(Kotak) BFSI, June 2, 2015 - Quarterly Review 4QFY15

Banks/Financial Institutions
India
ATTRACTIVE
JUNE 02, 2015
UPDATE
BSE-30: 27,849
Weak earnings; impairment ratios rise marginally. The quarter was even more
disappointing than the 3% yoy decline in earnings suggests. Earnings declined largely
on the back of weak NII growth (10% yoy) and high provisions (38% yoy). Impairment
ratios increased by 40 bps qoq to 10.9% with fresh impairments at 6.8% of loans.
NBFCs delivered a mixed performance with improved collections for most auto finance/
multi product NBFCs and sharp deterioration for others. We remain most positive on
housing finance (HDFC, LICHF and Dewan) and would like to play the CV recovery
through Cholamandalam and other multi product NBFCs.
Earnings slips into negative zone; NII growth tracking weak loan growth
After a few quarters of positive growth in earnings, 4QFY15 was a disappointment with a
decline of 3% yoy (ex-SBI at -9% yoy). Revenues grew 14% yoy with NII growth at 10% yoy
and non-interest income growth at 24% yoy. NII growth for private banks was stronger at 18%
yoy and weaker for public banks at 5% yoy, reflecting the weak trends on loan growth. We are
yet to see any slowdown in provisions for bad loans which grew 36% yoy with slippages mainly
from restructured loans. Among public banks, SBI declared strong results while Axis, HDFC
Bank and Yes Bank did likewise among private banks.
Loan growth still weak as recovery is still elusive; revenue growth sees support from treasury
Loan growth (under coverage) slowed to 11% yoy (Exhibit 24), the slowest in recent years as
demand for corporate loans slowed sharply and alternate channels opened up meaningfully.
Divergence further expanded between public (8% yoy) and private banks (18% yoy) primarily
due to the nature of the loan portfolio and private banks looking to rebuild growth in the
corporate segment. We see loan growth, and consequently revenue growth, as a key challenge
that is likely to continue in FY2016-17 as there is a lack of evidence of corporate demand (~45%
of loans) at this stage as bank pipelines show negligible sanctions. Revenue growth and
earnings growth should sustain/improve as the treasury book shows positive contribution.
QUICK NUMBERS
Earnings declined
3% yoy; NII grew
10% yoy
Gross NPLs at 3.9%
and restructured
loans at 5% for
banks under
coverage
Loan growth at 11%
yoy; public banks at
8% yoy
Impairment ratios weak as expected; recovery and upgradation improve qoq

Fresh impairments were high qoq at 6.8% of loans with slippages largely unchanged at 3%
and fresh restructuring at 3.8% of loans. Gross NPLs increased 6% qoq (flat qoq) to 3.7% (4.7%
for public and 2.1% for private banks). Gross NPLs were flat qoq and can be explained by
better trends on recovery/upgradation (Exhibit 10) and flat write-offs (Exhibit 9) a trend that
we would define as seasonal more than cyclical improvement. Outstanding restructured loans
increased 30 bps qoq to 5% of loans. Fresh restructuring was higher as most banks/borrowers
used the underlying opportunity to complete their pending restructuring.
NBFCs: mixed trends in business; overall trends remain weak
Most NBFCs continued to report weakness in core earnings on the back of slowing growth and
higher NPLs. Select players reported sharp bounce back in NPL collections or growth but guided
for moderation in 1HFY16. Defensives players (HDFC, LICHF and Bajaj Finance) remained strong.
Trends in auto finance NBFCs were mixed: Cholamandalam, Magma, MMFS, L&T Finance
reported stable or marginally improvements; Shriram Transport reported marginal weakness
and its equipment finance subsidiary reported sharp deterioration. We remain most positive on
housing finance (HDFC, LICHF and Dewan) and would like to play the CV recovery through
Cholamandalam and other multi product NBFCs.
M.B. Mahesh, CFA

mb.mahesh@kotak.com
Mumbai: +91-22-4336-0886
Nischint Chawathe
nischint.chawathe@kotak.com
Mumbai: +91-22-4336-0887
Abhijeet Sakhare
abhijeet.sakhare@kotak.com
Mumbai: +91-22-4336-0889
Kotak Institutional Equities Research

kotak.research@kotak.com
Mumbai: +91-22-4336-0000
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
India
Exhibit 1: Consolidated PAT for banks under coverage decreased 3% yoy

Consolidated earnings for banks under coverage, March fiscal year-ends, 4QFY14-4QFY15 (` bn)
4QFY14
449
215
664
155
139
155
124
NII
Non interest income
Total income
Provisions
Loan loss provisions
PAT
PAT (ex-SBI)
3QFY15
477
207
684
148
142
144
115
4QFY15
493
267
760
215
190
151
114
QoQ (%)
3.3
29.3
11.1
44.5
33.3
5.0
(0.9)
YoY (%)
9.7
24.2
14.4
38.2
36.4
(2.5)
(8.7)
Source: Company, Kotak Institutional Equities
Exhibit 2: PAT growth was negative in last quarter for the sector
Growth in PAT, March fiscal year-ends, 4QFY11-4QFY15 (%)
Public
Private
Sector
120
90
60
30
4QFY15
3QFY15
2QFY15
1QFY15
4QFY14
3QFY14
2QFY14
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
(30)
Exhibit 3: NII growth slowed to 10% yoy

Growth in NII, March fiscal year-ends, 4QFY11-4QFY15 (%)
Public
Private
Exhibit 4: Loan-loss provisions increased significantly

Loan-loss provisions, March fiscal year-ends, 4QFY11-4QFY15 (` bn)
Sector
Public
40
32
160
24
120
16
80
40
4QFY15
3QFY15
2QFY15
1QFY15
4QFY14
3QFY14
2QFY14
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
Private
200
KOTAK INSTITUTIONAL EQUITIES RESEARCH
India
Exhibit 5: Impaired loans increased for public banks this quarter

Public banks (under coverage), March fiscal year-ends, 4QFY134QFY15 (%)
5.6
5.8
5.9
5.8
6.2
2.1
2.0
2.0
2.1
1.7
2.0
2.0
2.0
2.1
1.6
1.7
1.8
1.8
2.0
1.8
1.8
1.9
1.8
1.8
4.8
2.4
2.7
4QFY15
5.5
3QFY15
5.7
2QFY15
5.3
5.5
1QFY15
7.2
3QFY14
3.6
2QFY14
9.6
Restructured loans
1QFY14
4.5
4QFY14
Gross NPL
Restructured loans
12.0
4QFY13
Gross NPL
Exhibit 6: Private banks saw a marginal increase this quarter

Private banks (under coverage), March fiscal year-ends, 4QFY134QFY15 (%)
3.8
4.3
4.4
4.4
4.1
4.2
4.4
4.7
4.7
0.9
-
4QFY15
3QFY15
2QFY15
1QFY15
4QFY14
3QFY14
2QFY14
1QFY14
4QFY13
Fresh impairments rise sharply; recovery/upgradation improve qoq

Broad trends on outstanding impairment ratios worsened marginally for the quarter. The
previous few quarters show a steady improvement in fresh impairment ratios, though the
trend was not visible this quarter, which was partly expected considering that this was the
last quarter where the sunset clause of maintaining existing classification of freshly
restructured loans was available.
Fresh impairments increased 250 bps qoq at 6.8% of loans with slippages at 3% and fresh
restructuring at 3.8% of loans. The qualitative assessment of the slippages for the quarter
suggests that a large share of slippages for banks is coming from the increasing rate of
failures of previous restructured loans, especially from the iron and steel sector.
SBI and BoB amongst public banks and Axis Bank in private banks reported better
performance on fresh impairment ratios. PNB, Canara Bank and BoI had a very disappointing
quarter with a large rise in fresh impairments.
Outstanding gross impairment levels (gross NPLs and restructured loans) increased 30 bps
qoq at 8.9% of loans. Public banks, having reported few quarters of improvement, saw their
overall impaired loans at 11% (40 bps qoq) while the same for private banks increased 10
bps qoq to 4.2% of loans.
Overall gross NPLs were flat qoq at 3.7% of loans (flat at 4.7% of loans for public banks and
<10 bps to 2.1% of loans for private banks. The marginally deteriorating trend for private
banks as compared to public banks can be partially explained by the better trends on
upgradation/recovery and write-offs as compared to the previous quarter. Large private
banks have now started indicating that the stress levels in the balance sheet is gradually
easing and believe that FY2014-15 was probably the weakest period from an impairment
perspective. However, public sector banks continue to be impacted by the restructured
portfolio where they are currently witnessing a higher share of slippages. A few banks did
resort to sale of loans, both standard, NPL and written-off loans to ARCs at a steep discount.
A noticeable feature would be the increase in upgradation, recovery in the current quarter.
Recovery/upgradation increased 50 bps qoq to 1.2% while the write-offs were flat qoq at
~1% of loans. Typically, the second half of the year is stronger on recovery and upgrades. It
could be seasonal and probably not cyclical and we would need to see the trends in 1HFY16
to establish the trend on impairment ratios.
India
Management, especially for public banks, continue to highlight that a disproportionate

bandwidth is towards impairment management but the efforts can pay-off only when there
is recovery in the economy, which at this stage appears to be promising. The earliest sign
that we would need to read to gain confidence on the impairment cycle would be the
reduction in slippages which at this stage is not visible though one would argue that it has
probably stabilized. We should, after a few quarters, notice stronger trends on
recovery/upgrades.
Provision coverage has shown a decline, albeit nothing substantial. Among banks, SBI
reported one of the sharpest improvements in provision coverage ratios while ICICI Bank
reported the steepest decline qoq.
Exhibit 7: Gross NPLs increased 5.5% qoq, ratio flat qoq
Gross NPLs and net NPLs, March fiscal year-ends, 4QFY14-4QFY15
Gross NPLs (Rs bn)
1QFY15 2QFY15 3QFY15 4QFY15
Public banks
BoB
BoI
Canara
OBC
PNB
SBI
Union
Old private
CUBK
DCB
Federal
KVB
J&K
New private
Axis
HDFC Bank
ICICI
IndusInd
Yes
Total
Change qoq (%)
Public banks
Private banks
Gross NPLs (%)

Net NPLs (Rs bn)

Net NPLs (%)

121
125
82
60
196
604
102
131
141
92
66
208
607
115
155
167
106
77
222
620
126
163
222
130
77
257
567
130
3.1
3.3
2.7
4.3
5.5
4.9
4.3
3.3
3.5
2.9
4.7
5.7
4.9
4.7
3.9
4.1
3.4
5.4
6.0
4.9
5.1
3.7
5.4
3.9
5.2
6.6
4.3
5.0
60
80
62
42
105
319
58
67
91
72
45
116
330
64
83
101
76
51
138
345
71
81
135
87
48
154
276
69
1.6
2.1
2.0
3.1
3.0
2.7
2.5
1.7
2.3
2.3
3.3
3.3
2.7
2.7
2.1
2.5
2.4
3.7
3.8
2.8
3.0
1.9
3.4
2.7
3.3
4.1
2.1
2.7
3
1
10
5
27
3
2
10
5
28
4
2
11
7
27
3
2
11
7
28
1.9
1.8
2.2
1.3
5.8
2.0
1.9
2.1
1.4
6.0
2.1
1.9
2.2
1.9
5.8
1.9
1.8
2.0
1.9
6.0
2
1
3
2
14
2
1
3
2
12
2
1
3
3
14
2
1
4
3
12
1.3
1.0
0.7
0.5
3.2
1.3
1.1
0.7
0.6
2.8
1.3
1.0
0.7
0.7
3.2
1.3
1.0
0.7
0.8
2.8
35
34
110
7
2
1,523
3.6
1,290
233
36
34
117
7
2
1,602
5.2
1,359
243
39
35
132
7
3
1,737
8.4
1,472
265
41
34
152
6
3
1,833
5.5
1,546
287
1.3
1.1
3.2
1.1
0.3
3.6
1.3
1.0
3.2
1.1
0.4
3.7
1.3
1.0
3.5
1.1
0.4
3.9
1.3
0.9
3.9
0.8
0.4
3.9
0.4
0.2
1.6
0.3
0.1
2.0
4.7
2.1
13
9
63
2
1
960
0.2
850
110
0.4
0.3
1.3
0.3
0.1
2.2
4.7
2.0
13
9
48
2
1
959
10.3
864
95
0.4
0.3
1.1
0.3
0.1
2.0
4.4
2.0
12
9
39
2
1
869
7.9
786
84
0.4
0.3
1.0
0.3
0.1
1.9
4.2
2.0
11
10
34
2
0
805
6.2
726
80
2.4
0.7
2.5
0.7
2.7
0.7
2.6
0.8
Exhibit 8: Fresh impairments were higher than previous quarter

