Syndicate Bank

Result Update February 13, 2015

Consequently, NNPA rose to | 4370 from | 3825 crore QoQ. Quarterly Performance Slippages came in lower on a sequential basis at | 1300 crore Q3FY15 Q3FY14 YoY (%) Q2FY15 QoQ (%) compared to | 1683 crore in Q2FY15 NII 1,318 1,358 -3.0 1,422 -7.4 • Credit growth came in better than expected increasing by 18.6% YoY Other income 428 292 46.4 437 -2.0 (vs. 13.6% in Q2) to | 186630 crore. Deposits grew at a faster pace PPP 838 806 4.0 954 -12.1 increasing by 28.9% YoY to | 251469 crore in Q3FY15; ahead of PAT 305 380 -19.7 316 -3.4 expectation Business growth to stay slightly ahead of industry Key Financials Syndicate Bank is a mid-sized PSU bank with close 3500 branches. In the | Crore FY2014 FY2015E FY2016E FY2017E past eight years, it consistently grew its business above industry except in NII 5,540 5,626 6,495 7,427 PPP 3,563 3,809 4,456 5,142 FY10-11 wherein it went into consolidation phase. Post FY11, business PAT 1,711 1,493 1,830 2,117 traction improved and was above industry at 17% CAGR in FY11-14 with loans at | 173912 crore and deposits at | 212343 crore by FY14. Currently, the book is diversified into corporate (36%), PSL (36%), retail (15%) and Valuation summary MSME (14%). We have built in business CAGR of 16% over FY14-17E FY14 FY15E FY16E FY16E with loans rising to | 270912 crore & deposits at | 360156 crore. P/E 4.3 4.9 4.0 3.5 Expect margins to stay stable against management guidance of pick-up Target P/E 4.5 5.2 4.2 3.7 Syndicate Bank’s NIMs declined to 2.3% in FY10 from 3% in FY07 owing P/ABV 0.9 1.1 1.0 1.0 to its focus on higher growth and also due to higher deterioration in asset Target P/ABV 0.9 1.2 1.1 1.0 quality during FY10. However, in FY11-13, margins improved and have RoA 0.7 0.5 0.6 0.6 stayed at ~3% due to shedding of bulk deposits (down to 17% in FY13 RoE 15.2 12.1 13.6 14.3 from >25% in FY09), maintenance of CASA ratio at >30% levels and controlled asset quality. However, in FY14, margins slipped significantly Stock data to 2.52% mainly due to a sharp spurt in slippages to | 3628 crore from Market Capitalisation |6832 Crore | 2142 crore in FY13 leading to a significant reversal of interest income. GNPA (Q3FY15) |6724 Crore We have built in calculated margins of ~2.3% over FY14-17E. NNPA (Q3FY15) | 4370 Crore NIM (Q3FY15) 2.3 Asset quality slightly better than peers; 9MFY15 bad in terms of NPA 52 week H/L 179 /78 The bank’s asset quality came under significant pressure in FY10 primarily Equity Capital | 602 Crore due to service sector followed by corporate & personal loans. However, Face value | 10 consolidation in asset growth brought in stability in asset quality with DII Holding (%) 11.2 GNPA ratio dropping to 2% as on FY13, which is relatively better than FII Holding (%) 8.9 peers. However, asset quality pressure has again emerged with GNPA surging to 3.4% (highest in the past seven years) to | 6724 crore. PCR has Price performance (%) also declined to 62.96% from >80% in Q3FY15. We revise our GNPA 1M 3M 6M 12M estimate upwards to | 9733 crore FY17E (3.6% of credit). Syndicate Bank -9.88 -11.68 -11.03 39.42 Dena Bank -8.86 -12.07 -10.71 3.87 Earnings traction to slide on NPA risks; maintain HOLD, reduce target J&K Bank -26.07 -21.54 -29.57 -19.15 Driven by MAT credit, FY12 and FY13 return ratios seemed higher with Syndicate Bank -9.88 -11.68 -11.03 39.42 average RoA and RoE at ~0.8% and 17.5%, respectively. However, the same was unavailable in FY14 due to which RoE dropped to 15.2% apart

