ING Vysya Bank

The bank presented a much better-than-expected set of numbers for Q1FY14. The main driver this time for the bottomline was the other income component. The banks, net profit rose 35% (YoY) at Rs.175 crore and the other income rose by a smart 43% (YoY) and 22% (QoQ) at Rs.245 crore.  Other income included a recovery of a non performing asset written off in an earlier year amounting to Rs. 23.2 crore. Adjusting for this recovery, other income grew by 29.4% to Rs. 221.2 crore with strong growth across core products such as asset processing fees, advisory fees, client related foreign exchange income and investment income while total income increased by 26% to Rs. 647 crore.  NII (YoY) rose 24% at Rs.425 crore and improvement in NIM was pretty significant at 3.56% v/s 3.29% (YoY) and this was because the cost of funds dropped 47 bps on YoY.  Deposits rose 14% while advances were up 13%. CASA ratio dropped to 30.2% v/s 33.3% (YoY).

There was some concern on the asset quality. Gross NPA was maintained at 1.75% v.s 1.76% (QoQ) but Net NPA went up sharply from 0.03% to 0.19%. In terms of rupees, net NPA was up by 7 times sequentially at Rs.64.4 crore. But what is strange is that Provision coverage ratio has fallen to 89% from 98% last year. Provisions and contingencies rose 2 times QoQ and 2.5 times YoY at Rs.68.1 crore. The bank has stated that this rise in provisions was on account of slippage of two medium-sized companies amounting to Rs.115 crore in our wholesale banking space. What is also noteworthy is that the bank has increased the share of credit substitutes in its total asset book from a meager Rs.55 crore in Q1FY13 to Rs.1800 crore in Q1Fy14.  Credit substitute is a form of lending wherein the bank subscribes to NCDs or corpotrate bond issues of rated companies. This form of lending helps banks build on relations with top companies. CAR fell from 13.35% to 12.59% (YoY). During the quarter the Bank expanded its network with 5 new branches as of June 2013, the Bank had 547 branches.