Fresh additions to NPLs and restructured loans, March fiscal year-ends, 4QFY14-4QFY15
Bank of Baroda
4QFY14
1.3
Fresh slippages (%)

1QFY15 2QFY15
2.1
1.9
3QFY15
3.1
4QFY15
1.3
Fresh restructuring (%)

1.2
1.0
1.2
1.6
4QFY15
3.8
Bank of India
3.8
4.0
3.0
3.3
6.4
2.5
1.7
1.4
0.7
2.7
Canara Bank
2.8
3.4
4.1
2.9
3.4
1.9
1.8
1.2
1.4
4.2
O riental Bank of Commerce
3.4
4.1
2.8
3.8
2.1
2.9
2.5
2.0
6.0
4.7
Punjab National Bank
5.1
3.4
4.4
5.7
7.8
3.7
1.7
3.7
2.7
8.3
State Bank of India
2.6
3.3
2.5
2.3
1.5
2.6
1.2
1.1
1.3
3.7
Union Bank
2.0
2.1
3.2
2.8
2.4
2.4
0.8
1.2
2.0
3.6
Axis Bank
0.5
1.1
1.5
1.1
0.9
1.9
0.8
0.9
0.2
2.2
ICICI Bank
1.5
1.4
1.8
2.4
3.4
2.5
1.6
0.9
1.9
1.3
Total
2.6
2.9
2.8
2.9
3.0
2.4
1.4
1.4
1.6
3.8
Total (ex SBI)
2.6
2.7
2.9
3.2
3.7
2.4
1.5
1.6
1.8
3.8
India
Exhibit 9: Banks made higher write-offs during the quarter

Write-off of loans, March fiscal year-ends, 4QFY14-4QFY15
Bank of Baroda
Bank of India
Canara Bank
Oriental Bank of Commerce
State Bank of India
Union Bank
Axis Bank
ICICI Bank
Total
Write-offs (Rs mn)

1QFY15
2QFY15
4,986
3,680
8,150
1,550
8,000
10,540
4,371
778
7,490
10,700
65,600
47,870
2,880
1,800
2,120
5,970
3,920
5,390
107,518
88,278
4QFY14
4,866
5,480
4,030
3,652
8,740
56,980
2,220
140
7,190
93,299
3QFY15
3,280
640
200
397
10,820
50,960
2,180
1,940
2,360
72,777
Write-offs (% of advances)
4QFY14 1QFY15 2QFY15 3QFY15 4QFY15
0.5
0.5
0.4
0.3
0.3
0.6
0.9
0.2
0.1
(0.2)
0.5
1.1
1.4
0.0
(0.5)
1.0
1.3
0.2
0.1
1.0
1.0
0.9
1.2
1.2
1.4
1.9
2.2
1.6
1.7
1.5
0.4
0.5
0.3
0.4
0.4
0.0
0.4
1.0
0.3
0.3
0.8
0.5
0.6
0.3
0.6
1.0
1.2
1.0
0.8
0.8
4QFY15
3,689
(2,330)
(4,010)
3,703
13,540
48,740
2,450
2,140
5,950
73,872
Exhibit 10: Strong recovery in 4QFY15, particularly for SBI and PNB
Recoveries and upgradation of loans, March fiscal year-ends, 4QFY14-4QFY15
Recovery and upgradation (Rs mn)
Bank of Baroda
Bank of India
12,155
22,911
12,214
7,254
12,874
1.2
1.3
2.4
1.2
0.7
1.3
Canara Bank
22,357
12,057
11,193
8,627
7,396
1.5
3.0
1.6
1.4
1.1
0.9
1.1
1QFY15
13,125
2QFY15
5,137
Recovery/upgradation (% of advances)
4QFY14
8,572
3QFY15
3,186
4QFY15
1,816
3QFY14
0.4
4QFY14
0.9
1QFY15
1.4
2QFY15
0.5
3QFY15
0.3
4QFY15
0.2
4,063
6,291
2,397
2,773
3,929
1.1
1.2
1.8
0.7
0.8
12,948
14,862
17,350
26,515
25,866
1.0
1.5
1.7
1.9
2.9
2.7
State Bank of India
84,430
45,411
26,349
6,679
51,611
1.0
2.8
1.5
0.9
0.2
1.6
Union Bank
1,905
3,179
5,582
3,856
8,672
0.5
0.3
0.5
0.9
0.6
1.3
Axis Bank
1,488
971
1,642
2,255
1,874
0.2
0.3
0.2
0.3
0.3
0.3
ICICI Bank
4,160
3,560
4,400
5,070
6,540
0.5
0.5
0.5
0.5
0.6
0.7
Total
152,077
122,368
86,263
66,216
120,579
0.9
1.7
1.4
1.0
0.7
1.2
Ex SBI
67,647
76,957
59,914
59,537
68,967
0.8
1.2
1.3
1.0
1.0
1.1
Exhibit 11: Nearly 30% of textiles and 25% of iron and steel exposure have been restructured or have slipped into NPLs
NPL and restructured loans in textiles and iron and steel across select banks, March fiscal year-end, 4QFY15 (%)
Textiles
Total
exposure
IOB
OBC (A)
PNB
SBI
(% of loan
book)
4.1
4.8
3.1
3.2
Iron & steel
Restructutred loans
(% of total
expoure)
10.1
11.6
12.1
15.7
(% of
restructured
loans)
3.7
4.1
3.7
24.3
Total
exposure
NPLs
(% of total
expoure)
14.6
13.3
8.6
8.4
(% of
NPLs)
7.1
12.2
3.9
6.3
(% of loan
book)
6.3
6.5
6.2
6.0
Restructutred loans
(% of total
expoure)
28.7
21.3
23.6
18.4
(% of
restructured
loans)
16.2
10.3
14.6
53.9
NPLs
(% of total
expoure) (% of NPLs)
12.3
9.3
11.3
14.2
10.1
9.3
7.3
10.4
Notes:
(a) Restructured loans amount assumed to be same as 3QFY15.
India
Exhibit 12: Loan loss provisions increased for most banks

Loan loss provision ratio, March fiscal year-ends, 4QFY14-4QFY15 (%)
4QFY14
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
Old private banks
City Union Bank
DCB
Federal Bank
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
Yes Bank
IndusInd Bank
1QFY15
2QFY15
3QFY15
4QFY15
0.6
1.5
1.0
2.1
2.4
1.9
1.2
0.8
1.0
1.5
1.7
1.4
1.3
0.7
0.6
0.9
1.1
1.3
2.0
1.3
1.1
1.2
1.5
1.4
1.6
2.1
1.5
1.3
1.4
2.3
1.2
1.8
3.8
1.9
1.2
0.6
0.5
0.3
0.1
0.3
1.1
0.6
0.4
1.5
1.8
1.2
0.4
0.5
0.8
3.1
0.6
0.4
0.5
1.7
1.8
0.7
0.5
0.3
1.8
3.1
0.7
0.4
0.8
0.3
0.5
0.6
0.5
0.8
0.5
0.6
1.1
0.6
0.8
0.3
0.4
0.6
0.6
1.0
0.3
0.7
0.5
0.6
1.3
0.6
0.5
Exhibit 13: Provision coverage ratio trends were mixed

Provision coverage ratio, March fiscal year-ends, 4QFY14-4QFY15 (%)
4QFY14
Public banks
BoB
BoI
Canara
OBC
PNB
SBI
Union
Old priv ate banks
City Union Bank
DCB
F ederal Bank
Karur V y sy a Bank
J &K Bank
New priv ate banks
Axis Bank
HDF C Bank
ICICI Bank
Yes
IndusInd Bank
Ex write-off
1QFY15 2QFY15 3QFY15
4QFY15
4QFY14
Inc write-off
4QFY15
49.2
37.5
21.2
30.5
47.5
49.5
44.2
50.2
35.8
24.6
29.3
46.6
47.2
43.7
48.7
35.6
21.8
32.0
44.0
45.7
43.7
46.3
39.7
28.5
33.8
37.9
44.4
43.5
50.4
39.1
33.0
37.2
40.1
51.4
46.9
65.5
58.7
60.1
60.2
59.1
62.9
59.9
66.7
58.1
60.1
59.1
60.0
62.7
58.9
65.4
56.3
58.7
59.0
59.1
63.2
58.0
62.4
56.6
59.4
57.4
57.3
63.6
57.3
65.0
52.4
57.3
60.6
58.2
69.1
59.2
32.7
46.5
70.4
49.9
87.0
33.7
46.1
70.1
59.5
48.7
35.3
44.1
69.1
56.8
49.3
38.9
46.9
68.8
62.3
46.3
30.7
43.2
64.7
58.5
55.3
62.0
80.5
84.1
75.0
90.3
61.1
79.1
84.9
75.0
55.1
62.0
76.8
85.1
75.0
54.9
62.0
77.1
85.0
75.1
51.0
58.0
74.7
83.9
75.2
59.0
67.4
72.6
68.8
85.1
70.4
67.8
70.0
68.4
78.4
70.1
67.3
72.7
65.8
75.8
70.2
67.9
73.9
63.5
76.8
70.0
68.0
73.9
58.5
72.0
62.6
India
Exhibit 14: We factor loan loss provisions to reduce gradually

Loan-loss provisions, March fiscal year-ends, 2009-17E (%)
Private
PSU
2.0
1.6
1.2
0.8
0.4
2017E
2016E
2015
2014
2013
2012
2011
2010
2009
0.0
Notes:
(a) City Union Bank, DCB, ING Vysya and Karur Vysya Bank not included from banks under coverage.
Source: Company, Kotak Institutional Equities estimates
Restructured loans shows an increase of 30 bps qoq; net NPL and restructured loans
increase 20 bps at ~7% of loans
Overall restructured loans increased by 30 bps qoq 5% of loans. Public banks reported an
increase of 40 bps qoq to 6.2% of loans while the share of restructured loans for private
banks increased by 10 bps to 2.1% of loans.
The increase on a sequential basis was broadly on expected lines. Loans restructured in the
SEB segment came off to 46% from 50% in the past few quarters. There would be no
further fresh disbursements from FY2016 to the SEB as a part of the financial restructuring
package.
Overall stress (net NPL and restructured loans) stands at 2.9% of loans (10 bps qoq) for
private banks and 8.8% of loans (20 bps increase qoq) for public banks. There are some
early signs that the pipeline for fresh restructuring is gradually easing across all banks.
However, it would be incorrect to extrapolate considering that incremental cases for
restructuring would be of a very large ticket size.
The transitional costs of the provisioning requirements on new restructured guidelines
continued to bite earnings as they would have to have make ~5% on the incremental loans
restructured and move the outstanding stock of restructured to 5% by FY2015. We do note
that there are high slippages into NPL from the restructured loan portfolio as the
restructuring package implemented in these corporate portfolios has not been successful.
India
Exhibit 15: Restructured loans and net NPLs to total loans are at about 9% for public banks, 3% for private banks
Restructured loans and net NPLs, March fiscal year-ends, 4QFY14-4QFY15 (%)
Restructured loans (%)
Public banks
BoB
BoI
Canara
O BC
PNB
SBI
Union
O ld private banks
City Union
DCB
Federal
Karur Vysya
J&K
Private
Axis
HDFC Bank
ICICI
IndusInd
Yes
Total
Public banks
Private banks
Net NPLs (%)

