City Union Bank (CITUNI) 87

Result Update October 3, 215 Rating matrix Rating : Buy Target : 15 Target Period : 12 months Potential Upside : 2% What s Changed? Target Changed from 114 to 15 EPS FY16E Changed from 7.8 to 7.1 EPS FY17E Changed from 8.9 to 8.2 Rating Unchanged Quarterly Performance crore Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%) NII 223.6 186.7 19.7 24.6 9.3 Other Income 14.9 11.7-5.2 15.5 -.5 PPP 197.1 172.7 14.2 178.8 1.3 PAT 111.5 99.5 12.1 99.1 12.6 Key Financials Crore FY14 FY15 FY16E FY17E NII 759 87 9 993 PPP 581 682 783 857 PAT 347 384 423 487 Valuation summary FY14 FY15 FY16E FY17E P/E 13.6 13.5 12.2 1.6 Target P/E 16.4 16.3 14.8 12.9 P/ABV 2.6 2.1 1.8 1.6 Target P/ABV 3.1 2.5 2.2 2. RoA 1.4 1.4 1.4 1.5 RoE 18.9 15.9 14.9 15.1 Stock data Market Capitalisation 5195 crore GNPA (Q2FY16) 398 crore NNPA (Q2FY16) 226 crore NIM (Q2FY16) 3.7 52 week H/L 16 /81 Equity Capital 59.6 crore Face value 1 DII Holding (%) 9.9 FII Holding (%) 36.2 Price performance (%) 1M 3M 6M 12M City Union Bank -4.5-12. -5.7 7.7 South Indian Bank -8.5-5.9-1.4-19.5 Karur Vysya Bank -9.5-12.4-14.2-23.3 Research Analyst Kajal Gandhi kajal.gandhi@icicisecurities.com Vishal Narnolia Vishal.narnolia@icicisecurities.com Vasant Lohiya vasant.lohiya@icicisecurities.com City Union Bank (CITUNI) 87 Steady quarter; well placed among peers... Profit grew 15.1% YoY to 18 crore below our estimate of 117.6 crore owing to higher-than-expected provisions of 49.9 crore vs. 42 crore estimated NII growth was healthy and above estimates at 16% YoY to 24 crore (I-direct estimate: 232.7 crore) led by higher-than-expected credit growth at 12.1% YoY (4.94% QoQ) to 18785 crore and strong margins of 3.74% Other income was muted as it declined 1% QoQ (up 4.8% YoY) to 95 crore owing to a weak recovery in income Asset quality saw pressure with GNPA ratio at 2.1% vs. 2% in Q1FY16 ( 398 crore vs. 359 crore QoQ). The absolute increase in GNPA QoQ was the highest in last several quarters. Slippages were at 97.6 crore (2.2% of loans). Full year slippages wee guided in the range of 2-2.25% in FY16E and below 2% in FY17E Strong regional bank; expect 13% CAGR in loans City Union Bank is the oldest bank in the old private sector bank category with 1+ years of existence with continuous profitability and dividend pay out. It is largely a south India oriented bank with a network of 486 branches of which 434 are in South India and 33 in Tamil Nadu alone. CUB s business traction at 29% CAGR over FY6-13 has been higher than industry except in FY14-15 wherein business growth fell to 8.6% at 17965 crore, focussing on quality rather than growth. We expect business growth of 13.4% CAGR over FY15-17E to 5448 crore. NIM above 3%+ for over decade; expect healthy levels to sustain ahead One of the commendable features of CUB is that it has been able to maintain NIMs of 3%+ for over a decade across economic cycles despite a low CASA base (~19% of total deposits). This is owing to the structure of its loan book, which is focused on the SME/MSME segment (~45% of loans) that is high yielding and wherein re-pricing is possible. Further, ~8% of the book is on a floating basis, which reduces interest rate risk. We expect calculated NIM to stay healthy at >3% levels over FY15-17E. Asset quality expected to remain prudent CUB s lending philosophy of giving small ticket secured loans helps control asset quality. Around 1:1 loan to collateral ratio was maintained. Unsecured loans are only 1% of loans. The bank did not go overboard on growth in the peak years of 27-8 and maintained its 25-3% credit growth. It improved its NNPA from 7-8% in the FY crisis to <1.