Analyst from subdued operational performance (lower margins and enhanced credit cost). We have revised our FY15E and F16E GNPA estimates Kajal Gandhi [email protected] upwards resulting in higher credit cost. Owing to asset quality pressure, Vasant Lohiya we anticipate FY17E RoA, RoE will be contained at 0.6%, 14.3%, [email protected] respectively, while the book value is expected to erode to | 124. We Vishal Narnolia rolled over valuation to | 124 (1x FY17E ABV) led by uncertainty over [email protected] asset quality and thereby return ratios.

ICICI Securities Ltd | Retail Equity Research

Variance analysis Q3FY15 Q3FY15E Q3FY14 YoY (%) Q2FY15 QoQ (%) Comments NII 1,318 1,449 1,358 -3.0 1,422 -7.4 NIM (%) 2.3 2.3 2.8 -51 bps 2.6 -32 bps NIM came down QoQ on the back of lower CASA and higher deposit growth Other Income 428 396 292 46.4 437 -2.0 Treasury gains led to higher other income

Net Total Income 1,746 1,845 1,651 5.8 1,859 -6.1 Staff cost 571 606 577 -1.1 552 3.4 Other Operating Expenses 337 295 268 25.5 354 -4.8

PPP 838 944 806 4.0 954 -12.1 Provision 290 505 459 -36.7 538 -46.0 PBT 548 440 347 58.0 416 31.7 Tax Outgo 242.8 88.0 -33.1 -834.4 100.5 141.6 Jump in tax outgo on account of DTL arising during the quarter

PAT 305.0 351.8 379.7 -19.7 315.6 -3.4 PAT was down YoY by 20% as tax outgo rose to the tune of | 786 crore.

Key Metrics Slippages accretion has toned down in Q3FY15 at | 1300 crore (Q2FY15: | 1638 crore). GNPA 6,724.0 6,649.0 4,400.9 52.8 6,049.0 11.2 GNPA surged to 3.6% of credit highest in past seven years NNPA 4,370.1 4,175.3 2,566.7 70.3 3,825.3 14.2 PCR dropped to 62.96% from 65.38%. Hence, NNPA rose to 2.38% of credit Total Restructured assets 10,736.0 10,503.0 10,151.0 5.8 10,736.0 0.0 Source: Company, ICICIdirect.com Research

Change in estimates FY15E FY16E (| Crore) Old New % Change Old New % Change Comments Net Interest Income 6,224 5,626 -9.6 7,102 6,495 -8.5 margin pressure led to downward revision in NII Pre Provision Profit 4,021 3,809 -5.3 4,694 4,456 -5.1 NIM (%) 2.5 2.3 -24 bps 2.5 2.3 -21 bps PAT 1,688 1,493 -11.6 2,011 1,830 -9.0 PAT revised to owing to uncertainty on asset quality ABV (|) 136.9 104.7 -23.5 145.5 117.3 -19.4 Higher provisions impact our book value estimate Source: Company, ICICIdirect.com Research

Assumptions Current Earlier FY13 FY14 FY15E FY16E FY15E FY16E Credit growth (%) 19.4 17.9 15.3 16.0 15.3 16.0 Deposit Growth (%) 17.4 14.6 21.6 17.7 17.3 18.9 CASA ratio (%) 28.0 26.4 25.3 25.3 26.2 26.0 NIM Calculated (%) 2.9 2.6 2.3 2.3 2.5 2.5 Cost to income ratio (%) 48.0 48.1 48.2 46.9 48.0 46.8 GNPA (| crore) 2,978.5 4,611.1 7,719.2 8,649.6 5,914.0 7,077.0 GNPA revised owing to higher slippages NNPA (| crore) 1,124.8 2,720.6 5,313.3 5,737.8 3,498.0 4,353.0 Slippage ratio (%) 1.7 2.5 3.3 1.7 1.9 1.7 Credit cost (%) 1.0 0.6 0.8 0.8 0.9 0.7

Source: Company, ICICIdirect.com Research

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Company Analysis Business growth to moderate but stay slightly higher than industry Syndicate Bank’s loan book stood at | 186630 crore with domestic advances amounting to | 148825 crore. In the past three years, domestic advances grew at a CAGR of 10% while foreign advances increased at 25% CAGR over FY12-14 partly supported by rupee depreciation. The bank’s loan book is well diversified between corporate (36%), PSL (36%), retail (15%) and SME (14%).