Net NPL and restructured loans (%)

5.2
5.5
7.7
9.8
10.2
3.6
5.3
6.0
5.5
7.9
11.6
9.8
3.5
5.0
5.8
5.5
7.9
11.3
10.2
3.6
6.6
5.9
4.9
8.1
12.7
9.5
3.8
5.0
6.1
4.9
8.6
13.6
10.1
4.3
5.2
1.5
2.0
2.0
2.8
2.9
2.6
2.3
1.6
2.1
2.0
3.1
3.0
2.7
2.5
1.7
2.3
2.3
3.3
3.3
2.7
2.7
2.1
2.5
2.4
3.7
3.8
2.8
3.0
1.9
3.4
2.7
3.3
4.1
2.1
2.7
6.7
7.5
9.7
12.6
13.0
6.1
7.6
7.6
7.6
10.0
14.7
12.8
6.2
7.5
7.6
7.8
10.2
14.5
13.4
6.4
9.3
8.0
7.4
10.6
16.3
13.3
6.6
7.9
7.9
8.3
11.2
16.9
14.1
6.4
5.2
1.7
1.0
5.3
4.1
3.4
1.6
0.9
5.5
4.3
3.0
1.5
1.0
5.0
4.5
2.8
1.5
1.2
5.1
4.7
4.1
1.4
0.5
5.6
5.4
5.5
1.2
0.9
0.7
0.4
0.2
1.3
1.0
0.7
0.5
2.2
1.3
1.1
0.7
0.6
2.5
1.3
1.0
0.7
0.7
3.2
1.3
1.0
0.7
0.8
2.8
2.9
2.0
6.1
4.5
3.6
2.9
1.9
6.2
4.8
5.2
2.8
2.1
5.7
5.1
5.3
2.8
2.2
5.7
5.4
7.3
2.7
1.5
6.3
6.2
8.3
2.4
0.2
3.1
0.3
0.2
4.7
5.6
2.0
2.5
0.2
3.2
0.4
0.2
4.7
5.8
2.1
2.5
0.1
3.0
0.5
0.2
4.8
5.9
2.0
2.4
0.1
3.2
0.6
0.3
4.7
5.8
2.0
2.7
0.1
2.8
0.5
0.5
5.0
6.2
2.1
0.4
0.3
1.0
0.3
0.1
1.8
2.3
0.5
0.4
0.3
1.0
0.3
0.1
1.9
2.4
0.7
0.4
0.3
1.1
0.3
0.1
2.0
2.6
0.7
0.4
0.3
1.3
0.3
0.1
2.2
2.8
0.8
0.4
0.2
1.6
0.3
0.1
2.1
2.6
0.8
2.8
0.5
4.1
0.7
0.2
6.5
7.9
2.6
2.9
0.5
4.2
0.7
0.3
6.7
8.2
2.7
2.9
0.4
4.1
0.9
0.3
6.9
8.5
2.7
2.8
0.4
4.5
0.9
0.4
6.9
8.6
2.8
3.2
0.3
4.5
0.8
0.6
7.1
8.8
2.9
Exhibit 16: Proportion of SEB restructured loans declined to 47% from 50% earlier led by implementation of FRP packages for SEBs
March fiscal year-end, 4QFY15 (%)
Power
Total loans
Andhra Bank
Allahabad Bank
BOB (B)
BOI
Central Bank (B)
Corporation Bank
Dena Bank
IDBI Bank
Indian Bank (B)
IOB (A)
OBC
PNB
SBI (B)
Vijaya Bank
Syndicate bank
Total
(Rs bn)
1,296
1,531
4,281
4,020
1,950
1,451
806
2,084
1,288
1,790
1,480
3,805
13,354
877
2,058
48,000
Infra exposure
(Rs bn)
199
248
357
490
410
238
153
572
230
280
335
637
1,773
234
255
7,442
(% of
loans)
15.4
16.2
8.3
12.2
21.0
16.4
19.0
27.5
17.8
15.7
22.6
16.7
13.3
26.7
12.4
15.5
SEB
(% of
loans)
3.6
3.4
1.5
3.7
9.4
2.7
9.0
3.3
5.4
4.7
2.8
0.8
8.4
5.6
3.4
Restructured loans (% of loans)

Non-SEB
(% of
loans)
7.2
5.8
3.0
4.6
4.4
6.9
3.4
12.0
6.6
5.7
8.7
7.0
7.2
9.6
2.7
6.1
Total
(% of
loans)
11.1
10.9
6.1
5.0
16.7
7.3
12.2
8.0
7.7
11.1
13.6
10.1
5.3
7.1
5.2
8.0
SEB
(% of
loans)
2.9
2.1
0.7
1.0
7.4
1.6
4.6
3.1
1.1
3.7
1.5
0.3
2.8
2.1
1.5
Aviation
(% of
loans)
0.4
0.2
0.3
0.6
0.6
0.6
0.2
0.2
0.5
0.4
0.8
0.4
0.1
0.4
0.3
Others
(% of
loans)
7.7
8.6
5.0
3.5
8.7
5.1
7.4
7.8
4.1
9.6
9.1
8.1
4.9
4.2
2.8
6.2
SEB
restructuring
(% of SEB
loans)
82.2
61.0
46.1
25.7
78.5
60.5
51.6
91.1
20.5
78.8
54.8
35.5
33.6
36.9
46.1
Notes:
(A) Exposure to power extrapolated proportionate to increase in infrastructure book
(B) Assumed infrastructure exposures and SEB restructured loans same as previous quarter
(C) We have assumed exposure to be equal to last quarter where data is not available
India
NBFCS: MIXED RESULTS; OVERALL TRENDS WEAK

Most NBFCs continued to report weakness in core earnings on the back of slowing growth and higher NPLs.
NIM improved marginally due to seasonal trends and lower incremental borrowings cost.
Key highlights
Sharp bounce back in select players. Some of the NBFCs like Mahindra Finance
reported a sharp bounce back in collections. High (31% qoq) loan growth for SKS (on the
back of weak traction in past three quarters) and 6% qoq loan growth (on the back of
flat loan book in last seven quarters) for Muthoot was reassuring.
Defensives remain strong. Housing finance companies (HDFC, LICHF) and Bajaj Finance
continued to deliver strong and stable performance though marginally tempered by
seasonal factors.
Divergent trends in CV collections. Cholamandalam, Magma, L&T Finance reported
stable or marginally improvement in collections. However, collections remained weak at
Shriram Transport Finance. The sharp rise in NPL (GNPL ratio of 15% from 3% qoq) in
Shrirams equipment finance subsidiary) rattled the street, raising concerns about
significant slippages for other players however, most other listed players have not
reported any such sharp deterioration.
Business momentum picked up

Most NBFCs reported improvement in business momentum during 4QFY15 though this may
not be construed as a sign of recovery in the sector.
Housing finance companies (HDFC, LICHF and Dewan) continue to report strong retail
loan growth. Market share gains over the last few quarters have also boosted growth for
these players. Reported yoy loan growth and disbursements growth has accelerated by
~1% yoy between 3QFY15 and 4QFY15.
CV finance companies reported slightly better business growth due to a pick-up in CV
sales in 2HFY15. HCV sales picked up during the quarter; while this benefitted banks
(catering to large fleet operators), some of the NBFCs (catering to smaller operators)
reported higher growth as well. This was likely due to financing of vehicles sold down to
small fleet operators from large fleet operators.
Bajaj Finance continued to report high loan growth (up 35%) yoy driven by 14 business
lines across consumer as well as business loan verticals.
SKS report high loan growth (31% qoq) due to an increase in ticket size and higher
momentum in 4Q.
Muthoot reported 6% qoq loan growth as compared to a flat performance in the past
few quarters as disbursements picked up gradually as its marketing efforts ramped up.
Reported loan growth declined for several players (Cholamandalam, Magma, Mahindra
Finance and L&T Finance) as business momentum has been weak for several quarters while
repayments remain stable/high.
India
Exhibit 17: Loan growth remains weak

Yoy loan growth, 4QFY14-4QFY15 (%)
Bajaj Finance
Cholamandalam
DHFL
HDFC
IDFC
LIC Housing Finance
Mahindra Finance
Magma Finance
Muthoot Finance
Pow er Finance Corporation
Rural Electrification Corporation
Shriram City Union Finance
Shriram Transport Finance
SKS Microfinance
4QFY14
37
22
16
5
17
23
10
(16)
18
17
(7)
7
41
1QFY15
40
18
24
15
(8)
17
17
12
(17)
17
17
(2)
4
39
2QFY15
41
17
28
15
(4)
17
13
13
(11)
16
17
3
3
50
3QFY15
37
12
28
14
(3)
18
10
13
(2)
16
19
8
7
35
4QFY15
35
9
27
16
(10)
19
11
9
7
15
21
14
11
47
Comments
Loan grow th remains high
Retains cautious stance
Loan grow th continues
Improving trend in retail busienss
Loan book dow n sharply
Disbursements remain high
Loan grow th w eak
Slow ing dow n
Loan book up 6% qoq
Business gradually slow ing dow n
Remains stable
Grow th improves on low base
Strong yoy grow th in disbursements
Strong grow th in ticket size
Source: Kotak Institutional Equities , Company
Exhibit 18: Trends in disbursements were better qoq

Disbursements, 4QFY13-4QFY15 (%)
Bajaj Finance
4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15

21
32
20
45
38
48
50
NA
NA
Cholamandalam
DHFL
HDFC
33
-
29
(3)
(7)
(5)
11
11
10
64
20
(3)
31
22
10
18
22
17
(3)
23
24
30
17
19
13
L&T Finance
25
LICHF -retail
18
13
(0)
15
23
Mahindra Finance
(2)
27
32
(11)
(13)
(2)
(8)
(18)
(13)
28
33
14
(12)
Shriram City
NA
(21)
(27)
(4)
18
17
Shriram Transport
55
48
18
(8)
(10)
(6)
13
39
31
Magma Fincorp
NIM rise and NPLs decline qoq

NIM improved for most players on a qoq basis. Seasonally, NPLs decline and collections
improve in most segments likely due to managements focus on recoveries. Higher income in
semi urban/rural India after the harvest season is also one of the reasons.
Borrowings cost down. Borrowings cost of most players has declined marginally. Large
and high-rated NBFCs shifted funds from bond markets at competitive rates. For instance,
LICHFs bond yield was down 150 bps in 2HFY15.
Lower growth = lower decline in borrowings cost. Lower loan growth implies that
incremental borrowings are low and hence reduction in average borrowings cost is lower.
Lower loan sell down. Share of loan sell down has declined yoy for most players due to
change in guidelines for bank classification of RIDF bonds. This is weighing negatively on
NIM.
10
India
Exhibit 19: NIM- mixed trends

NIM (KS- calculations), 4QFY14-4QFY15 (%)
Bajaj F inance
Cholamandalam
DHF L
HDF C
IDF C
LIC Housing F inance
Mahindra F inance

8.7
10.0
8.5
10.6
6.9
6.7
6.9
7.6
2.6
2.9
2.8
2.8
4.3
3.3
3.4
3.6
4.1
4.2
3.8
4.3
2.4
2.2
2.2
2.2
10.2
9.1
9.5
9.1
Magma F incorp
Muthoot F inance
Pow er F inance Corporation
Shriram Transport F inance
Shriam City Union F inance
SKS Microfinance
5.5
10.4
4.9
5.0
6.9
13.3
9.5
5.2
10.0
4.8
5.0
7.2
13.5
11.2
5.3
10.0
5.1
5.2
7.3
13.3
13.6
4QFY15
8.8
7.2
2.7
4.1
3.4
2.5
10.7
5.9
9.5
5.0
5.2
7.5
14.3
10.9
5.9
9.7
4.8
5.1
7.5
13.7
9.9
Comments
Seasonal w eakness in NIM
Change in classification on EIS
Stable qoq
Strong seasonal trends
Low er debt market gains
Seasonal trends at w ork
Seaonally strong NIM
Low er share of loan securitization and
higher share of high-y ield loans
NIM up marginlly qoq
NIM remains high
NIM remains high
Stable qoq
Higher share of gold loans
Cash distorted calculated ratio
Exhibit 18: Share of off-balance sheet loans lower yoy

