Net interest income (NII) came largely in line with ours estimates led by above industry average loan growth and marginal improvement in margins. Other income surprised positively, led by robust fee income growth, treasury gains and recovery from written-off accounts. Low cost deposits grew by 20% yoy, but the ratio declined marginally as of March 2009. Reported asset quality largely appears stable and about Rs26.6bn (about 1.85%) loans were restructured in FY09. Another Rs16bn of loan (1.0%) applications for restructuring are pending approval.
Asset quality: Reported asset quality largely remained stable on a qoq basis. In FY09, about Rs10bn were additions to opening gross NPLs, while recovery and upgradation was Rs7.4bn and writeoffs were about Rs4bn. Gross NPLs were at 1.27% (Rs18.4bn) as of March 2009 (1.5% – Rs19.2bn in December 2008) and net NPLs are 0.31% as of March 2009 (0.37% in December 2008).
At the current price, the stock trades at 6.1x FY10F earnings and 1.0x FY10F adjusted book value