Deposits amount to | 251469 crore with CASA deposits of | 62445 crore constituting 27.9%. The domestic CASA ratio has been maintained above 30% for the past five years despite increased competition owing to a sustainable increase in branches, concentrated focus on CASA build up and a significant presence in the southern region, which accounts for the second highest CASA mobilisation in India after the western region.

If we consider the past eight years, the bank has consistently grown its business above industry except in FY10-11 wherein it went into a consolidation phase. During FY06-09, loan CAGR was 31%, which got reduced to 14% over FY10-11 owing to a sharp spurt in NPAs (absolute We have factored in business CAGR of 16% over FY14-17E GNPA rose 26% YoY in FY10). This made the bank take a re-look at its with loans increasing to | 270912 crore & deposits at | strategy. Post FY11, the bank’s business traction improved and was 360156 crore above industry at 17% CAGR over FY11-14.

Going ahead, the management expect loans and deposit growth to pick up and be above the industry growth. We have built in business CAGR of 16% over FY14-17E with loans rising to | 270912 crore & deposits at | 360156 crore.

Exhibit 1: Business traction to stay ahead of industry

350000 50.0 41.7 46.6 45.0 300000 40.0 250000 35.0 27.3 200000 24.0 29 30.0 25 (%) 18.1 19.4 17.9 18.1 18.6 25.0 150000 21.8 15.8 21.6 16.0

(| crore) 21.0 13.6 15.3 20.0 10.9 16.5 17.4 18 17.7 100000 15.9 14.6 15.0 10.0 50000 5.0 0 51670 78634 64051 95171 81532 115885 90406 1.0117026 106782 135596 123620 157941 147569 185356 173912 212343 176442 214863 173845 239215 186630 251469 200521 258228 232604 303909 0.0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 Q3FY15 FY15E FY16E

Advances Deposits Advances Growth (YoY) (RHS) Deposits Growth (YoY) (RHS)

Source: Company, ICICIdirect.com Research

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Exhibit 2: Corporate & PSL segment remain major components

SME 14%

Corporate Retail 35% 15%

Priority sector 36%

Source: Company, ICICIdirect.com Research

Expect margins to stay stable against management guidance of pick-up We expect the bank’s calculated NIMs to stay steady at ~2.3% over FY14- 17 on the back of stable CASA and steady business growth. We believe the focus on retail loans, going ahead, and within that on home loans, which are available at the base rate in order to be competitive, will keep margins upside under check. The management is banking on an improvement in overseas margins from 0.3% to ~0.5-0.6% for an We expect the bank’s calculated NIMs to stay steady at improvement in overall NIMs, which we believe is difficult considering the ~2.3% over FY14-17E. global economic scenario. Further, fresh slippages will continue though going ahead, which keep pressure on margins.

Syndicate Bank’s NIMs had declined to 2.3% in FY10 from 3% in FY07 owing to its focus on higher growth and also due to higher deterioration in asset quality during FY10. However, in FY11-13, margins improved and stayed at ~3% due to shedding of bulk deposits (down to 17% in FY13 from >25% in FY09), maintenance of CASA ratio >30% levels despite competition from private banks and controlled asset quality. However, during FY14, margins slipped significantly to 2.52% mainly due to a sharp spurt in slippages to | 3628 crore from| 2142 crore in FY13 leading to a significant reversal of interest income.

