1QFY2014 Result Update | Banking

July 19, 2013

IDBI Bank
Performance Highlights

Particulars (` cr) NII Pre-prov. profit PAT 1QFY14 1,475 1,317 307 4QFY13 1,440 1,594 554 % chg (qoq) 2.4 (17.4) (44.6) 1QFY13 1271 1132 427 % chg (yoy) 16.1 16.3 (28.2)

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Banking 9,309 1.2 118/66 237,831 10 20,150 6,029 IDBI.BO IDBI@IN

`70 -

Source: Company, Angel Research

IDBI Bank delivered a weak set of numbers for 1QFY2014, dragged by asset quality challenges. While the NII grew by 16.1% yoy, non-interest income grew by 37.9% yoy, leading to operating income and pre-provisioning profit growth of 22.4% and 16.3% yoy, respectively. The bank witnessed sequential asset quality deterioration, as its absolute Gross NPA levels increased by 23.4% sequentially, on an already large base. The bank increased provisioning by 62.7% yoy, which resulted in 28.2% yoy earnings de-growth. NIM declines qoq; Slippages spike to 3.4%: During the quarter, the banks loan book grew at a subdued pace of 7.1% yoy (declined by 8.8% qoq). Going forward, the Management has guided for advances growth of ~10-12% for FY2014, with primary focus on increasing PSL share in the overall loan book. Savings deposits grew by 25.8% yoy, while current deposits declined by 8.6% yoy. CASA deposits grew by 8.9% yoy, which considering a decline of 4.4% yoy in overall deposits (due to shedding of bulk deposits), aided a 251bp yoy improvement in CASA ratio to 20.6% (454bp lower sequentially on back of 53.2% qoq de-growth in volatile current deposits). NIMs declined by 7bp qoq to 2.12%, as 37bp qoq decline in cost of funds was more than offset by 63bp sequential fall in yield on assets. Aided by strong growth in income from the forex/derivatives segment (which more than trebled on a yoy basis), the non-interest income (excluding treasury) grew by 21.1% yoy. The bank faced asset quality pressures, as slippages ballooned to `1,685cr, as compared to `907cr in 4QFY2013. Of the slippages during the quarter, `663cr came from 4-5 chunky accounts. Annualized slippage ratio spiked to 3.4%, as against 2.0% in 4QFY2013. Recoveries/upgrades during the quarter came in lower sequentially at `174cr compared to `486cr in 4QFY2013. PCR (incl. technical write-offs) came off by 286bp qoq to 68.0%. During the quarter, the bank restructured advances worth ~`650cr. Going forward, the Management guided that a textile exposure could slip into NPA category in the next few quarters, while the restructuring pipeline for the bank stands at ~ `500cr. Outlook and valuation: At the CMP, the bank is trading at a valuation of 0.4x FY2015E P/ABV, (0.5x adjusting for the SASF). Considering the recent macroeconomic developments, the pace of asset quality improvement is likely to be much slower than earlier anticipated. Hence, we recommend a Neutral rating on the stock. Key financials (standalone)
Y/E March (` cr) NII % chg Net Profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) # RoA (%) RoE (%) FY2012 4,545 6.5 2,032 23.1 1.7 15.9 4.4 0.5 0.7 13.4 FY2013 5,373 18.2 1,882 -7.4 1.8 14.1 4.9 0.5 0.6 10.2 FY2014E 6,321 17.6 2,065 9.7 1.9 15.5 4.5 0.5 0.6 10.2 FY2015E 7,158 13.2 2,945 42.6 2.0 22.1 3.2 0.4 0.8 13.3

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 71.7 13.6 3.8 10.8

Abs. (%) Sensex IDBI Bank

3m 6.0

1yr 16.6

3yr 12.4

(19.0) (25.5) (43.1)

Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com

Sourabh Taparia
022 3935 7800 Ext: 6872 sourabh.taparia@angelbroking.com

Harshal Patkar
022 3935 7800 Ext: 6847 harshal.patkar@angelbroking.com

Source: Company, Angel Research; Note: # without adjusting for SASF

Please refer to important disclosures at the end of this report

IDBI Bank | 1QFY2014 Result Update

Exhibit 1: 1QFY2014 performance (standalone)