Off-balance sheet loans as % of total AUM, March fiscal year-end, 4QFY14-4QFY15 (%)
DHFL
Mahindra Finance
Magma Finance
SKS Microfinance
4QFY14
9
7
36
13
31
39
1QFY15
9
6
33
11
26
21
2QFY15
9
5
32
8
21
5
3QFY15
9
5
30
6
14
14
4QFY15
10
5
32
6
17
30
Exhibit 20: NPLs decline qoq for most players

Gross NPLs of NBFCs, 4QFY13-4QFY15 (%)
Bajaj Finance
Cholamandalam
DHFL
HDFC
IDFC
LIC Housing Finance
LTF Holdings
L&T Finance
L&T Infra Finance
Magma Finance
Mahindra Finance
Muthoot Finance
Power Finance Corporation
SKS Microfinance
4QFY13
1.0
1.1
0.7
0.7
0.2
0.6
2.03
2.5
1.5
3.0
2.0
0.7
0.4
3.2
2.2
0.5
1QFY14
1.1
1.1
0.8
0.8
0.4
0.8
2.54
3.4
1.5
4.2
2.1
0.7
0.4
3.1
2.3
0.3
2QFY14
1.1
1.4
0.8
0.8
0.3
0.7
2.89
3.4
2.4
1.3
4.1
1.9
0.7
0.4
3.3
2.5
0.2
3QFY14
1.2
1.7
0.9
0.8
0.6
0.8
2.93
3.5
2.4
1.6
4.8
1.6
0.7
0.3
3.6
2.5
0.1
4QFY14
1.2
1.9
0.8
0.7
0.6
0.7
3.18
3.4
3.1
2.2
4.4
1.9
0.7
0.3
3.9
2.7
0.1
1QFY15
1.1
2.4
0.8
0.7
0.6
0.8
3.57
3.8
3.5
2.9
6.2
1.9
1.0
0.9
3.7
2.9
0.2
2QFY15
1.4
2.6
0.8
0.7
0.6
0.6
2.96
3.5
2.5
3.6
6.3
2.1
1.0
0.8
3.7
2.9
0.1
3QFY15
1.5
2.8
0.8
0.7
0.7
0.6
3.01
3.9
2.3
3.6
7.1
1.9
1.0
0.8
3.6
3.0
0.1
4QFY15
1.5
3.1
0.8
0.7
0.7
0.5
2.25
3.0
1.8
4.1
5.9
2.2
1.1
0.7
3.8
3.1
0.1
11
India
Impaired loans rise for PFC and REC

Impaired loans, March fiscal year-end, 1QFY14-4QFY15 (Rs bn)
1QFY14
PFC
Gross NPLs
Rescheduled/ restructured loans
Total impaired loans
(% of loan book)
REC
Gross NPLs
Rescheduled/ restructured loans
Total impaired loans
(% of loan book)
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
12
101
113
7
12
115
127
7
12
133
144
8
12
116
128
7
20
127
147
8
20
156
176
9
20
175
195
10
24
205
229
11
5
337
342
26
5
337
342
25
5
337
342
24
5
337
342
23
13
337
350
23
13
30
43
3
13
95
108
6
13
164
178
10
Notes:
PFC
(a) If the commission date of a private sector project project is postponed by a single day,the loan is classified as 'rescheduled'.
(b) ) If the loan repayment scheudule is revised due to change in cash flow forecasts, the loan is classified as 'restructured'.
REC
(a) 1Q FY14-1Q FY15: If the commission date of a private/ public sector project is postponed or loan repayment schedule is revised by a
single day, the project is classified as 'rescheduled'.
(b) 2Q FY15-4Q FY15: If the commission date of a private/ public sector project is postponed by over two years or loan repayment
schedule is revised, the loans is classified as 'restructured'.
Exhibit 21: Earnings growth trend mixed for NBFCs

Core PBT growth for NBFCs, 4QFY14-4QFY15 (%)
Bajaj Finance
Cholamandalam
DHFL
HDFC
IDFC
LICHF
Mahindra Finance
Magma Finance
Muthoot Finance
PFC
REC
Shriram Transport
SKS Microfinance
Exhibit 22: Earnings growth trend mixed for NBFCs

PAT growth for NBFCs, 4QFY14-4QFY15 (%)
Core PBT (%)

16
20
18
33
24
12
2
7
21
48
33
40
40
24
5
13
18
21
12
12
16
2
(5)
12
(21)
21
13
9
18
17
1
(19)
(6)
(17)
5
(22)
(18)
15
29
36
(20)
(7)
(20)
(20)
(8)
15
16
12
11
13
26
16
33
21
17
(7)
15
803
1
8
886
4
10
255
10
9
90
16
5
71
Bajaj Finance
Cholamandalam
DHFL
HDFC
IDFC
LICHF
Mahindra Finance
Magma Finance
Muthoot Finance
PFC
REC
Shriram Transport
SKS Microfinance
PAT (%)
11
20
18
33
6
2
6
21
7
22
18
17
11
21
14
18
(47)
(14)
(14)
(16)
17
14
21
16
(7)
(19)
(6)
(17)
1
1
31
25
(20)
(7)
(20)
(20)
9
21
11
1
24
11
35
12
(17)
(10)
(8)
4
17
9
9
10
803
886
255
90
4QFY15
27
49
13
15
49
10
7
18
(8)
11
(8)
7
1
49
Summary of takeaways for select NBFCs

Bajaj Finance reported 27% growth in earnings supported by 35% growth in loan book
(Rs324 bn). Calculated NIM declined due to the shift to lower-yield loans. The company
made extra provisions of Rs174 mn as an impact of change in provisioning policy this
pulled down growth in reported earnings.
Cholamandalams (Chola) 4QFY15 PAT was up 21% yoy driven by high income on
recoveries (interest income including penal charges). Provisions were strong as well;
Cholas management indicated that delinquency resolution in early buckets (0-4 months)
was strong and substantially lower yoy but delinquencies in the past two months slipped
into the NPL category.
12
India
Dewan Housing Finances (Dewan) comparable PAT was up 20% yoy on the back of 27%
yoy loan growth to Rs568 bn. Calculated NIM were stable yoy at 2.7% as the company
has likely fully passed on the benefit of lower borrowings cost to its borrowers.
HDFC reported PAT (before DTL) was up 15% yoy. Overall loan book (including
outstanding loans sold to banks) was up 16% yoy to Rs2.53 tn. Individual loan book was
up 18% yoy. Non-individual loan book was up 13% yoy, higher than 8-11% yoy over the
past seven quarters. Calculated NIM (4.1%) was down 20 bps yoy but up 50 bps qoq due
to liability-side benefits.
LICHF reported 17% yoy growth in comparable earnings and 22% growth in NII on the
back of stable (19%) loan growth and marginal yoy NIM expansion.
L&T Finance (the retail and mid-market business of L&T Finance Holdings) 14% PBT
growth yoy. The sharp (45%) decline in CV/CE loans and weak business loans has offset
high growth in tractor and microfinance (leading to flat loan book) but such a strategy
boosted asset yields (up 40 bps yoy). The company made extra provisions (which
accounted for about half the provisions during the quarter) to prepare for 150 days past
due (dpd) NPL recognition from FY2017. The company will follow 150 dpd guidelines
from 1QFY15.
L&T Infra Finance reported strong loan growth of 27% yoy (from renewable projects,
roads and operating assets). Incremental trends are little weaker as seen from
disbursements (+2% yoy and -36% qoq). NIM was flat but high provisions (statutory and
extra provisions) affected earnings.
Sharp rise in impaired loans for PFC (and REC) were the key highlight of 4Q results. PFCs
impaired loans increased sharply led by large (17% qoq) rise in rescheduled loans. RECs
restructured loans were up 72% qoq; the restructured loan book in the public sector
increased by 23% yoy to Rs117 bn and the company restructured loans of about Rs47 bn
(NIL earlier) in the private sector.
Magma Fincorp (Magma) reported PBT growth of 36% largely supported by (1) lower
provisions due to relaxation of the NPL norms and (2) 19% yoy growth in NII (supported
by 11% loan growth and NIM expansion). Cost-to-income ratio increased to 61% in
4QFY15 from 56% in 3QFY15. The tax rate was higher at 23% from 17% in 3QFY15
and 10% in 4QFY14 due to the lower share of loan securitization, which in turn boosted
NIM to some extent.
Mahindra Finances (MMFS) PAT was up 7% yoy but 13% ahead of estimates. Strong
NPL recoveries in March led to 17% qoq decline in gross NPLs, thus reducing provisioning
expenses (down 45% qoq) and boosting NIM (write-back of interest reversals boosted
asset yields by 35 bps qoq). MMFSs strong recovery efforts and reversion of high
delinquencies in 3QFY15 is likely to have driven strong collections performance, in our
view.
Muthoot Finances (Muthoot) PAT was down 9% yoy but up 7% qoq. Loan growth
picked up sharply (up 6% qoq to Rs234 bn). NIM expanded as well (20 bps qoq). The
company continued its focus on reducing its operating expenses opex ratio was lower
at 5.1% of loans from 5.4% qoq.
Shriram City Union Finance (SCUF) reported 5% growth in PBT. NII, up 14% yoy, was
supported by similar (14%) loan growth even as NIM (13.7%) was stable yoy. Cost-toincome ratio was up 400 bps yoy and 230 bps above estimates to 41% due to increase in
number of employees on roll.
13
India
SKS Microfinances business momentum picked up sharply in 4QFY15 with 31% qoq
loan growth due to the average size/loan increase of 25% qoq. Long-term loans (loan
with tenure of 104 weeks for borrowers, who have completed at least two loan cycles)
contributed 31% of the qoq loan growth. Greater liquidity on balance sheet, higher loan
sell-down (which calls for higher cash collateral) pulled down calculated NIM (9.9% as
compared to 10.9% in 3QFY15) Consequently, PAT was lower qoq at Rs405 mn (Rs412
in 3QFY15).
Shriram Transport Finance reported subdued earnings due to high (32%) rise in credit
cost. NII was up 19% yoy on the back of 11% loan growth (up 7% in 3QFY15) and yoy
NIM expansion. Large losses in the subsidiary company due to a sharp rise in NPLs (15%
from 3% qoq) was the key reason for disappointment.
Loan growth slowdown is the emerging challenge for banks