% in FY1 and maintained it despite banking system NPAs surging in both FY12 and FY13. With anticipation of a revival in economy, we expect NPA to stabilise and expect GNPA and NNPA ratios at 2.2% and 1.3% to 514 crore and 291 crore, respectively, by FY17E. Operational performance holding up well vs. peers; maintain BUY We have lowered our PAT CAGR to 13% over FY15-17E to 486 crore vs. 17% CAGR estimated earlier as we factor in lower credit traction and rise in slippages & credit cost. Accordingly, our RoE estimates have reduced to 15% from 16% earlier. However, despite this, we prefer CUB as it is well placed among regional players and comfortable on capital adequacy front with tier I ratio at 15%. We believe CUB is capable of sustaining its RoA at ~1.5%. CUB has historically traded at a slight premium to other regional banks owing to better return ratios. We maintain our BUY rating and target multiple of 2x FY17E ABV but reduce target price to 15 (earlier 114) owing to reduction in the FY17E ABV to 53 from 55.6. ICICI Securities Ltd Retail Equity Research

Variance analysis Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments NII 24 233 26 16.4 224 7.4 NII traction healthy on the back of strong margins and better-than-expected credit growth of 12% YoY NIM (%) 3.7 3.5 3.5 2 bps 3.6 15 bps Other Income 95 18 9 4.8 15-9.9 NIM improved 15 bps QoQ led by 16 bps decline in CoF. However, these margins are unsustainable, going ahead, as the impact of reduction in base rate will kick in Lower other income was on the back of lower recovery income, which was at 1.9 crore vs 21.7 crore in Q1FY16 Net Total Income 335 34 296 12.9 328 1.9 Staff cost 49 51 47 4.7 48 1.4 Other Operating Expenses 8 86 77 4.8 83-3.2 PPP 25 24 173 18.7 197 4.1 Operational performance sustained well Provision 5 43 55-8.7 45 1.5 Credit cost came in higher due to pressure on asset quality PBT 155 161 118 31.4 152 2.2 Tax Outgo 48 44 25 93.9 41 17.3 PAT 18 118 94 15.1 112-3.3 Key Metrics GNPA 398 377 338 17.9 359 1.8 Slippages of 97 crore occurred in Q2FY16 vs. 77.6 crore seen in Q1FY16 NNPA 256 244 219 17. 234 9.2 Provision coverage ratio improved to 61% from 58% in Q1FY16 Total Restructured assets 246 265 25-1.6 244 1.1 Outstanding restructuring declined QoQ forming 1.3% of the total credit vs 1.4% in Q1FY16. There is no pipeline of any accounts in 5:25 scheme Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Comments Net Interest Income 91 9 -.1 1,1 993-1.6 NII estimates reduced as we factor in moderation in credit growth Pre Provision Profit 784 783 -.1 873 857-1.8 NIM (%) 3.2 3.2 bps 3.1 3.1-3 bps PAT 468 423-9.6 534 487-8.9 PAT traction reduced as we factor in higher credit cost and reduce our NII estimates ABV ( ) 47.8 47. -1.7 55.6 53.2-4.4 Assumptions Current Earlier FY14 FY15E FY16E FY17E FY16E FY17E Comments Credit growth (%) 5.6 11.6 12.9 13. 13. 15. Deposit Growth (%) 8.4 9.3 13.3 14.2 13.5 15.3 CASA ratio (%) 17.8 19.2 19.4 19.6 19.6 19.8 NIM Calculated (%) 3.3 3.2 3.2 3.1 3.2 3.1 Cost to income ratio (%) 44.1 43.7 42.7 43.5 42.7 43. GNPA ( crore) 293 336 445 514 47 453 Upward revision in GNPA based on anticipation of higher slippage NNPA ( crore) 197 233 243 291 24 238 Slippage ratio (%) 3. 2.6 2.2 1.7 2. 1.6 Slippage revised upwards as per management guidance Credit cost (%) 1. 