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - Fee income - Treasury income - Recoveries from w-off acc. - Others Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies - Provisions for NPAs - Provisions for Investments - Other Provisions PBT Provision for Tax PAT Effective Tax Rate (%)
Source: Company, Angel Research

1QFY14 6,728 5,097 1,585 39 8 5,253 1,475 717 574 381 143 11 182 2,192 875 490 385 1,317 830 740 10 79 487 180 307 37.0

4QFY13 6,397 4,940 1,377 63 16 4,957 1,440 1,147 1,004 805 143 116 83 2,587 993 534 459 1,594 869 669 86 114 725 171 554 23.5

% chg (qoq) 5.2 3.2 15.1 (39.2) (53.2) 6.0 2.4 (37.5) (42.8) (52.7) (90.5) 119.6 (15.3) (11.8) (8.2) (16.1) (17.4) (4.5) 10.6 (88.0) (30.8) (32.8) 5.5 (44.6) 1344bp

1QFY13 6,270 4,926 1,327 15 1 4,999 1,271 520 473 368 47 34 71 1,791 659 316 342 1,132 510 382 38 90 622 195 427 31.3

% chg (yoy) 7.3 3.5 19.5 153.4 443.0 5.1 16.1 37.9 21.4 3.5 204.3 (67.6) 156.3 22.4 32.9 54.9 12.6 16.3 62.7 93.8 (73.0) (12.0) (21.7) (7.6) (28.2) 564bp

FY2013 25,064 19,549 5,335 156 24 19,691 5,373 3,220 2,789 2,237 431 237 315 8,593 3,134 1,569 1,565 5,458 2,836 2,127 145 565 2,622 740 1,882 28.2

FY2012 23,370 17,969 5,291 46 64 18,825 4,545 2,110 1,953 1,509 157 141 303 6,655 2,607 1,187 1,420 4,048 1,418 965 196 257 2,630 598 2,032 22.7

% chg (yoy) 7.3 8.8 0.8 237.5 (62.7) 4.6 18.2 52.6 42.8 48.2 174.5 68.1 3.7 29.1 20.2 32.2 10.2 34.9 100.0 120.5 (26.2) 119.5 (0.3) 23.7 (7.4) 547bp

Exhibit 2: Actual vs. Angel estimates

Particulars (` cr) NII Non-Interest Income Operating Income Operating Expenses Pre-Prov. Profit Provisions & Cont. PBT Prov. for Taxes PAT
Source: Company, Angel Research

Actual 1,475 717 2,192 875 1,317 830 487 180 307

Estimates 1,481 639 2,120 807 1,313 506 806 258 548

Variation (%) (0.4) 12.2 3.4 8.5 0.3 63.8 (39.6) (30.3) (44.0)

July 19, 2013

IDBI Bank | 1QFY2014 Result Update

Exhibit 3: 1QFY2014 performance (standalone)

Particulars (` cr) Balance sheet Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Cost of funds Yield on assets Return on Earning Assets Cost of Liabilities Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%) Slippage ratio (%) Loan loss prov. to avg. assets (%)
Source: Company, Angel Research

1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy) 178,945 196,306 183,277 227,116 97.6 15,565 22,145 37,710 20.6 13.4 7.8 8.0 10.0 10.2 7.0 2.1 39.9 7,959 4.3 3,872 2.2 68.0 3.4 1.0 86.4 33,289 23,760 57,049 25.1 13.1 7.7 8.4 10.6 10.9 7.0 2.2 38.4 6,450 3.2 3,100 1.6 70.8 2.0 0.9 (8.8) 167,138 (19.3) 191,747 1120bp (53.2) (6.8) (33.9) (454)bp 22bp 15bp (37)bp (63)bp (65)bp 6bp (7)bp 156bp 23.4 112bp 24.9 58bp (286)bp 143bp 7bp 87.2 17,037 17,606 34,643 18.1 14.4 8.2 8.4 10.0 10.3 7.4 2.1 36.8 5,496 3.2 3,478 2.1 65.5 2.3 0.5 7.1 (4.4) 1047bp (8.6) 25.8 8.9 251bp (101)bp (41)bps (43)bp (6)bp (6)bp (36)bp 3bp 316bp 44.8 110bp 11.3 9bp 247bp 113bp 43bp