Growth remained similar to industry average for the banks under coverage at 11% yoy.
Public banks continued to report a noticeable slowdown with growth at 8% yoy; the
corporate segment is witnessing the maximum slowdown as the fresh capex cycle is not
showing any improvement and there is some shift in lending to money market instruments
owning to a sharp change in the liquidity environment.
Loan growth for private banks remained healthy at 18% yoy and similar to the previous
quarter levels. Select banks like Axis Bank, Yes Bank, IndusInd Bank and HDFC Bank seeing a
large growth in the corporate loan portfolio.
We note that old private banks, CUBK and Federal Bank have reported an improvement in
loan growth despite growth in gold loans being a major challenge. These banks continue to
focus on SME loans for incremental growth. KVB and J&K Bank reported a modest or weak
growth.
Most of the other public and private banks have shifted focus towards lending to retail and
SME. We believe that this is likely to be the biggest source of concern in FY2015 as fresh
sanctions have not shown any improvements, repayments are increasing from existing loans
while retail, where banks have shifted focus contributes to only 20% of the overall loans for
the sector. Public banks are likely to struggle more as their ability to shift to retail is
challenging and growth in the corporate segment is likely to remain weak for a few more
quarters.
Exhibit 23: Loan growth has been weak at 11% yoy in recent months
Yoy growth in loans, March fiscal year-ends, 2012-2015 (%)
2012
2013
2014
2015
30
25
20
15
10
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
14
India
Exhibit 24: Loan growth for banks under coverage was at 11% yoy
Yoy growth in loans, March fiscal year-ends, 4QFY13-4QFY15 (%)
4QFY13
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
O ld private banks
CUBK
DCB
Federal Bank
KVB
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
Yes Bank
IndusInd Bank
Public sector
Private sector
Total
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
14.2
16.5
4.2
16.3
5.1
20.5
17.1
12.4
17.1
10.8
12.4
3.6
15.7
16.5
16.3
29.4
30.3
9.2
6.5
19.1
25.5
17.7
27.2
31.8
8.4
9.7
17.4
19.9
21.0
28.4
24.3
8.1
13.1
15.7
10.6
18.8
23.3
21.2
8.1
13.9
13.0
18.1
13.5
18.5
10.6
8.1
13.8
9.6
10.3
11.7
15.1
8.5
5.5
11.1
7.4
8.9
7.8
9.4
9.6
5.2
9.0
7.5
12.1
25.6
24.6
16.8
22.7
18.5
20.5
18.8
8.5
25.8
21.1
16.8
17.8
16.3
24.3
35.3
9.0
23.4
5.4
21.2
21.5
6.4
23.6
(1.5)
15.2
18.3
5.0
28.1
9.1
11.9
10.3
7.7
31.7
14.8
11.3
(3.9)
7.2
28.9
15.3
8.0
2.4
11.5
28.6
18.1
5.5
(3.9)
16.0
22.7
14.4
23.7
26.4
15.0
18.5
15.9
15.8
21.2
12.3
24.3
27.3
13.3
17.2
14.3
16.9
16.0
15.5
13.6
24.2
19.3
17.3
18.8
17.8
22.9
16.0
14.7
23.7
18.7
18.3
18.6
16.8
26.4
16.7
18.4
24.3
17.5
18.7
17.8
16.3
20.7
15.2
23.2
23.7
16.0
17.0
16.3
20.3
21.8
13.8
30.0
22.4
11.7
17.5
13.3
23.2
17.0
12.8
32.4
21.7
9.5
16.9
11.5
22.2
20.6
14.4
35.8
24.8
8.4
18.4
11.1
15
India
Exhibit 25: Industry loan growth is slowing down gradually

Break-up of loans and growth across segments, March fiscal year-ends, 2012-2015 (%)
Proportion of loans
Growth yoy
Incremental contribution
Agriculture & Allied

Priority Sector
Agriculture & Allied Activities
Micro & Small Enterprises
Manufacturing
Services
Housing
Weaker Sections
2012
12.7
33.1
12.7
11.6
5.5
6.1
6.2
5.4
2013
12.1
31.6
12.1
11.5
5.8
5.7
5.5
5.6
2014
12.0
33.7
12.0
13.5
6.9
6.6
5.5
6.9
2015
12.7
33.5
12.7
13.3
6.3
7.0
5.4
6.7
2012
13.3
12.1
13.3
12.3
12.2
12.5
10.7
18.1
2013 2014
7.7 13.5
8.2 22.0
7.7 13.5
12.5
33.6
20.0 35.5
5.8
31.6
0.3 13.5
17.1
41.3
20122015
CAGR
12.0
12.4
12.0
17.3
17.4
17.2
6.7
20.2
Industry
Mining & Q uarrying
Food processing
Textiles
Rubber, Plastic & their Products
Glass & Glassware
Cement
Basic metals
Construction
Infrastructure
Power
Telecom
Roads
O ther Infrastructure
45.2
0.8
2.2
3.7
0.7
0.1
0.9
6.1
1.1
14.7
7.7
2.2
2.6
2.2
45.8
0.7
2.4
3.8
0.6
0.2
0.9
6.5
1.1
15.0
8.5
1.8
2.7
1.9
45.3
0.6
2.7
3.7
0.7
0.2
1.0
6.5
1.1
15.1
8.8
1.6
2.8
1.9
44.1
0.6
2.9
3.4
0.6
0.1
0.9
6.4
1.2
15.3
9.2
1.5
2.8
1.8
20.3
27.6
22.1
9.4
15.7
14.8
24.9
22.4
11.9
20.5
23.9
0.5
22.1
32.2
14.9
6.6
24.5
14.9
4.1
18.5
24.0
19.7
7.3
15.7
25.5
(6.8)
18.2
0.5
13.1
2.0
26.1
11.1
18.0
17.0
18.0
15.2
17.7
15.1
17.4
3.0
19.9
9.3
11.2
3.0
22.4
8.4
8.3
12.0
14.9
13.8
14.8
13.6
19.0
(0.6)
14.8
4.1
53.7
1.2
2.8
2.2
0.7
0.1
1.2
7.9
0.8
17.6
10.5
0.1
3.3
3.8
50.6
0.4
4.0
4.2
0.2
0.2
1.6
9.0
0.6
17.3
14.8
(1.1)
3.5
0.1
42.0
0.1
4.4
2.9
0.8
0.2
1.2
6.9
1.3
15.8
10.4
0.4
3.7
1.3
41.5
0.2
4.5
2.5
0.5
0.1
1.1
7.1
1.4
16.8
13.0
(0.1)
3.3
0.7
Services
Transport
Professional Services
Trade
Real Estate
NBFCs
23.7
1.8
1.1
5.2
2.6
5.3
23.7
1.6
1.2
5.7
2.6
5.3
24.0
1.6
1.3
5.8
2.8
5.3
23.4
1.5
1.2
6.0
2.8
5.2
14.4
9.1
5.0
21.1
15.6
23.9
13.1
4.2
18.8
22.4
11.9
14.1
16.1
12.4
25.3
17.0
22.4
13.2
11.5
4.9
16.3
17.1
14.2
11.2
21.0
1.0
0.4
6.4
2.5
7.2
23.3
0.6
1.6
8.8
2.3
5.6
26.6
1.4
2.1
6.7
4.1
4.9
22.5
0.7
1.6
7.8
3.2
4.9
Personal Loans
Housing
Vehicle
O ther Personal Loans
18.4
9.4
2.1
3.7
18.4
9.4
2.3
3.6
18.6
9.7
2.3
3.6
19.8
10.4
2.5
3.9
12.9
12.3
22.2
8.1
13.6
13.2
24.5
11.1
15.5
18.4
17.4
12.6
14.8
16.1
19.0
14.2
14.8
7.3
2.7
2.0
18.8
9.3
3.8
3.1
20.0
12.1
2.8
3.2
23.2
13.0
3.5
4.5
2012
10.5
25.1
10.5
9.0
4.2
4.8
4.2
5.9
2013
7.4
20.5
7.4
11.0
8.3
2.7
0.1
7.0
2014
11.4
48.6
11.4
27.1
14.5
12.6
5.2
16.2
20122015
12.7
34.3
12.7
17.6
8.4
9.2
3.3
9.8
Source: RBI, Kotak Institutional Equities
Pressure on NIM across banks; lending yields under pressure

NIM performance across banks was weak. Only a few banks reported an increase and were
primarily from regional banks. Most private sector banks reported flat performance in NIM
qoq while most public banks showed a marginal deterioration. Across the board, public
banks reported a fall in lending yields primarily due to higher share of de-recognition due to
the sharp rise in restructured loans qoq. Also, slippages were higher from the restructured
loans, which implies higher share of income de-recognition.
We note that trends on the cost of funds (reported) were broadly stable or have started to
decline qoq. Our outlook on NIM is broadly negative. We expect costs of funds to come off,
while lending yields are likely to remain weak as bargaining power remains in favor of
borrowers. On the retail side, a bulk of the growth is coming from housing where yields are
low.
16
India
Exhibit 26: Margins were under pressure for most banks, especially public banks
NIM and yoy growth in NII for banks, March fiscal year-ends, 4QFY14-4QFY15 (%)
NIM (%)
NII yoy growth (%)

Public banks
Bank of Baroda
Bank of India
Canara Bank
O BC
State Bank of India
Union Bank
O ld private banks
City Union Bank
DCB
Federal Bank
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Yes Bank
4QFY15
2.3
2.3
2.3
2.7
3.2
3.2
2.6
2.4
2.2
2.3
2.6
3.4
3.1
2.6
2.4
2.3
2.2
2.6
3.2
3.1
2.5
2.2
2.2
2.2
2.7
3.2
3.1
2.5
2.2
2.1
2.3
2.6
2.8
3.2
2.4
11.0
23.1
21.3
7.8
5.9
16.5
3.7
15.2
5.9
22.0
(4.9)
12.1
15.1
10.9
17.5
19.9
8.1
(2.7)
3.4
8.4
6.6
7.5
2.2
6.9
5.4
0.3
9.0
8.0
1.5
(6.6)
(1.9)
(0.8)
(5.3)
14.0
3.4
3.3
3.6
3.6
2.7
4.1
3.3
3.7
3.3
2.7
3.7
3.5
3.7
3.4
2.7
3.9
3.5
3.7
3.2
3.1
3.7
3.4
3.8
3.3
3.2
3.9
6.6
22.7
30.3
12.2
10.7
(0.3)
67.2
10.7
2.5
(2.5)
8.6
28.9
10.5
13.1
(2.7)
6.2
29.7
7.6
28.2
(1.2)
10.8
29.6
(0.3)
14.1
(2.7)
3.9
4.4
3.4
3.8
3.0
3.9
4.4
3.4
3.7
3.0
4.0
4.5
3.4
3.6
3.2
4.0
4.4
3.5
3.7
3.2
3.8
4.4
3.6
3.7
3.2
18.8
15.3
14.5
18.1
12.8
15.5
17.0
17.6
17.8
13.1
20.0
23.1
15.2
19.0
27.4
20.3
23.0
13.1
18.0
36.6
20.0
21.4
16.6
18.4
35.8
Exhibit 27: Deposit growth has been subdued as well in recent quarters
Yoy growth in deposits, March fiscal year-ends, 2012-2015 (%)
2012
2013
2014
2015
25
22
19
16
13
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
10
Source: RBI
17
India
Exhibit 28: Short-term rates came off by ~40 bps YTD

CP and CD rates, February 2012 February 2015 (%)
CP rate
Exhibit 29: Liquidity has been comfortable

Net Reverse Repo, Jan 2014- May 2015 (` bn)
CD rate
Net LAF
14.0
MSF
2,200
1,800
12.6
1,400
1,000
11.2
600
200
9.8
(200)
8.4
(600)
(1,000)
(1,400)
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
7.0
Source: Bloomberg, Kotak Institutional Equities
Source: Bloomberg, Kotak Institutional Equities
Exhibit 30: Yields for AAA-rated corporate bonds have declined ~12 bps YTD
Yields on 5-year corporate bonds and 10-year G-Secs in India, May 2014- May 2015 (%)
5-Year AAA
10.5
5-Year AA
10-Year G Sec
9.9
9.3
8.7
8.1
May-15
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
7.5
Source: Kotak Institutional Equities, Company
18
India
Exhibit 31: Deposit growth declined for most banks, CASA ratios improved
Yoy growth in deposits and CASA ratio, March fiscal year-ends, 4QFY14-4QFY15 (%)
Deposit growth (%)
4QFY14
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
O ld private banks
City Union Bank
DCB
Federal Bank
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Yes Bank
1QFY15
2QFY15
CASA ratio (%)

