Buy ING Vysya Bank; target Rs 792: Maximus Securities

Maximus Securities' research report on ING Vysya Bank

"ING Vysya Bank - the only bank with a MNC set up has emerged as one of the stronger banks amongst its peers over the years with stable improvements in balance sheet and earnings growth.

Strong asset quality - Bank's GNPL ratio has declined from 2.96 percent in FY10 to 1.76 percent in FY13 which was aided by mild slippages. Restructuring has been minimal due to bank's negligible exposure to ailing sectors.

Stable NIM margins - Bank's NIM has remained resilient above 3 percent over FY10-13 due to improvement in CASA ratio driven by acceleration in savings growth.

Further improvement in RoA - Bank has been able to manage its costs by bringing down cost-to-income ratio from 83.4 percent in FY06 to 56.2 percent in FY13. We feel there can be further improvement in RoA aided by improvement in operating leverage, improving employee productivity and higher growth in asset base. As per management, Bank plans to bring down its cost-to-income ratio close to 50 percent in 2-3 years.

Robust loan profile - In FY13, Bank's credit growth has been lower than that of Industry growth by 3 percent. According to management, there shall be revival of growth in coming fiscal. Bank has a diversified loan book comprising major exposure to corporate (40 percent), SME (34 percent) & retail banking (16 percent).

On yearly basis, Bank's NII increased by 27 percent which in return improved its NIM by 22 bps from 3.30 percent to 3.52 percent due to rise in cost of deposits by 174bps yoy as against lower growth in yield on advances by 148bps. Bank's capital adequacy ratio stands at 13.24 percent (76 bps yoy decrease).

Valuations: Bank's continues improvement in asset quality, maintaining its PCR above 90 percent along with improvement in fee income shall lead the stock to reach new 52 week high levels this year. Bank looks adequately capitalized and may not need to raise further capital for next 2-3 years. At CMP of 625 we recommend a BUY rating on ING Vysya Bank with a target price of Rs. 792 (2.05x FY14E BV)," says Maximus Securities research report.

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