Balance Sheet growth remains moderate during the quarter

The banks Balance Sheet grew at a moderate pace during the quarter. Its loan book grew at a subdued pace of 7.1% yoy (declined sequentially by 8.8%); deposits witnessed a decline of 4.4% yoy and 19.3% qoq. Going forward, the Management has guided for an advances growth of ~10-12% for FY2014, with primary focus on increasing the share of PSL in the overall loan book (PSL achievement at the end of 1QFY2014 stands at around 20%). During the quarter, the bank witnessed strong traction in savings deposits, with a growth of 25.8% yoy (down by 6.8% qoq), while volatile current deposits declined by 8.6% yoy (the decline was much sharper sequentially with de-growth of 53.2%). CASA deposits grew by 8.9% yoy, which considering a decline of 4.4% yoy in overall deposits (due to shedding of bulk deposits), aided a 251bp yoy improvement in CASA ratio to 20.6% (which came sequentially lower by 454bp on back of 53.2% qoq de-growth in volatile current deposits). About two years back (September 2010), the bank had waived off all transaction and service-related charges on all current and saving bank accounts to attain higher growth in CASA deposits. As a result, the bank has increased the number of saving accounts by a robust ~15% (to ~72.5lakh) over the past one year.

July 19, 2013

IDBI Bank | 1QFY2014 Result Update

Exhibit 4: Balance sheet growth remains moderate

12.0 10.0 8.0 6.0 4.0 2.0 (2.0) (4.0) (6.0) Adv. yoy chg (%) Dep. yoy chg (%) CDR (%, RHS) 105.0 97.6 100.0 95.0 90.0

Exhibit 5: CASA deposit improve sequentially

30.0 25.0 20.0 15.0 10.0 13.7 18.0 CASA ratio (%) CASA yoy growth (%, RHS) 30.0

92.4 87.2

91.6

19.3 12.5 8.9 15.0

86.4

7.8 8.8

6.7 3.2

9.4 5.4

8.4 7.9

7.1

85.0

(4.4)

18.1

21.9

22.3

25.1

75.0 70.0

5.0 -

20.6

80.0

1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

Source: Company, Angel Research

Source: Company, Angel Research

NIM declines sequentially

During 1QFY2013, margins for the bank declined by 7bp qoq to 2.12%, as the 37bp qoq decline in cost of funds was more than offset by 63bp sequential fall in yield on assets. The Cost of Funds for the bank declined by 37bp sequentially to 8.0%, primarily driven by re-pricing of bulk deposits at a lower rate, decline in proportion of bulk deposits (more than 300bp fall on a yoy basis to 47% as of 1QFY2014) and capital raising done in 4QFY2013. Yield on assets for the bank also declined by 63bp sequentially to 9.97%, dragged primarily by asset quality challenges.

Exhibit 6: Yield on Assets declines 63bp sequentially...

(%) 11.5 10.5 9.5 8.5 7.5 6.5 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 10.03 10.37 10.82

Exhibit 7: ...hence NIM declines 7bp qoq

(%) 2.50

10.60 9.97
2.25 2.00 1.75 1.50 1QFY13 2QFY13 2.09 2.05

2.30 2.19 2.12

3QFY13

4QFY13

1QFY14

Source: Company, Angel Research

Source: Company, Angel Research

Healthy growth in non-interest income (excl. treasury) aided by strong performance in Forex and Derivatives income
During 1QFY2014, the bank reported a healthy performance on the non-interest (excluding treasury) front, with a growth of 21.1% yoy to `573cr. Although, the income from the commission, exchange and brokerage (CEB) stream grew at a muted pace of 3.5% yoy, a strong growth in income in the Forex/derivatives segment which more than trebled on a yoy basis, aided the overall growth in noninterest income (excluding treasury performance). Recoveries from written-off accounts came in at `11cr as compared to `34cr in 1QFY2013. Income from treasury almost trebled at `143cr during the quarter as against `47cr in 1QFY2013. Overall, the bank reported a 37.7% yoy growth in its other income.
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IDBI Bank | 1QFY2014 Result Update

Exhibit 8: Healthy core other inc. gr. aided by strong forex income
Particulars (` cr) CEB Treasury Forex Recoveries Others Other income Other inc excl. treasury
Source: Company, Angel Research

1QFY14 381 143 152 11 29 716 573

4QFY13 805 143 58 116 26 1,148 1,005

% chg (qoq) (52.7) 162.1 (90.5) 11.5 (37.6) (43.0)