1..9.8.7.6 ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis Regional bank with focus on SME segment; expect 13% CAGR in loans CUB is a south India based small sized bank with a legacy of over 1 years. Based out of Tamil Nadu, it has a network of 486 branches with 434 branches concentrated in southern India and 33 branches in Tamil Nadu alone. CUB has a history of 1 years of profits and dividend payouts. One of its distinguishing features is its focus on its target segment of SME/MSME in southern India, which accounts for ~45% of CUB s advances book. The bank capitalises on knowledge of its niche market of small businesses, SME and traders primarily based in south India. Going ahead, the bank maintains that its focus would continue to be the SME/MSME segment. Going ahead, we expect advances growth of 13% CAGR over FY15-17E to 22911 crore CUB s credit grew above industry at 29% CAGR to 15246 crore between FY6 and FY13. However, owing to a weak economic scenario, the bank scaled down its advances traction at 8.6% YoY CAGR to 17965 crore over FY14-15. Going ahead, we expect advances growth of 13% CAGR in FY15-17E to 22911 crore with MSME and retail remaining the thrust areas. Any major improvement in the economic scenario could result in higher-than-expected traction in loans than factored in by us. Exhibit 1: Strong growth seen before sharp decline in FY13-15; expect to be slightly above industry ( crore) 25, 2, 15, 1, 5, 4 36.3 35.4 35 31.1 3 24.4 25.6 25 21. 2 4,537 5,645 6,833 9,255 12,137 15,246 16,97 11.6 1.8 1.8 15 12.9 13. 1 5.6 5. 5.7 7.2 5 16153 16758 16968 17,966 1791 18785 2,278 22,911 FY8 FY9 FY1 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 (%) Q3FY15 FY15 Q1FY16 Q2FY16 FY16E FY17E Advances Growth (YoY) Exhibit 2: Loan break-up ---- Sector wise Wholesale Traders 13% Retail Traders 6% Retail 9% CRE 6% Others 9% Large Industries 7% Agri 15% MSME 35% Exhibit 3: Loan break-up ---- Product wise Term loans 34% Bills Purchased & discounted 1% Working capital loans 65% ICICI Securities Ltd Retail Equity Research Page 3

CUB s deposits have also tracked credit growth. It registered a healthy CAGR of 28% over FY6-13 to 235 crore. Like credit, deposit growth also slowed in FY14 at 8.4% and 9.3% in FY15 to 2475 crore. Exhibit 4: CASA ratio expected to gradually move up, going ahead ( crore) 35 3 25 2 15 1 5 36.7 27.7 25.3 25.6 26.5 24.3 2.9 21.9 18.9 19.6 18.2 8.4 16.8 17.8 18.1 9.1 6425 827 1285 12914 16341 235 2217 22383 1. 9.3 12.2 13.3 14.2 1.6 19.2 19.2 18.9 19.5 19.4 19.6 23152 2475 25111 25616 27268 31137 4 35 3 25 2 15 1 5 FY8 FY9 FY1 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 FY15 (%) Q1FY16 Q2FY16 FY16E FY17E Deposits Growth (YoY) CASA ratio We have factored in deposit CAGR of 13.7% over FY15-17E to 31137 crore. CASA ratio is estimated to gradually move up at ~19.6% by FY17E to 688 crore We expect margins to stay at healthy levels of > 3% over FY15-17E CUB s deposits are largely retail in nature with nil bulk deposits. CASA ratio at ~19.5% is on the lower side. Going ahead, we expect deposit to track credit traction and grow at 13.7% CAGR in FY15-17E to 31137 crore. CASA ratio is estimated to gradually move up at ~19.6% by FY17E to 688 crore. Structure of loan book aids NIMs; expect to stay at healthy levels CUB has historically maintained a higher NIM of above 3%. In FY14, reported margins were at 3.5%. This is commendable considering that its CASA ratio has been below 2% at 18%. As discussed above, given its positioning as an SME/MSME (~45% of loans) focused bank catering to their specific requirements, higher churn and yields due to greater proportion of short-term loans (working capital loans at ~64%), extensive knowledge about its market dynamics and a floating loan book size of approximately 8%, the bank has been able to manage its yields on advances across business cycles, thus maintaining the spread. The bank has enjoyed high yields of over 12% since FY8. Moreover, the deposit base consists mainly of retail term deposits, which have a higher maturity. This reduces the bank s dependence on high cost bulk deposits, which currently is nil. However, owing to declining interest rate scenario we expect some pressure on margins. However, it is expected to stay at healthy levels of >3% over FY15-17E. Exhibit 5: Margins historically healthy at >3% levels; expect it to be maintained (%) 16. 