Exhibit 3: Margins to stay near 2.3% in FY14-17E

3.5 3.2 3.3 3.0 2.9 2.5 2.5 2.6 2.3 2.3 2.3 2.3 2.0 (%) 1.5 1.0 0.5 0.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E

NIMs (Calculated)

Source: Company, ICICIdirect.com Research

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Asset quality slightly better than peers; 9MFY15 bad in terms of NPA Syndicate Bank’s asset quality has been relatively better than peers. The stressed asset ratio (GNPA + restructured assets) as on FY14 stood at 9%, lower compared to its peer’s ratio of 10%+. This is due to its diversified book and consolidation phase adopted during FY10-11, which proved to be a blessing in disguise where its asset growth was moderate compared to aggressive growth clocked by peers. Further, its infra exposure at ~14% was lower compared to peers.

During FY10, the bank’s asset came under significant pressure wherein the GNPA ratio increased to 2.2% vs. 1.9% in FY09 primarily contributed by the service sector followed by corporate and personal loans. However, the consolidation phase adopted during FY10-11 brought in stability in the asset quality with GNPA ratio dropping to 2% as on FY13, which is The stressed asset ratio (GNPA + restructured assets) as relatively better than peers. on FY14 stood at 9%, which is lower compared to its peer’s ratio of 10%+ However, FY14 saw the GNPA ratio rising to 2.65% (highest in the past six years) as the economy weakened further. Further, in the first half of FY15 so far, slippage continues to be high with | 1500 crore slippage in Q1FY15 and | 1683 crore in Q2FY15, which continued in Q4FY15 leading to GNPA rising to 3.60% (higher in seven years). PCR has also declined to 62.96% from >80% in FY13. As per the management, fresh slippage may moderate. Going forward, the bank has strengthened its recovery process, which will aid contain NPAs. However, we have factored in a slippage ratio of 3.3% in FY15E and 1.7% in FY16E leading to absolute GNPA increasing to | 8650 crore in FY16E from | 4611 crore as on FY14.

Exhibit 4: Slippages to continue but pace may reduce

10,000 4.5 9,000 3.8 4.0 8,000 3.6 3.7 3.4 3.5 7,000 3.0 3.0 6,000 2.6 2.7 2.6 2.4 2.4 2.5 2.5 5,000 2.2 2.2 2.0 2.0 2.0 4,000 1.9 1.6 3,000 1.5 1.1 1.0 1.0 1.0 2,000 0.8 0.8 1,000 0.5 1,595 632 2,007 963 2,599 1,031 3,183 1,185 2,979 1,125 4,611 2,721 7,719 5,313 8,650 5,738 - 5243 3271 6049 3825 6724 4370 0.0 FY09 FY10 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 Q3FY15 FY15E FY16E

GNPA NNPA GNPA ratio (RHS) NNPA ratio (RHS)

Source: Company, ICICIdirect.com Research

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Outlook and valuation Driven by MAT credit, FY12 and FY13 return ratios seemed higher with average RoA and RoE at ~0.8% and 17.5%, respectively. However, the same was unavailable in FY14 due to which RoE dropped to 15.2% apart from subdued operational performance (lower margins and enhanced credit cost). We have tweaked our FY15E and FY16E NPA estimates slightly higher resulting in higher credit cost. Thus, our earnings CAGR fell to 7.4% over FY14-17E. FY16E RoA and RoE, therefore, may moderate to 0.6% and 13.6%, respectively. Owing to asset quality pressure, we anticipate FY17E RoA, RoE will be contained at 0.6%, 14.3%, respectively, while the book value is expected to erode to | 124. We rolled over valuation to | 124 (1x FY17E ABV) led by uncertainty over asset quality and thereby return ratios.