1QFY13 368 47 45 34 26 520 473

% chg (yoy) 3.5 204.3 237.8 (67.6) 11.5 37.7 21.1

Asset quality faces pressure; Slippages spiked to 3.4% in 1QFY2014

On the asset quality front, the bank faced pressure as slippages for the quarter ballooned to `1,685cr, as compared to `907cr in 4QFY2013 and `1,043cr witnessed in 1QFY2013. Of the slippages during the quarter, `663cr came from
4-5 chunky accounts, the highest of which was `300cr coming from a textile sector account. The Annualized slippage ratio spiked to 3.4%, as compared to 2.0% in

4QFY2013 and 2.3% in 1QFY2013. Recoveries/upgrades during the quarter came in lower at `174cr compared to `486cr in 4QFY2013 and `93cr in 1QFY2013. On an absolute basis, Gross and Net NPA levels increased by 23.4% and 24.9% qoq, respectively. The PCR (including technical write-offs) for the bank came off by 286bp qoq to 68.0%. During the quarter, the bank restructured advances worth ~`650cr. As of 1QFY2014, the restructured book of the bank stood at `14,251cr, out of which `11,987cr are standard restructured advances. Going forward, the Management guided that a textile exposure could slip into NPA category in the next few quarters, while the restructuring pipeline for the bank stands at around `500cr. Exhibit 9: NPA ratios increase sharply qoq...
Gross NPAs (%) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Net NPAs (%) 70.8 PCR (%, RHS) 80.0 65.5 65.8 69.2 68.0 70.0 60.0 50.0 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 40.0 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2.3 1QFY13 1.4 2QFY13 1.6 3QFY13 2.0 4QFY13 3.4 1QFY14 0.4 0.5 0.9 1.0

Exhibit 10: ...as slippages spiked to 3.4% in 1QFY2014

Slippages (%) 1.2 Credit cost (%, RHS) 1.4 1.2 1.0 0.8 0.6 0.4 0.2 -

3.2 2.1

3.5 2.0

3.7 1.9

3.2 1.6

Source: Company, Angel Research

4.3 2.2

Source: Company, Angel Research

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IDBI Bank | 1QFY2014 Result Update

Exhibit 11: Steady network expansion continues

1,150 1,100 1,702 1,050 1,000 950 900 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
Source: Company, Angel Research

Exhibit 12: Cost ratios trends

1,900 1,800 1,700 (%) 1.5 1.2 0.9 0.6 0.3 0.9 1QFY13 1.1 2QFY13 1.1 3QFY13 1.3 4QFY13 1.1 1QFY14 20.0 10.0 36.8 Opex to average assets (%, RHS) 38.9 32.0 30.0 38.4 CIR (% , RHS) 39.9 40.0

Branches

ATMs (RHS) 1,799

1,581

1,591

1,597 1,600

1,019

1,077

1,111

982

998

1,500 1,400

Source: Company, Angel Research

Merger with Stock Holding Corporation of India (SHCIL) on hold

IDBI Bank had sought approval from the finance ministry to merge SHCIL (one of the largest custodians of securities and a leading depository participant) with itself. SHCILs current major shareholding includes IDBI (19% holding), IFCI (34%), GIC (17%) and LIC (15%). As per media reports, the finance ministry is of the view that IDBI Bank does not have enough capital/retained earnings to effect the merger on its own and the ministry isnt comfortable with the share swap arrangement (that the bank had proposed) as that would effectively result in a dilution of Government shareholding. Meanwhile, IFCI (which has the largest shareholding in SHCIL) is also learnt to have opposed the merger. If at all the merger gets through, it is likely to be a share swap deal, which would be based on valuation of both. SHCIL is an unlisted company, but in the past one year there was a stake sale in the company (by ICICI Bank to IFCI), which was priced at `818 per share, thereby valuing the company at 3.8x FY2012 BV. IDBI bank currently trades at 0.4x FY2015 ABV. If the swap ratio is priced using the last reported/traded valuations mentioned above, it would significantly dilute the book and earnings for the existing shareholders. The merger will augment the branch network of the bank by 23% with an addition of 227 branches (assuming RBI sanctions conversion of SHCIL branches into banks branches). The retail client base would increase by 10%, with an addition of ~8lakh customers, to whom the bank can cross sell. However, the extent of benefit that the bank can reap out of higher branches/customers cannot be ascertained (considering lack of clarity regarding the profile of these branches/customers).