3QFY15
4QFY15
4QFY15
20.0
24.9
18.2
10.0
15.3
15.9
12.9
18.1
20.7
12.3
5.8
12.1
12.8
9.5
16.9
19.9
17.8
6.4
16.7
14.0
4.6
12.1
16.8
13.1
8.4
15.1
11.9
9.7
8.6
11.5
12.6
5.4
11.1
13.1
6.4
31.8
30.0
25.9
24.3
41.3
44.4
29.5
31.3
28.4
24.2
24.1
39.9
43.5
29.1
31.9
28.4
23.7
24.9
39.9
42.8
28.7
32.4
28.7
24.1
23.7
39.4
42.6
28.7
33.0
29.5
25.5
24.2
40.6
42.9
29.2
8.4
23.5
3.7
13.2
8.0
9.1
26.8
8.5
5.6
9.1
10.0
24.0
13.7
3.4
(5.2)
9.9
23.5
13.5
3.2
1.2
9.3
22.1
18.6
2.1
(5.2)
17.8
25.0
30.8
20.6
39.1
18.1
25.4
30.8
21.0
41.5
18.5
25.5
30.6
21.8
41.8
16.9
23.8
30.5
21.5
41.5
19.2
23.4
30.4
22.0
41.8
11.2
24.0
13.4
11.8
10.8
14.1
22.7
15.3
14.8
16.7
11.1
24.8
13.9
24.4
18.6
11.0
18.6
12.1
23.3
21.0
14.8
22.7
8.9
22.5
22.9
45.0
44.8
42.9
32.5
22.2
42.4
43.0
43.0
33.3
22.3
44.5
43.2
43.7
33.9
22.5
43.1
40.9
44.0
34.1
22.6
44.8
44.0
45.5
34.1
23.1
Exhibit 32: Lending yields declined for most banks qoq

Yield on advances, March fiscal year-ends, 4QFY14-4QFY15 (%)
4QFY14
Public banks
Bank of Baroda
Bank of India
State Bank of India
Union Bank
O ld private banks
City Union Bank
DCB
Federal Bank (a)
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank (a)
HDFC Bank (a)
ICICI Bank (a)
IndusInd Bank
Yes Bank
1QFY15
2QFY15
3QFY15
4QFY15
8.2
8.5
11.7
9.9
10.5
10.5
8.3
8.5
11.7
10.3
10.6
10.5
8.4
8.6
11.7
9.9
10.6
10.6
8.1
8.4
11.7
9.9
10.6
10.4
7.7
8.4
11.6
9.5
10.6
10.2
13.1
12.9
11.6
12.0
12.3
13.0
12.8
11.8
12.3
11.3
13.6
12.6
11.7
12.3
11.4
13.1
12.5
11.6
12.3
11.3
13.1
12.6
11.2
11.7
11.4
10.5
11.3
9.9
13.7
12.4
10.6
11.4
9.8
13.5
12.5
10.6
11.4
10.0
13.3
12.2
10.3
11.3
9.8
13.0
12.2
10.4
11.0
9.8
12.8
12.0
Notes:
(a) Yields are KS estimates for Axis Bank, HDFC Bank, ICICI Bank and Federal Bank.
Source: Company, Kotak Institutional Equities estimates
19
India
Exhibit 33: Cost of funds/deposits declined for most banks

Cost of funds/deposits, March fiscal year-ends, 4QFY14-4QFY15 (%)
4QFY14
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
O ld private banks
City Union Bank
DCB
Federal Bank
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Yes Bank
1QFY15
2QFY15
3QFY15
4QFY15
5.3
5.6
7.4
7.7
6.1
6.4
7.3
5.2
5.7
7.4
7.8
6.1
6.3
7.2
5.2
5.8
7.4
7.7
6.1
6.3
7.4
5.2
5.7
7.4
7.6
6.1
6.3
7.3
5.2
5.7
7.4
7.7
6.0
6.3
7.3
8.3
7.9
8.3
8.1
6.7
8.3
7.8
7.9
8.1
6.7
8.2
7.7
8.0
8.2
6.5
8.0
7.8
7.9
8.0
6.7
8.1
7.9
7.5
7.7
6.5
6.2
5.8
6.0
6.8
8.4
6.2
5.9
6.0
6.9
8.5
6.2
6.0
6.1
6.7
8.3
6.2
6.1
6.0
6.6
8.1
6.3
5.9
5.9
6.5
7.8
Exhibit 34: Most banks have cut fixed deposit rates

Retail term deposit rates for various maturities, April/May 2015 (%)
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Canara Bank
Corporation Bank
OBC
State Bank of India
Union Bank of India
ICICI Bank
Axis Bank
HDFC Bank
Federal Bank
Yes Bank
7-14
days
5.00
6.50
4.50
4.00
4.00
5.50
4.00
4.50
6.00
4.00
4.50
3.50
3.50
4.00
5.75
15-30
days
5.50
6.50
4.50
4.50
4.50
6.00
4.50
4.50
6.00
4.75
4.75
3.50
5.00
5.00
5.75
31-45
days
6.50
6.50
4.50
4.50
6.00
6.00
6.00
5.00
6.00
6.00
5.50
6.00
6.00
5.00
5.75
46-90
days
7.50
6.75
6.50
6.50
6.50
6-7.5
6.75
6.50
7.00
7.00
7.0-7.75
7.50
7.50
7-7.5
7.50
91-179
days
8.50
8.00
7.00
7.00
7.00
7.50
7.75
7.00
7.00
7.25-7.5
7.75
7.5-8.25
8.00
7.50
8.00
180-269
days
8.50
8.25
7.75
7.75
7.75
8.00
8.00
7.75
7.25-7.50
8.25
7.75
8.50
8.25
7.50
8.25
270-364
days
8.50
8.25
8.25
8.25
8.00
8.25
8.00
7.75
7.50
8.25
7.75
8.50
8.25
7.50
8.50
1 Year- less
than 2 years
8.75
8.50
8.50
8.50
8.50
8.50
8.50
8.50
8.00-8.25
8.50
8.0-8.75
8.50
8.50
8.40
8.50
2 Year- less
than 3 years
8.60
8.50
8.50
8.50
8.50
8.50
8.25
8.50
8.25
8.50
8.75
8.50
8.25
8.25
8.50
3 years and
above
8.6-8.5
8.25
8.50-8.00
8.5-8
8.25-8.00
8.50
8.25
8.5-8.25
8.25-8.00
8.50
8.75-8.5
8.50
8.25
8.25
8.50
20
India
Exhibit 35: Base rates declined for most banks in 4QFY15

Base rates (%)
Aug-11
Public banks
Andhra Bank
Bank of Baroda
Bank of India
Canara Bank
Indian Bank
IOB
OBC
PNB
SBI
Union Bank
Private banks
Axis Bank
ICICI Bank
HDFC Bank
Yes Bank
IndusInd Bank
Oct-11
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.00
10.75
Dec-11
Apr-12
10.65
10.50
10.50
10.50
10.50
10.50
10.50
10.50
10.50
Aug-12
Jan-13
Feb-13
Jul-13
Aug-13
10.25
10.25
10.00
10.25
10.25
10.25
10.20
10.00
9.95
10.40
10.50
9.80
Nov-13
10.25
Jan-14
Apr-14
Oct-14
Jan-15
Apr-15
10.00
9.95
10.00
10.20
10.20
10.25
10.25
10.25
9.70
10.25
9.70
9.70
9.80
10.25
10.00
10.25
10.00
9.80
9.75
10.50
10.75
Sep-13
10.25
9.80
10.65
10.00
10.00
10.00
10.50
May-12
9.60
10.00
10.00
9.85
10.00
10.00
10.15
10.00
9.95
9.75
9.85
10.75
11.00
Contribution from non-interest income accelerates; treasury contribution

sharply rises qoq
Non-interest income grew sharply for all banks as the contribution from treasury improved
sharply. However, on a yoy basis, a few banks reported gains on the sale of loans to ARC
reversed in FY2015. Performance of non-interest income growth, excluding treasury, was
disappointing.
Private banks had a relatively better quarter, barring ICICI Bank. A large part of this
improvement qoq appears to have come from the retail segment where banks have seen a
higher contribution from distribution of wealth management products. Amongst public
banks, SBI did relatively well on the back of strong growth in government-related
transactions.
Credit related fees remain a big challenge for banks. Corporate activity has been subdued
and this typically should give early indication on the growth in loans in subsequent quarters.
Discussions with most banks indicate that sanctions have still not picked up pace as the
corporate segment is still looking at maintaining current portfolios of assets rather than
planning expansion.
Contribution levels from treasury showed improvement. The contribution of treasury gains
to PBT increased to 27% of PBT from 18% of PBT in 3QFY15. With yields showing a
softening bias, we believe the contribution is likely to increase hereon.
21
India
Exhibit 36: Contribution from non-treasury non-interest income remained under pressure for
several banks, particularly PSU banks
Yoy growth in non-interest (ex-treasury) income, March fiscal year-ends, 4QFY14-4QFY15 (%)
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
O ld private banks
City Union Bank
DCB
Federal Bank
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
Yes Bank
IndusInd Bank
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
37.0
(11.3)
31.9
84.9
33.2
16.3
7.9
(2.5)
19.0
17.8
39.5
(3.8)
12.0
14.5
(5.0)
(17.9)
24.4
0.3
63.0
35.4
42.7
5.2
(21.7)
12.9
(0.4)
14.8
9.3
2.5
(24.4)
9.2
(17.9)
(44.1)
4.1
10.9
24.4
(1.0)
10.7
(0.6)
37.7
(27.7)
37.9
3.8
(7.9)
11.0
16.2
47.4
24.9
12.8
24.2
148.8
26.8
15.1
3.4
10.8
14.9
(9.9)
28.0
52.4
0.5
148.8
12.8
13.2
29.1
33.2
28.1
6.7
5.8
18.3
19.2
32.9
(4.8)
(3.3)
15.9
14.6
30.8
6.3
8.2
12.5
35.8
22.4
20.8
20.3
1.4
27.9
28.7
Exhibit 37: Investment gains were strong for most banks

Treasury income (` mn) and treasury-to-PBT (%) of banks, March fiscal year-ends, 4QFY14-4QFY15
4QFY14
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
O ld private banks
City Union Bank
DCB
Federal Bank
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Yes Bank
Total
Total - public
Total - private
Treasury profits (Rs mn)

1QFY15
2QFY15
3QFY15
4QFY15
4QFY14
Treasury profits as % of PBT

4QFY15
893
830
748
267
2,610
4,011
830
2,242
2,430
909
1,242
2,190
5,868
990
1,790
1,530
1,440
628
2,280
4,528
750
2,436
3,200
3,010
2,048
2,880
9,195
2,520
3,603
2,150
5,090
2,217
6,230
16,589
2,830
6.3
18.5
9.5
5.9
25.2
8.5
15.9
11.5
20.8
9.0
20.7
10.0
11.1
10.1
11.8
13.1
17.7
29.4
20.6
10.9
16.6
22.6
112.4
31.5
(2,662.8)
22.4
22.6
41.1
41.1
(25.9)
70.4
(129.4)
(98.7)
28.5
44.1
149
26
400
2
210
223
43
401
30
153
249
40
420
37
543
400
126
770
307
153
421
68
950
336
543
13.0
6.6
11.0
0.2
5.0
17.2
7.4
12.2
2.3
9.5
21.1
8.7
11.5
3.3
27.9
28.3
25.2
19.3
19.6
9.5
32.0
12.7
22.1
51.6
27.9
2,170
333
2,450
811
16,738
10,188
6,550
2,600
250
3,880
899
24,349
15,871
8,478
2,710
951
1,370
490
19,755
12,945
6,810
3,290
2,655
4,430
885
100
38,405
25,289
13,116
2,750
1,961
7,260
899
207
54,105
38,710
15,395
7.9
1.0
6.6
13.5
7.7
10.8
5.4
10.4
0.7
10.2
14.1
9.8
12.0
7.2
11.1
2.6
3.6
7.5
9.2
13.7
5.6
11.7
6.3
10.9
13.1
1.3
17.7
30.6
9.7
8.3
4.7
17.6
12.1
2.6
26.5
60.2
11.0
Cost control continued to support earning growth