Exhibit 5: Trend in return ratios

22 21.4 20.5 19 19.6 16.5 16.3 16 15.3 15.2 13 13.6 12.1

(%) 10 7 4

1 0.9 0.8 0.6 0.7 0.8 1.0 0.7 0.5 0.6 -2 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E

RoE RoA

Source: Company, ICICIdirect.com Research

Exhibit 6: Valuation NII Growth PAT Growth P/E ABV P/ABV RoA RoE (| cr) (%) (| cr) (%) (x) (|) (x) (%) (%) FY13 5,540 1.6 1,711.5 -14.6 4.3 132.2 0.9 0.7 15.2 FY15E 5,626 1.5 1,492.6 -12.8 4.9 104.7 1.1 0.5 12.1 FY16E 6,495 15.5 1,829.6 22.6 4.0 117.3 1.0 0.6 13.6 FY17E 7,427 14.4 2,117.3 15.7 3.5 123.8 1.0 0.6 14.3

Source: Company, ICICIdirect.com Research

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Company snapshot

200

180

160 Target price: | 124 140

120

100

0 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date Event FY00 Syndicate came out with an IPO aggregating | 125 crore at the price of | 10 FY07 Stock was in a bull run for years making a high of | 115. The economy was in a boom period with yields falling, asset quality improving and strong PAT growth FY09 Stock corrected as recession set in but corporates had a limited impact. Since SBL has high corporate exposure - PAT and asset quality remained healthy FY10 SBL went into consoloidation phase with credit growth of 10.9%, 18.1% and 15.8% for FY10, FY11 and FY12, respectively, with change of management FY11 Stock made all-time highs as the market and economy recovered from recession. Also, Syndicate is delivering a healthy financial performance Jan-12 The stock has fallen in line with other PSU banks as risk of corporate NPA rises. However, SBL did not face much of an NPA issue as the bank was in consolidation May-13 G-sec yields spiked post the Fed announcement on May 22 of its intention to taper QE and tighten liquidity measures by RBI. MTM risk and CoF rose. Also, asset quality of Syndicate came under pressure for the first time as the market was factoring it. A few large chunky accounts had slipped in H2FY14 Sep-13 Stock recovered as the new Governor announced measures to tackle rupee volatility and ease liquidity. Risk of a further rise in CoF subsides but MTM risk stayed Aug-14 Stock under pressure after the news that CBI has taken the CMD of the bank in custody over allegedly extending credit facilities to private companies in lieu of bribe

Source: Company, ICICIdirect.com Research

Top 10 shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 1 Government of India 31-Dec-14 67.39 420.9 0.0 Promoter 66.2 67.4 67.4 67.4 67.4 2 Life Insurance Corporation of India 31-Dec-14 8.34 52.1 1.0 FII 6.7 6.6 8.1 6.5 8.9 3 HDFC Standard Life Insurance Company Limited 31-Dec-14 1.51 9.4 -3.0 DII 14.2 13.3 12.4 13.3 11.2 4 Dimensional Fund Advisors, L.P. 31-Dec-14 0.97 6.0 0.0 Others 12.9 12.8 12.1 12.8 12.5

5 GMO LLC 31-Dec-14 0.71 4.4 0.2 6 Jupiter Asset Management Ltd. 30-Nov-14 0.64 4.0 -0.3 7 Mellon Capital Management Corporation 31-Jan-15 0.36 2.2 0.2 8 Robeco Institutional Asset Management B.V. 31-Oct-14 0.23 1.4 0.0 9 Norges Bank Investment Management (NBIM) 31-Dec-13 0.20 1.3 1.3 10 JM Financial Asset Management Pvt. Ltd. 31-Dec-14 0.19 1.2 -0.4

Source: Reuters, ICICIdirect.com Research

Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Norges Bank Investment Management (NBIM) 2.18m 1.27m HDFC Standard Life Insurance Company Limited -6.20m -2.97m Life Insurance Corporation of India 2.02m 1.04m Russell Investments Limited -2.29m -1.30m Kotak Mahindra Asset Management Company Ltd. 1.94m 0.97m Wellington Management Company, LLP -1.70m -1.11m L&T Investment Management Limited 1.18m 0.56m PineBridge Investments Asset Management Company (India) Priv -0.77m -0.53m State of Wisconsin Investment Board 0.46m 0.25m JM Financial Asset Management Pvt. Ltd. -0.76m -0.37m