Investment Arguments
Strong branch expansion and relatively healthy fee income
IDBI Bank enjoys the advantage of a modern, 100% CBS branch network, which is growing organically at a much faster rate than other PSU banks (1718% CAGR post the FY2007 UWB acquisition). While the present 1,111 branches are predominantly urban-concentrated (~66%), the bank intends to increase its presence in semi-urban areas going forward. Steady branch expansion plans of

July 19, 2013

IDBI Bank | 1QFY2014 Result Update

the Management, in our view, should continue to increase the contribution of retail deposits in the banks funding mix and drive strong CASA market share gains. The banks CASA deposits posted a 31.5% CAGR over FY200713, and we have factored in a 15.7% CAGR over FY2013-15E. Relative to other PSU banks, on account of the banks strong corporate relationships and government mandates, the banks fee income at 0.9% is also reasonably healthy (though going forward, in light of the banks move to waive off charges for retail depositors to attract CASA deposits as well as slower balance sheet growth and consistent with Managements guidance, we expect the banks fee income as a proportion of average assets to moderate to 0.8%).

RoA enjoying structural tailwinds, but cyclical headwinds

Historically, IDBI Bank has witnessed the lowest NIM in the industry, majorly on account of high cost of funding due to the liability mix heavily skewed towards bulk deposits. Also, since the bank relied heavily on corporate lending to increase its loan book, yields on assets on an average have been lower than peers. In wake of lower NIMs, the bank has indicated a strategy of lower advances growth (~1012% for FY2014) than the system to concentrate on the increasing percentage of low-cost CASA deposits and to consciously shift focus from large corporate lending to retail and MSME lending to bring in higher-yielding loans.

SASF A burden on the banks books

Due to the erstwhile DFI structure being challenged by a number of asset-quality issues, IDBI Bank at the time of the merger had to set up a stressed asset stabilization fund (SASF) to quarantine defaulted assets. The transfer value of the SASF was ~`9,000cr, through which the bank has witnessed only ~`3,800cr worth of cash recoveries (as of FY2012). The possibility of an entire recovery seems implausible and would lead to full provisioning expenses towards the amount that remains unrecoverable. The SASF with an outstanding value of ~`5,200cr also remains a burden on the banks investment books due to its special nature of zero interest securities. Accordingly, we have adjusted 75% of the value of the SASF against the banks net worth to arrive at ABV estimates for valuing the bank. At the same time, the bank has material stakes in several financial institutions, including NSE, CARE, NSDL and ARCIL, apart from subsidiaries such as IDBI Federal Life, and the market value of all these investments is estimated to be about `2,000cr more than the banks investment cost (about `15/share, post 25% holding company discount). Monetization of these investments could partially help in compensating the decline in the banks net worth on account of legacy NPAs, providing an upside to our estimates.

Outlook and valuation

The bank has been among the fastest-growing banks in terms of CASA deposits over the past few years (CAGR of ~32% over FY2007-13) even when compared to private banks and now has a market share of 2.5% (as of FY2013). At the CMP, the bank is trading at a valuation of 0.4x FY2015E P/ABV, (0.5x adjusting for the SASF). Considering the recent macro-economic developments, the

July 19, 2013

IDBI Bank | 1QFY2014 Result Update

pace of asset quality improvement is likely to be much slower than earlier anticipated. Hence, we recommend a Neutral rating on the stock.

Exhibit 13: Key assumptions

Particulars (%) Credit growth Deposit growth CASA Ratio NIMs Other Income growth Growth in Staff Expenses Growth in Other Expenses Slippages Coverage Ratio
Source: Angel Research

Earlier estimates FY2014 10.0 10.0 26.3 1.9 (5.5) 17.0 17.0 1.7 73.0 FY2015 12.0 12.0 27.3 2.0 2.0 17.0 17.0 1.7 75.0

Revised estimates FY2014 10.0 8.0 25.6 1.9 (0.7) 20.0 15.0 2.5 70.0 FY2015 12.0 12.0 26.6 2.0 3.5 17.0 17.0 1.8 75.0