14. 12. 1. 8. 6. 4. 2.. 13.5 13. 12.5 13.6 13.5 13.4 12.7 12.6 12.5 8. 7.7 9.3 9.2 9.1 8.1 8.4 8.4 6.9 3.5 3.2 3.6 3.4 3.4 3.5 3.2 3.2 3.1 FY9 FY1 FY11 FY12 FY13 FY14 FY15* FY16E* FY17E* Reported Yields on Advances Reported Cost of Deposits Reported NIM, * Calculated ICICI Securities Ltd Retail Equity Research Page 4

Asset quality expected to remain prudent CUB has largely maintained its asset quality well over a long time. The GNPA and NNPA ratios declined to 1.1% and.6% as on FY13 from 4.43% and 1.95%, respectively, in FY6. CUB s lending philosophy of giving small ticket secured loans helps control asset quality. Around 1:1 loan to collateral ratio is maintained. Unsecured advances aggregate to only 1% of loans. The bank did not go overboard on growth in the peak years of 27-8 and maintained its 25-3% credit growth. We expect GNPA and NNPA ratios at 2.2% and 1.3%, respectively, by FY17E. RA is also one of the lowest in the industry at 1.3% ( 246 crore) as on Q2FY16. However, during FY14, owing to a weak economy, CUB witnessed asset quality pressures with fresh slippages rising to 456 crore from 223 crore in FY13. During FY14, absolute GNPA and NNPA increased to 293 crore (GNPA ratio at 1.8%) and 197 crore (NNPA ratio at 1.2%), respectively. Further, PCR fell to 62% from 7% levels earlier. In FY15, slippages came in higher than trajectory prior to FY14. However, it remained lower compared to last year at 425 crore along with higher reduction at 382 crore in FY15 vs. 336 crore in FY14. Consequently, GNPA and NNPA increased to 336 crore and 233 crore, respectively. Despite deterioration, we believe CUB s asset quality remains manageable compared to its peers. Lower exposure to stressed segments like the infra segment at ~1% also provides comfort. The management has guided slippages will remain between 2% & 2.25% in FY16E and fall below 2% in FY17E. Accordingly, we have revised our NPA estimates upwards and now expect GNPA and NNPA ratios at 2.2% and 1.3% to 514 crore and 291 crore, respectively, by FY17E. Exhibit 6: Asset quality remains acceptable despite pressures witnessed recently ( crore) 6 5 4 3 2 1 93.5 39.7 2.5 2.1 1.8 1.9 2. 2. 2.1 2.2 2.2 2. 1.9 1.5 1.4 1.2 1.1 1.2 1.3 1.3 1.3 1.3 1.3 1.4 1.2 1.3 1. 1..6.5.4 112.5 48.4 123.5 54. 173. 96.4.6 293. 197.3 38.3 24.4 337.9 218.7 36.7 22.4 335.7 232.8 359.4 234.3 398.3 255.9 445.2 242.9 513.9 291..5. FY1 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 Q3FY15 FY15 Q1FY16 Q2FY16 FY16E FY17E (%) GNPA NNPA GNPA (RHS) NNPA (RHS) ICICI Securities Ltd Retail Equity Research Page 5

Exhibit 7: Superior operational efficiency in past; expect to stabilise near 4-43% in FY15-17E CUB s cost-to-income ratio (C/I ratio) has largely stayed near 4%, which is been better than its peers wherein the C/I ratio was ~45%. Positives for the bank include no pressure from provisioning for gratuity & pension as faced by public sector banks. 5 45 4 35 3 25 2 15 1 5 38.1 39.3 37.5 39.6 41.7 44.1 41.9 41.7 45.3 43.7 4. 38.7 42.7 43.5 FY9 FY1 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 Q3FY15 FY15 Q1FY16 Q2FY16 FY16E (%) FY17E C/I ratio Exhibit 8: Other income break up & trend 35 ( crore) 3 25 2 15 1 5 5.1 65.5 55.5 55.3 35.4 41 23 1.5 17.2 172.7 195.6 14.3 14.5 38.9 21.7 1.9 128.9 99.2 22.3 24.9 4 42.1 31.2 28.9 49.5 51 43.3 52.9 52 54.8 FY11 FY12 FY13 FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 CEB & charges Treasury Income others ICICI Securities Ltd Retail Equity Research Page 6