Growth in operating expenses accelerated in 4QFY15 primarily on account of high staff
costs. However, this is primarily led by a few factors (1) wage settlement and (2) its
subsequent impact on retirement costs as well as the impact of the decline in interest rates
on retirement expenses. Operating expenses growth was broadly similar for private and
public banks at 17% yoy.
22
India
There were apprehensions that the decline in interest rates would result in higher staff costs
but it appears that the final impact was materially lower than initially expected. We would
probably need to see the assumptions made by banks while calculating retirement expenses
to understand this better.
Cost-to-income ratio declined >250 bps to 47% for public banks while private banks
reported a stable ratio of 41%. We are a bit more positive on public banks cost-income
ratio as the peak of NIM correction appears to be complete. Meanwhile, costs led by these
one-off charges are likely to remain for another quarter before growth comes off sharply
and contribution from treasury income to boost non-interest income is likely to show
improvement from current levels. Also, FY2016 would have no amortization of prior costs
items like the pension/gratuity.
Exhibit 38: Increased growth in operating expenses for most banks
Yoy growth in operating expenses, March fiscal year-ends, 4QFY14-4QFY15 (%)
4QFY14
1QFY15
2.6
31.4
23.1
(6.8)
5.9
(0.0)
28.7
12.3
7.4
24.8
(8.9)
9.5
3.3
14.6
14.1
24.7
14.6
2.1
19.1
2.2
16.5
13.7
19.3
18.3
11.5
12.9
5.6
11.0
(5.2)
29.4
20.7
4.6
7.6
22.1
7.0
20.9
16.5
24.8
24.7
8.7
19.2
20.0
13.7
11.1
34.5
16.7
20.9
16.0
7.5
16.6
14.3
26.2
18.4
6.9
22.1
(4.4)
29.5
20.0
11.4
16.6
13.9
1.2
19.6
26.3
20.5
7.1
12.5
9.0
16.8
4.6
13.4
25.0
23.5
7.3
13.0
9.3
18.3
19.2
16.1
34.4
26.1
9.4
18.8
12.5
14.9
19.4
9.5
32.9
24.0
10.2
16.4
12.3
16.1
21.4
7.9
30.0
25.3
16.5
16.5
16.5
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
O ld private banks
City Union Bank
DCB
Federal Bank
Karur Vysya Bank
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
Yes Bank
IndusInd Bank
Public banks
Private banks
Total
2QFY15
3QFY15
4QFY15
23
India
Exhibit 39: Cost-income ratio decreased for most banks

Operating expense-to-income ratio of banks, March fiscal year-ends, 4QFY14-4QFY15 (%)
4QFY14
Public banks
Bank of Baroda
Bank of India
Canara Bank
State Bank of India
Union Bank
O ld private banks
City Union
DCB
Federal Bank
KVB
J&K Bank
New private banks
Axis Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Yes Bank
Public banks
Private banks
Total
1QFY15
2QFY15
3QFY15
4QFY15
42.0
49.6
47.8
32.9
41.2
45.5
53.3
43.0
44.5
48.1
37.6
44.4
49.8
51.2
45.3
47.1
52.0
47.8
49.6
52.8
53.9
46.6
51.7
49.5
43.9
50.2
51.1
51.1
39.7
64.1
54.6
36.9
42.8
46.6
49.4
46.7
62.4
47.7
57.6
40.7
41.9
53.2
51.2
53.4
46.5
41.7
61.3
48.9
56.2
50.3
45.3
59.8
50.8
51.2
48.5
38.8
61.4
49.5
55.0
40.1
39.6
45.7
39.3
44.9
41.6
45.1
42.5
44.1
42.1
45.3
38.5
45.6
45.4
47.1
43.0
45.6
42.2
46.3
36.5
47.9
40.0
50.8
42.8
47.6
41.1
42.0
36.3
47.4
40.3
50.1
41.1
46.5
38.1
44.9
36.2
46.3
40.2
47.4
41.0
44.9
Source: Companies, Kotak Institutional Equities
Tax rate showed a marginal decline

Tax rate was lower qoq at 18% of PBT in 4QFY15, primarily on account of write-backs due
to lower-than-expected income. This is lower as compared to 26% in FY2014 and 22% in
FY2013. There are essentially very few areas where a bank enjoys a lower tax rate. Most of
the areas mentioned below have a reference from Supreme Court through various rulings.
MTM on the investment portfolio. Banks are allowed to look at their entire investment
portfolio as a stock rather than differentiating the portfolio between HTM, AFS and HFT.
With rising interest rates in recent years, there would be losses in the HTM portfolio of
the bank as compared to the reported P&L where only the losses of AFS/HFT are reported.
Infrastructure or long-term financing. This (Section 36 (1) VIII) creates a DTL which RBI
has indicated that it is not a good exercise and this year saw most banks reducing their
net worth to the extent of DTL created prior to FY2014.
Dividends received from subsidiaries.
Others. This may include benefits like positive tax rulings in earlier cases contested by the
bank/sector.
24
India
Exhibit 40: Tax rate for 4QFY15 was lower qoq

Tax rate for banks, March fiscal year-ends, 2011-4QFY15 (%)
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara
Central Bank of India
Corporation Bank
Dena Bank
IDBI
Indian Bank
Indian O verseas Bank
State Bank of India
Syndicate Bank
UCO Bank
Union Bank
United Bank
Vijaya Bank
Total
2011
26.3
28.3
24.9
28.8
14.8
19.9
24.5
26.9
31.9
27.6
34.8
32.6
26.3
32.5
44.7
18.5
0.8
29.6
21.7
13.8
31.2
2012
13.7
26.3
16.9
25.2
34.6
19.6
29.7
21.0
16.9
22.7
23.0
19.1
19.9
30.6
36.7
8.0
3.6
34.1
25.2
10.5
26.6
2013
23.7
27.2
7.3
8.6
43.5
21.8
23.1
14.9
21.5
27.6
13.4
24.1
13.5
27.2
29.3
(28.2)
4.4
29.6
20.2
(1.6)
22.1
2014
28.4
40.6
17.4
23.0
48.4
20.4
(26.9)
(132.4)
(113.9)
35.6
21.5
28.6
27.9
28.7
32.7
(4.2)
12.4
17.9
22.0
7.2
25.5
1QFY15
69.3
49.5
30.3
31.0
49.9
19.9
41.7
3.0
4.9
30.2
33.5
29.8
39.3
36.1
35.5
11.1
23.9
32.2
55.7
19.9
32.5
2QFY15
66.9
43.2
27.1
32.9
44.7
22.8
25.7
(36.5)
(1,332.8)
42.6
34.3
(50.7)
(36.4)
48.1
25.2
24.1
14.1
39.3
59.1
6.9
30.6
3QFY15
61.9
47.2
69.0
39.1
(46.3)
31.4
15.4
(83.2)
2.6
34.8
34.6
(13.0)
354.4
39.6
28.3
44.3
41.3
50.7
49.3
11.2
39.5
4QFY15
46.3
49.9
31.7
93.2
32.0
15.2
33.1
(15.9)
155.7
29.2
19.1
20.0
(4.1)
148.5
35.7
14.2
30.0
30.9
9.8
(1,313.1)
17.6
25
India
Exhibit 41: Banking sector valuations

Key valuation parameters, March fiscal year-ends, 2015-2017E
Targ et
pric e
Rec o .
(Rs )
Pub lic b an ks
Bank of Baroda
ADD
200
Bank of India
ADD
220
Canara Bank
REDUCE
320
O BC
ADD
270
PNB
REDUCE
155
SBI
ADD
320
Union Bank
ADD
170
O ld private b an ks
City Union Bank
ADD
110
DCB Bank
BUY
140
Federal Bank
BUY
165
Karur Vysya Bank
BUY
630
J&K Bank
ADD
120
N ew private b an ks
Axis Bank
ADD
580
IndusInd Bank
ADD
970
HDFC Bank
ADD
1,100
ICICI Bank
BUY
400
Yes Bank
ADD
850
N o n - b an ks
Bajaj Finserv
ADD
1,620
Cholamandalam
ADD
620
Dewan housing finance
BUY
570
HDFC
ADD
1,410
HDFC core
IDFC
BUY
210
IIFL Holdings
BUY
235
LIC Hsg Fin
ADD
500
L&T Finance Holdings
ADD
80
Magma Fincorp
ADD
130
Mahindra Finance
SELL
270
Max India
ADD
520
Muthoot Finance
BUY
250
Power Finance Corporation ADD
320
Rural Electrification Corp.
ADD
380
Shriram City Union Finance REDUCE 1,775
Shriram Transport
ADD
1,050
SKS Microfinance
ADD
460
Pric e
29 - May- 15
Market
c ap.
US
EPS (Rs )
20 15 20 16 E 20 17E
PER (X)
20 15 20 16 E 20 17E
ABVPS (Rs )
20 15 20 16 E 20 17E
APBR (X)
20 15 20 16 E 20 17E
Ro E (%)
20 15 20 16 E 20 17E
163
197
343
214
154
278
173
5.6
2.1
2.8
1.0
4.5
33.0
1.7
15
26
57
17
17
18
26
21
50
47
51
24
21
36
28
56
63
59
27
26
51
10.6
7.7
6.0
12.9
9.3
15.8
6.5
7.8
4.0
7.4
4.2
6.4
13.1
4.8
5.8
3.5
5.4
3.6
5.6
10.8
3.4
152
285
437
335
148
147
223
162
322
440
347
170
160
235
183
350
489
393
205
179
270
1.1
0.7
0.8
0.6
1.0
1.9
0.8
1.0
0.6
0.8
0.6
0.9
1.7
0.7
0.9
0.6
0.7
0.5
0.8
1.6
0.6
9.2
6.3
8.8
3.7
8.5
10.5
9.4
11.4
11.4
7.2
10.7
11.3
11.8
11.8
14.0
11.8
9.0
11.4
11.8
12.8
14.9
103
133
143
463
108
1.0
0.6
1.9
0.9
0.8
7
7
12
37
10
7
7
14
58
17
8
8
16
69
18
15.5
19.6
12.2
12.4
10.3
14.2
19.0
10.5
8.0
6.4
12.3
15.9
9.0
6.7
6.0
43
52
87
334
109
48
59
98
363
124
55
66
109
402
142
2.4
2.6
1.6
1.4
1.0
2.1
2.3
1.5
1.3
0.9
1.9
2.0
1.3
1.2
0.8
16.7
14.5
13.7
12.0
8.7
15.1
12.1
14.2
15.6
12.8
15.3
12.7
14.9
16.7
12.4
585
874
1,051
317
882
21.8
7.3
41.3
28.8
5.8
31
34
41
19
48
36
41
50
22
57
41
47
59
26
66
18.9
25.8
25.8
16.6
18.4
16.5
21.5
21.2
14.1
15.4
14.3
18.6
17.8
12.2
13.4
185
191
245
131
278
214
226
282
145
320
247
265
327
163
370
3.2
4.6
4.3
2.4
3.2
2.7
3.9
3.7
2.2
2.8
2.4
3.3
3.2
1.9
2.4
17.7
19.0
18.2
14.5
21.3
17.5
19.2
17.7
15.5
18.9
17.4
18.9
19.1
16.2
18.9
1,527
579
442
1,236
638
155
187
419
65
100
270
470
195
273
296
1,678
824
462
3.8
1.3
1.0
30.5
15.7
3.9
0.9
3.3
1.7
0.4
2.4
2.0
1.2
5.6
4.6
1.7
2.9
0.9
106
30
46
40
31
11
14
30
5
9
15
11
17
45
57
85
56
15
115
34
55
47
36
8
17
36
5
10
18
11
21
46
57
102
73
19
133
42
65
55
43
12
21
39
6
11
21
14
26
49
59
123
89
26
14.4
19.2
9.5
30.6
20.7
14.3
13.0
13.9
13.0
11.4
18.3
44.7
11.6
6.0
5.2
19.8
14.6
31.0
13.2
16.9
8.1
26.4
17.8
18.8
10.7
11.7
13.0
10.0
15.0
44.5
9.4
5.9
5.2
16.4
11.3
24.0
11.5
13.9
6.8
22.3
14.7
13.1
8.8
10.8
10.8
8.9
13.0
33.8
7.6
5.6
5.0
13.7
9.3
17.8
689
182
324
203
146
108
83
165
37
87
96
124
128
235
223
635
402
83
792
230
351
227
170
116
100
192
41
100
112
158
142
212
251
724
448
102
936
268
403
256
199
127
121
226
47
109
127
184
158
246
293
831
498
128
2.2
3.2
1.4
6.1
4.4
1.4
2.3
2.5
1.7
1.2
2.8
3.8
1.5
1.2
1.3
2.6
2.0
5.6
1.9
2.5
1.3
5.4
3.7
1.3
1.9
2.2
1.6
1.0
2.4
3.0
1.4
1.3
1.2
2.3
1.8
4.5
1.6
2.2
1.1
4.8
3.2
1.2
1.5
1.9
1.4
0.9
2.1
2.6
1.2
1.1
1.0
2.0
1.7
3.6
16.7
17.5
16.3
21.2
23.8
10.4
20.1
18.1
13.9
10.7
15.5
8.8
14.3
19.9
24.3
15.8
14.3
25.0
15.6
17.0
15.7
21.8
24.1
7.4
20.0
19.3
12.6
11.7
16.8
7.5
15.4
17.6
20.5
15.1
16.3
20.8
15.4
16.7
16.1
23.0
26.0
9.8
19.9
19.8
13.5
11.0
17.3
8.1
17.2
16.4
18.4
15.8
17.2
22.6
Source: Companies, Bloomberg, Kotak Institutional Equities estimates
26
India
Exhibit 42: Banks and financials have had an outperformance in recent months
Absolute and relative performance of stocks (%)
C h an g e in pric e (%)
1 mo n th 3 mo n th 6 mo n th 12 mo n th
Pub lic b an ks
Bank of Baroda
(3.8)
Bank of India
(9.0)
Canara Bank
(9.3)
Indian Bank
19.2
IO B
(2.6)
O BC
5.2
PNB
(3.8)
O ld private b an ks
City Union Bank
8.8
DCB
9.1
Federal Bank
8.8
Karur Vysya Bank
(3.8)
J&K Bank
12.0
N ew private b an ks
Axis Bank
3.1
IndusInd Bank
6.1
HDFC Bank
6.2
ICICI Bank
(4.2)
Yes Bank
5.1
N o n - b an ks
Bajaj Finserv
6.4
Cholamandalam
(1.6)
Dewan houisng
(1.1)
HDFC
5.6
IDFC
(8.0)
IIFL Holdings
7.4
LIC Housing Finance
(2.6)
L&T Finance Holdings
2.4
Magma Fincorp
9.8
Max India
9.7
MMFS
1.0
Muthoot Finance
6.3
PFC
2.6
REC
(4.9)
(13.0)
Shriram Transport
(15.1)
SKS Microfinance
(1.6)
Ytd
Relative perfo rman c e to BSE- 30 In d ex (%)