Exhibit 14: Change in estimates

FY2014 Particulars (`cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT Source: Angel Research Earlier estimates 6,374 3,043 9,416 3,667 5,749 1,876 3,873 1,239 2,634 Revised estimates 6,321 3,197 9,518 3,683 5,835 2,799 3,036 972 2,065 Var. (%) (0.8) 5.1 1.1 0.4 1.5 49.2 (21.6) (21.6) (21.6) Earlier estimates 7,289 3,103 10,392 4,291 6,101 1,497 4,604 1,565 3,039 FY2015 Revised estimates 7,158 3,310 10,468 4,309 6,159 1,697 4,462 1,517 2,945 Var. (%) (1.8) 6.7 0.7 0.4 0.9 13.4 (3.1) (3.1) (3.1)

Exhibit 15: P/ABV# band

300 250 200 150 100 50 0 Price (`) 0.45x 0.7x 0.95x 1.2x 1.45x

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Apr-12

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Oct-12

Apr-13

Source: Company, Angel Research; Note: #Without adjusting the book value for SASF

July 19, 2013

Oct-13

IDBI Bank | 1QFY2014 Result Update

Exhibit 16: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Reco. Buy Neutral Accumulate Buy Neutral Neutral Accumulate Neutral Accumulate Accumulate Accumulate Neutral Neutral Accumulate Neutral Neutral Accumulate Neutral Neutral Buy Accumulate Accumulate Accumulate Reduce Accumulate Neutral Accumulate CMP (`) 1,191 381 681 959 23 425 85 78 570 211 49 319 63 327 68 70 107 47 1,250 174 631 1,814 111 69 157 46 45 Tgt. price (`) 1,441 745 1,160 95 642 236 54 360 113 203 718 2,077 121 63 178 47 Upside (%) 21 9 21 13 13 12 9 10 5 17 14 14 9 (9) 14 6 FY2015E P/ABV (x) 1.3 0.8 3.2 1.4 0.9 1.8 0.4 0.5 0.6 0.5 0.5 0.5 0.6 0.4 0.4 0.4 0.4 0.3 1.0 0.4 0.6 1.0 0.6 0.7 0.5 0.3 0.5 FY2015E Tgt. P/ABV (x) 1.6 3.5 1.7 0.4 0.7 0.5 0.6 0.5 0.4 0.4 0.7 1.2 0.6 0.7 0.6 0.5 FY2015E P/E (x) 7.6 6.7 15.1 9.6 5.5 8.5 2.6 3.4 3.9 3.1 3.8 3.7 3.4 3.1 2.7 3.1 2.6 2.4 5.9 2.8 3.6 6.4 4.0 4.4 3.3 2.3 4.1 FY2013-15E EPS CAGR (%) 19.1 7.5 26.3 17.4 5.7 17.1 18.3 (0.3) 16.8 21.6 10.0 15.4 52.3 5.7 3.7 27.1 7.0 78.9 (1.7) 17.0 14.5 17.5 (8.5) 67.5 14.7 54.6 9.5 FY2015E RoA (%) 1.6 1.1 1.9 1.6 0.9 1.3 0.7 0.7 0.9 0.7 0.6 0.8 0.6 0.7 0.7 0.8 0.9 0.6 1.2 0.8 1.1 1.0 0.6 0.6 0.7 0.6 0.4 FY2015E RoE (%) 18.1 13.1 22.8 16.2 16.2 22.8 13.6 13.2 16.0 15.1 15.3 14.2 14.3 14.2 14.7 13.5 14.7 13.0 16.8 12.9 16.5 17.0 14.6 13.6 15.2 14.7 11.5

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

Company Background
IDBI Bank is the sixth largest PSU bank in India, with a branch network of ~1,100 branches and a balance sheet size of over `2.8lakh cr. IDBI was incorporated in 1964 as a development financial institution; but in October 2004, it was transformed into a banking company with the reverse merger of IDBI and its subsidiary IDBI Bank. The bank now offers an array of wholesale and retail banking products, apart from providing long-term finance for industrial development.