Source: Reuters, ICICIdirect.com Research

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Financial summary

Profit and loss statement | Crore Key ratios (Year-end March) FY14 FY15E FY16E FY17E (Year-end March) FY14 FY15E FY16E FY17E

Interest Earned 18,620.3 21,237.3 24,536.2 28,427.8 Valuation

Interest Expended 13080.5 15611.8 18041.1 21000.3 No. of Equity Shares (Crore) 62.5 62.5 62.5 62.5

Net Interest Income 5,539.8 5,625.6 6,495.1 7,427.5 EPS (Rs.) 27.4 23.9 29.3 33.9

growth (%) 1.6 1.5 15.5 14.4 BV (Rs.) 175.8 189.8 209.2 233.2

Non Interest Income 1324.9 1732.5 1900.0 2094.8 ABV (Rs.) 132.2 104.7 117.3 123.8

Fees and advisory 567.1 657.8 756.5 869.9 P/E 4.3 4.9 4.0 3.5

Treasury Income 157.9 394.8 375.0 356.3 P/BV 0.7 0.6 0.6 0.5

Other income 599.9 679.9 768.5 868.6 P/ABV 0.9 1.1 1.0 1.0

Net Income 6864.7 7358.0 8395.0 9522.3 Yields & Margins (%) Net Interest Margins Staff cost 2228.6 2336.2 2553.9 2789.5 2.6 2.3 2.3 2.2 Other Operating expense 1073.1 1212.7 1384.9 1590.5 Yield on assets 8.6 8.6 8.6 8.5 Avg. cost on funds 6.1 6.1 6.0 5.9 Operating profit 3563.0 3809.2 4456.2 5142.4 Yield on average advances 9.0 9.1 9.2 9.2 Provisions 1919.5 1778.4 2064.5 2374.7 Avg. Cost of Deposits 6.1 6.2 6.1 6.0 PBT 1643.4 2030.8 2391.7 2767.7 Quality and Efficiency (%) Taxes -68.1 538.2 562.0 650.4 Cost to income ratio 48.1 48.2 46.9 46.0 Net Profit 1,711.5 1,492.6 1,829.6 2,117.3 Credit/Deposit ratio 81.9 77.7 76.5 75.2 growth (%) -14.6 -12.8 22.6 15.7 EPS (|) 27.4 23.9 29.3 33.9 GNPA 2.7 3.8 3.7 3.6

NNPA 1.6 2.6 2.5 2.5 Source: Company, ICICIdirect.com Research ROE 15.2 12.1 13.6 14.3 ROA 0.7 0.5 0.6 0.6

Source: Company, ICICIdirect.com Research

Balance sheet | Crore Growth ratios (% growth) (Year-end March) FY14 FY15E FY16E FY16E (Year-end March) FY14 FY15E FY16E FY17E Sources of Funds Total assets 17.1 18.9 15.9 16.8 Capital 624.6 624.6 624.6 624.6 Advances 17.9 15.3 16.0 16.5 Reserves and Surplus 11300.9 12175.2 13386.5 14885.4 Deposit 14.6 21.6 17.7 18.5 Networth 11925.5 12799.8 14011.1 15510.0 Total Income 9.0 15.2 15.1 15.5 Deposits 212343.0 258227.9 303909.0 360156.3 Net interest income 1.6 1.5 15.5 14.4 Borrowings 19224.0 19940.6 20626.8 21157.6 Operating expenses 3.9 7.5 11.0 11.2 Other Liabilities & Provisions 8449.0 8537.5 8634.5 8733.6 Operating profit 3.3 6.9 17.0 15.4 Total 251,942 299,506 347,181 405,558 Net profit -14.6 -12.8 22.6 15.7 Net worth 14.8 8.0 10.2 11.5 Applications of Funds EPS (17.7) (12.8) 22.6 15.7