1 mo n th 3 mo n th 6 mo n th 12 mo n th Ytd
52
week
h ig h
(Rs )
52
week
lo w
(Rs )
(12.2)
(15.8)
(17.4)
(9.6)
(12.0)
(10.6)
(7.2)
(24.9)
(31.0)
(15.4)
(11.5)
(23.5)
(30.3)
(28.8)
(3.5)
(36.2)
(17.2)
(2.4)
(44.1)
(36.8)
(18.6)
(25.0)
(34.7)
(23.5)
(23.5)
(30.5)
(36.9)
(29.9)
(6.6)
(11.6)
(11.9)
15.7
(5.5)
2.1
(6.6)
(6.6)
(10.1)
(11.5)
(4.1)
(6.5)
(5.1)
(1.9)
(21.8)
(27.7)
(12.5)
(8.7)
(20.5)
(27.0)
(25.6)
(16.0)
(44.5)
(28.0)
(15.1)
(51.4)
(45.0)
(29.2)
(25.9)
(35.4)
(24.4)
(24.4)
(31.4)
(37.6)
(30.7)
229
333
498
224
90
371
232
143
188
332
132
40
183
142
3.3
16.8
0.1
(21.2)
(5.2)
12.5
27.0
(3.2)
(12.1)
(22.9)
50.8
91.5
22.9
3.4
(28.2)
9.1
10.1
(5.8)
(19.3)
(28.1)
5.6
5.9
5.6
(6.7)
8.7
8.1
21.0
5.1
(15.2)
(0.0)
14.7
28.8
(0.7)
(9.3)
(19.9)
31.2
66.7
6.9
(10.1)
(37.5)
7.8
8.8
(6.9)
(20.2)
(29.0)
104
137
154
619
177
68
69
111
446
94
(4.4)
(4.6)
(1.9)
(8.3)
2.4
19.7
13.1
10.6
(9.8)
23.5
59.4
63.7
32.5
11.9
55.0
16.5
8.9
10.4
(10.2)
14.3
0.1
3.0
3.1
(7.0)
2.0
0.7
0.5
3.1
(3.0)
7.2
21.7
15.2
12.8
(7.0)
25.4
38.7
42.4
15.3
(2.7)
34.8
15.1
7.6
9.1
(11.2)
12.9
655
967
1,109
393
910
350
521
791
267
502
8.5
1.6
(10.5)
(7.4)
(10.8)
7.8
(12.5)
(3.5)
6.2
2.0
9.0
(18.1)
(7.0)
(10.4)
(16.8)
(32.5)
5.8
32.8
25.7
10.7
8.7
(2.0)
5.3
(0.7)
(7.6)
(9.1)
25.1
(11.5)
(0.1)
(12.4)
(13.6)
(1.2)
(26.3)
31.2
79.2
85.4
46.8
41.0
22.4
72.3
31.8
(11.0)
9.1
78.2
(10.7)
(0.2)
(6.6)
(7.3)
17.1
(13.0)
57.2
16.8
22.3
11.9
8.8
(1.8)
9.3
(3.9)
(4.7)
(3.0)
18.6
(18.0)
1.4
(9.6)
(11.6)
(13.6)
(25.7)
11.9
3.3
(4.5)
(4.0)
2.5
(10.7)
4.3
(5.4)
(5.0)
6.6
6.5
(2.0)
3.2
2.6
(7.7)
(15.6)
(17.6)
(4.5)
13.0
6.5
(5.0)
(2.1)
(5.3)
12.4
(6.9)
(7.8)
10.8
6.9
13.5
(12.2)
(7.0)
(4.9)
(11.0)
(25.9)
10.5
34.5
27.6
13.0
10.9
0.6
7.7
1.8
(20.0)
(6.3)
26.9
(8.7)
2.4
(12.4)
(10.8)
1.4
(23.1)
33.0
56.0
61.3
27.7
22.7
6.5
49.9
14.7
(35.0)
(5.0)
55.1
(22.3)
(13.1)
(6.6)
(19.4)
1.9
(24.3)
36.8
15.4
20.8
10.6
7.5
(2.9)
8.0
(5.0)
(21.1)
(4.2)
17.2
(19.0)
0.2
(9.6)
(12.7)
(14.6)
(26.6)
10.6
1,575
635
570
1,402
188
199
509
83
142
522
345
255
345
383
2,200
1,288
525
837
327
301
871
123
107
276
60
82
256
232
166
219
233
1,380
761
250
Source: Bloomberg, Kotak Institutional Equities estimates
27
India
Exhibit 43: Public banks are trading at closer to long term

trading averages
PBR and PER public banks, 2008-2015 (X)
Exhibit 44: Private banks trading at premium to long term

trading averages
PBR and PER private banks, 2008- 2015 (X)
15
3.5
1.6
12
2.8
20
1.2
2.1
15
0.8
1.4
10
0.4
0.7
25
May-15
May-14
May-13
PER (RHS)
May-12
May-11
May-10
May-09
PBR (LHS)
May-08
May-15
May-14
PER (RHS)
May-12
May-11
May-10
May-09
May-08
PBR (LHS)
May-13
2.0
Exhibit 45: Divergence in valuation declined between public and private banks
Adjusted PBR and PER of private and public banks, March fiscal year-ends, 2008- 2015 (X)
PBR (LHS)
PER (RHS)
May-15
Nov-14
May-14
Nov-13
1.0
May-13
1.0
Nov-12
1.6
May-12
1.6
Nov-11
2.2
May-11
2.2
Nov-10
2.8
May-10
2.8
Nov-09
3.4
May-09
3.4
Nov-08
4.0
May-08
4.0
28
Disclosures
"I, M.B. Mahesh, hereby certify that all of the views expressed in this report accurately reflect my personal views about the
subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be,
directly or indirectly, related to the specific recommendations or views expressed in this report."
Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional
Equities, within the specified category.
70%
60%
50%
38.0%
40%
30%
24.7%
21.1%
20%
10%
16.3%
4.2%
4.8%
1.2%
1.2%
REDUCE
SELL
0%
BUY
ADD
Percentage of companies within each category for

which Kotak Institutional Equities and or its affiliates has
provided investment banking services within the
previous 12 months.
* The above categories are defined as follows: Buy = We
expect this stock to deliver more than 15% returns over
the next 12 months; Add = We expect this stock to
deliver 5-15% returns over the next 12 months; Reduce
= We expect this stock to deliver -5-+5% returns over
the next 12 months; Sell = We expect this stock to deliver
less than -5% returns over the next 12 months. O ur
target prices are also on a 12-month horizon basis.
These ratings are used illustratively to comply with
applicable regulations. As of 31/03/2015 Kotak
Institutional Equities Investment Research had
investment ratings on 166 equity securities.
Source: Kotak Institutional Equities
As of March 31, 2015
Ratings and other definitions/identifiers

Definitions of rating
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.
Our target prices are also on a 12-month horizon basis.
Other definitions
Coverage view. The coverage view represents each analysts overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.
Other ratings/identifiers
NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)
and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction
involving this company and in certain other circumstances.
CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.
NC = Not Covered. Kotak Securities does not cover this company.
RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient
fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock
and should not be relied upon.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.
29
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(Kotak) BFSI, June 2, 2015 - Quarterly Review 4QFY15

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(Kotak) BFSI, June 2, 2015 - Quarterly Review 4QFY15

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Banks/Financial Institutions

Impairment ratios weak as expected; recovery and upgradation improve qoq

M.B. Mahesh, CFA

Kotak Institutional Equities Research

Exhibit 1: Consolidated PAT for banks under coverage decreased 3% yoy

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Exhibit 3: NII growth slowed to 10% yoy

Exhibit 4: Loan-loss provisions increased significantly

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 5: Impaired loans increased for public banks this quarter

Exhibit 6: Private banks saw a marginal increase this quarter

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Fresh impairments rise sharply; recovery/upgradation improve qoq

Management, especially for public banks, continue to highlight that a disproportionate

Gross NPLs (%)

Net NPLs (Rs bn)

Net NPLs (%)

Source: Company, Kotak Institutional Equities

Exhibit 8: Fresh impairments were higher than previous quarter

Fresh slippages (%)

Fresh restructuring (%)

O riental Bank of Commerce

Punjab National Bank

State Bank of India

Total (ex SBI)

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 9: Banks made higher write-offs during the quarter

Write-offs (Rs mn)

Source: Company, Kotak Institutional Equities

Oriental Bank of Commerce

Punjab National Bank

State Bank of India

Source: Company, Kotak Institutional Equities

Iron & steel

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 12: Loan loss provisions increased for most banks

Source: Company, Kotak Institutional Equities

Exhibit 13: Provision coverage ratio trends were mixed

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 14: We factor loan loss provisions to reduce gradually

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Net NPLs (%)

Net NPL and restructured loans (%)

Source: Company, Kotak Institutional Equities

Restructured loans (% of loans)

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH

NBFCS: MIXED RESULTS; OVERALL TRENDS WEAK

Business momentum picked up

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 17: Loan growth remains weak

Source: Kotak Institutional Equities , Company

Exhibit 18: Trends in disbursements were better qoq

4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15

Source: Company, Kotak Institutional Equities

NIM rise and NPLs decline qoq