July 19, 2013

IDBI Bank | 1QFY2014 Result Update

Income statement (standalone)

Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY10 2,256 82.0 2,181 39.6 4,437 58.4 1,831 36.9 2,605 78.0 1,561 226.3 1,045 6.0 14 1.3 1,031 20.1 FY11 4,269 89.2 2,143 (1.7) 6,413 44.5 2,255 23.1 4,158 59.6 1,877 20.3 2,281 118.3 631 27.6 1,650 60.0 FY12 4,545 6.5 2,119 (1.1) 6,664 3.9 2,607 15.6 4,056 (2.4) 1,426 (24.0) 2,630 15.3 598 22.7 2,032 23.1 FY13 5,373 18.2 3,220 52.0 8,593 28.9 3,134 20.2 5,458 34.6 2,836 98.8 2,622 (0.3) 740 28.2 1,882 (7.4) FY14E 6,321 17.6 3,197 (0.7) 9,518 10.8 3,683 17.5 5,835 6.9 2,799 (1.3) 3,036 15.8 972 32.0 2,065 9.7 FY15E 7,158 13.2 3,310 3.5 10,468 10.0 4,309 17.0 6,159 5.5 1,697 (39.4) 4,462 46.9 1,517 34.0 2,945 42.6

Balance sheet (standalone)

Y/E March (` cr) Share Capital Reserve & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY10 725 9,440 49.2 35,010 12,699 8,031 13,903 679 73,345 33.6 2,997 4,446 35.5 FY11 985 13,583 7.6 36,607 14,962 6,754 19,559 1,207 68,269 13.7 3,037 4,206 8.5 FY12 1,278 18,150 16.6 38,451 15,027 7,439 15,090 2,967 83,175 15.3 3,019 5,427 14.8 FY13 1,333 19,903 227,116 7.9 51,158 14,651 8,607 322,769 10,544 7,381 98,801 196,306 8.4 2,925 6,811 322,769 11.0 FY14E 1,333 21,506 245,286 8.0 54,045 14,285 9,994 346,449 11,038 5,197 103,920 215,937 10.0 3,046 7,311 346,449 7.3 FY15E 1,333 23,758 274,720 12.0 60,021 13,928 11,001 384,762 12,362 5,771 113,378 241,850 12.0 3,281 8,120 384,762 11.1

167,667 180,486 210,493

233,573 253,377 290,837

138,202 157,098 181,158

233,573 253,377 290,837

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IDBI Bank | 1QFY2014 Result Update

Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 1.1 0.8 0.3 0.3 0.7 0.7 1.4 0.9 0.5 0.0 0.5 25.9 13.2 1.8 0.8 1.0 0.1 1.0 0.8 1.9 0.9 0.9 0.3 0.7 23.3 15.8 1.7 0.5 1.1 0.1 1.2 0.7 1.9 1.0 1.0 0.2 0.7 18.0 13.4 1.8 0.9 0.8 0.1 1.0 0.9 1.9 1.0 0.9 0.2 0.6 16.6 10.2 1.9 0.8 1.1 0.0 1.1 0.9 2.0 1.1 0.9 0.3 0.6 16.6 10.2 2.0 0.5 1.5 0.0 1.5 0.9 2.4 1.2 1.2 0.4 0.8 16.5 13.3 4.9 0.6 4.3 4.2 0.5 5.0 4.4 0.5 4.4 4.9 0.5 5.0 4.5 0.5 4.3 3.2 0.4 6.4 14.2 113.4 3.0 16.8 128.5 3.5 15.9 132.6 3.0 14.1 142.1 3.5 15.5 152.2 3.0 22.1 174.4 4.5 1.5 1.0 1.4 0.4 74.9 1.8 1.1 1.4 0.5 74.7 2.5 1.6 1.6 0.4 68.3 3.2 1.6 1.5 0.7 70.8 4.6 2.0 2.5 0.7 70.0 4.6 1.6 1.8 0.4 75.0 14.6 82.4 11.3 6.2 20.9 87.0 13.6 8.0 24.1 86.1 14.7 8.5 25.1 86.4 13.5 8.0 25.6 88.0 13.1 8.1 26.6 88.0 12.5 8.1 1.2 41.3 0.5 13.2 1.8 35.2 0.7 15.8 1.7 39.1 0.7 13.4 1.8 36.5 0.6 10.2 1.9 38.7 0.6 10.2 2.0 41.2 0.8 13.3 FY10 FY11 FY12 FY13 FY14E FY15E

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IDBI Bank | 1QFY2014 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

IDBI Bank No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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