Fixed Assets 1469.0 1427.4 1479.1 1535.1 Source: Company, ICICIdirect.com Research Investments 55539.0 61305.6 71972.8 85965.4 Advances 173912.4 200521.0 232604.4 270912.4 Other Assets 6000.0 20989.4 25597.2 30902.4 Cash with RBI & call money 15007.0 15262.4 15528.1 16242.2 Total 251,927 299,506 347,181 405,558

Source: Company, ICICIdirect.com Research

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ICICIdirect.com coverage universe (Banking)

CMP M Cap EPS (|) P/E (x) P/ABV (x) RoA (%) RoE (%) Sector / Company (|) TP(|) Rating (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E Bank of India (BANIND) 227 255 Hold 13,587 42 46 55 5.4 4.9 4.2 0.7 0.8 0.7 0.5 0.5 0.5 10 10 11

Bank of Baroda (BANBAR) 181 210 Buy 7,616 21 17 25 8.6 10.4 7.3 1.3 1.4 1.2 0.8 0.5 0.7 13 10 13 Dena Bank (DENBAN) 5556Hold2,94510695.39.85.90.70.90.80.50.20.3947 Punjab National Bank (PUNBAN) 166 215 Buy 30,223 18 21 24 9.0 8.1 7.0 1.2 1.3 1.1 0.6 0.6 0.7 10 10 11 State Bank of India (STABAN) 284 374 Buy 212,251 15 18 21 19.5 15.5 13.3 2.4 2.2 2.0 0.6 0.7 0.7 10 11 12 Syndicate Bank (SYNBN) 118 124 Hold 6,823 27 25 32 4.1 4.5 3.5 0.9 0.9 0.8 0.7 0.6 0.6 15 13 15 Axis Bank (UTIBAN) 579 590 Buy 136,455 26 30 35 21.9 19.0 16.4 3.7 3.2 2.7 1.7 1.7 1.8 17 17 17 City Union Bank (CITUNI) 94 110 Buy 4,551 6 7 9 14.7 13.6 10.8 2.8 2.2 1.9 1.4 1.5 1.7 19 17 18 DCB Bank (DCB) 115 140 Buy 2,980 6 6 8 19.0 17.9 14.8 2.8 2.3 2.0 1.3 1.3 1.3 15 14 13 Federal Bank (FEDBAN) 141 164 Buy 12,026 10 12 14 14.3 11.8 9.9 1.8 1.6 1.5 1.2 1.3 1.3 13 14 15 HDFC Bank (HDFBAN) 1,076 1,036 Hold 256,889 35 42 51 30.4 25.9 21.3 6.1 4.4 3.8 1.9 1.9 2.0 21 20 19 IndusInd Bank (INDBA) 870 925 Buy 45,595 27 33 41 32.5 26.1 21.0 5.2 4.5 3.8 1.8 1.8 1.9 17 18 19 Jammu & Kashmir Bank(JAMKAS) 109 119 Hold 5,282 24 13 22 4.5 8.4 5.0 0.9 1.1 1.0 1.6 0.8 1.1 22 11 16 Kotak Mahindra Bank (KOTMAH) 1,297 1,505 Hold 99,416 20 23 27 66.5 56.8 48.1 8.4 7.4 6.5 1.8 1.8 1.8 14 13 14 South Indian Bank (SOUIN0) 27 29 Hold 3,592 4 3 4 7.1 8.8 7.5 1.2 1.2 1.1 1.0 0.6 0.7 17 11 13 Yes Bank (YESBAN) 839 890 Buy 34,920 45 48 63 18.7 17.4 13.3 4.3 3.0 2.5 1.6 1.7 1.8 25 21 20

Source: Company, ICICIdirect.com Research

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RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

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ANALYST CERTIFICATION We /I, Kajal Gandhi, CA, Vishal Narnolia, MBA and Vasant Lohiya, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report.

It is confirmed that Kajal Gandhi, CA, Vishal Narnolia, MBA and Vasant Lohiya, CA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

It is confirmed that Kajal Gandhi, CA, Vishal Narnolia, MBA and Vasant Lohiya, CA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

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