mr. Anish Jhaveri 91-22-4031-3330 anish@antiquelimited.com
Mr. Dharmesh Dalal 91-22-4031-3331 dharmesh@antiquelimited.com
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Mr. Chaitanya Kotadia 91-22-4031-3336 chaitanya@antiquelimited.com
Mr. Anuj Sonpal 91-22-4031-3326 anuj@antiquelimited.com
Derivative Sales
Mr. Ashish Maheshwari 91-22-4031-3350 ashish.maheshwari@antiquelimited.com
Mr. Jatin Dedhia 91-22-4031-3344 jatin@antiquelimited.com
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Research
Mr. Krish Shanbhag 91-22-4031-3440 krish@antiquelimited.com
Mr. Abhijeet Kundu 91-22-4031-3430 abhijeet@antiquelimited.com
Mr. Abhineet Anand 91-22-4031-3441 abhineet@antiquelimited.com
Mr. Amish Shah 91-22-4031-3442 amish@antiquelimited.com
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Important Disclaimer:
This report is prepared and published on behalf of the research team of Antique Stock Broking Limited (ASBL). This is intended for private circulation
and should not be taken as recommendation to trade in the securities mentioned.We have exercised due diligence in checking the correctness and
authenticity of the information contained herein,so far as it relates to current and historical information, but do not guarantee its accuracy or
completeness. Theopinions expressed are our current opinions as of the date appearing in the material and may be subject to changefrom time to time
without notice. ASBL or any persons connected with it do not accept any liability arising from theuse of this document. The recipients of this material
should rely on their own judgment and take their own professionaladvice before acting on this information. ASBL or any of its connected persons
including its directors orsubsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise toany
person from any inadvertent error in the information contained, views and opinions expressed in this publication.ASBL and/or its affiliate companies
may deal in the securities mentioned herein as a broker or for any othertransaction as a Market Maker, Investment Advisor, etc. to the issuer company
or its connected persons.
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Banks Dec08 Antique

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Banks Dec08 Antique

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December 18, 2008 Strictly confidential

Indian Banks - Bank on them!

How much can NPAs rise to?

NPA trend - Will peak in FY11

GNPA (INR bn) GNPA ratio (RHS) NNPA ratio (RHS)

Gross NPAs, gross advances - Estimated changes in the next 3 years

Source: IBA, Capitaline, Antique Research

Antique Stock Broking Limited Banking Sector 2

Why do we feel that markets’ expectation of a huge rise in NPAs from

Gross NPAs in banking system - FY08

Other priority Agriculture

Source: Antique, RBI

Networth growth - BSE-500 companies

Source: Antique, Capitaline

Antique Stock Broking Limited Banking Sector 3

Current shareholding of CIBIL

GE Strategic Invst Stan' Chart'

Trans Union Intl Citicrop Finance

Union Bank of India

Antique Stock Broking Limited Banking Sector 4

Gross NPA levels for select banks in the next 3 years

What caused such high NPAs in the system until 1995?

¦ Lack of focus and control: The government-controlled operations of banks resulted in

¦ Corruption and bureaucracy: Political interference and lack of supervision increased

Antique Stock Broking Limited Banking Sector 5

Post-1995 - Incredible improvement in loan quality

NPAs fall even when IIP falls!

GNPA ratio NNPA ratio Credit Grow th (RHS) IIP grow th

Source: IBA, Capitaline, Antique Research

GDP growth - US, UK and India

Source: RBI, IBA, Antique Research

Antique Stock Broking Limited Banking Sector 7

Have Indian banks achieved the best asset quality levels?

Gross NPA/Advances ratio - India vs others

Efficiency and return parameters - Room for betterment?

Operating expenses/Total assets ratio

Source: RBI, IBA, Antique Research

Antique Stock Broking Limited Banking Sector 8

Banks of China and India Return on assets - India vs others

Indian Banking - Internal dynamics - Changed circumstances

Future credit growth for Credit growth:

Source: RBI, Antique Research

Antique Stock Broking Limited Banking Sector 9

Inflation no longer a Inflation (WPI)

Source: Office of Economic Advisor, Antique

Inflation and Bankex

Bankex WPI - Inflation (RHS)

Antique Stock Broking Limited Banking Sector 10

Credit composition - Diversified

Diversification – The key Gross bank credit deployment

Bank credit deployment (%) – Industry segment

Antique Stock Broking Limited Banking Sector 11

Banks - Market share (%) - Deposits and advances

Antique Stock Broking Limited Source: IBA, Antique Research

GDP and credit growth

A B B/A C C/A D D/A E E/A

Source: RBI, Antique Research

Antique Stock Broking Limited Banking Sector 13

Private-sector credit to GDP ratio

Indian banking environment Private-sector credit to GDP ratio - Global comparison

1) State Bank of India

3) Punjab National Bank