Outlook and valuation We have lowered our PAT CAGR to 13% over FY15-17E to 486 crore vs. 17% CAGR estimated earlier as we factor in lower credit traction and rise in slippages & credit cost. Accordingly, we have reduced our RoE estimates to 15% from 16% earlier. However, despite this, we prefer CUB as it is well placed among regional players. It is comfortable on the capital adequacy front with tier I ratio at 15%. We believe CUB is capable of sustaining its RoA at ~1.5%. CUB has historically traded at a slight premium to other regional banks owing to better return ratios. We maintain our BUY rating and target multiple of 2x FY17E ABV but reduce the target price to 15 (earlier 114) owing to reduction in the FY17E ABV to 53 from 55.6. Exhibit 9: RoEs expected to moderate but still remain better relative to peers 3 1.8 (%) 25 2 15 1 5 1.5 19.9 2.61.5 1.6 23.5 1.7 24.9 1.6 22.3 1.4 18.9 1.4 1.4 1.5 15.9 14.9 15.1 1.7 1.6 1.5 1.4 1.3 1.2 1.1 FY9 FY1 FY11 FY12 FY13 FY14 FY15 FY16E FY17E 1. RoE RoA (RHS) Exhibit 1: Valuation NII Growth PAT Growth P/E ABV P/ABV RoA RoE ( cr) (%) ( cr) (%) (x) ( ) (x) (%) (%) FY14 759 21.7 347.1 7.8 13.6 33.6 2.6 1.4 18.9 FY15 87 6.3 384.1 1.7 13.5 41.2 2.1 1.4 15.9 FY16E 9 11.4 423.4 1.2 12.2 47. 1.8 1.4 14.9 FY17E 993 1.4 486.5 14.9 1.6 53.2 1.6 1.5 15.1 ICICI Securities Ltd Retail Equity Research Page 7

Company snapshot 12 1 Target price: 15 8 6 4 2 Jan-5 May-5 Sep-5 Jan-6 May-6 Sep-6 Jan-7 May-7 Sep-7 Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event FY98 A 1 year old regional bank, got listed in FY98 FY2 They entered into a MoU with Life Insurance Corporation of India and National Insurance Co Ltd for selling insurance products. FY3 Bank started expanding beyond south and opened branch in Mumbai FY7 Bank makes major preferential placement to L&T, LIC and other funds at 169 to 19 range FY7 Announces share split in the ratio of 1:1 and rights issue in 1:4 ratio at 1 FY1 Mr. Kamakodi tookover as CEO and MD, a young top management replacing Mr. Balasubramanian, who became chairman FY13 Further Rights Issue announced at 3 in 1:4 ratio Jul-14 The bank raised 35 crore via QIP by diluting 8% stake Top 1 shareholders Shareholding Pattern Rank (in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 1 Lavender Investments, Ltd. 31-Mar-15 3.95 23.6. Promoter - - - - - 2 George Kaiser Family Foundation 31-Mar-15 3.93 23.5. FII 33. 33.8 34.6 37.1 36.2 3 Life Insurance Corporation of India 31-Mar-15 3.1 18.5-3.1 DII 1.6 1.6 1.2 1.1 9.9 4 ICICI Prudential Asset Management Co. Ltd. 31-Aug-15 3. 18.. Others 56.3 55.6 55.2 52.9 53.9 5 NTAsset (Cayman) Ltd. 31-Mar-15 2.86 17.1.1 6 Mason Hill Advisors, LLC 31-Mar-15 2.77 16.6. 7 Vaidyanathan (Vilasini) 31-Mar-15 2.9 12.5. 8 Capital World Investors 31-Mar-15 1.93 11.6 11.6 9 MCap Fund Advisors Pvt. Ltd. 31-Mar-15 1.58 9.5. 1 Ruane, Cunniff & Goldfarb, Inc. 31-Mar-15 1.47 8.8-2. Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Capital World Investors 17.96m 11.55m Wasatch Advisors, Inc. -17.51m -11.26m Pictet Asset Management Ltd. 3.39m 2.13m Somerset Capital Management, L.L.P. -1.13m -6.51m Mellon Capital Management Corporation 1.29m.92m Sanlam Investment Management (Pty) Ltd. -4.86m -4.6m Axis Asset Management Company Limited 1.19m.85m Life Insurance Corporation of India -4.13m -3.12m Reliance Capital Asset Management Ltd..75m.53m Ruane, Cunniff & Goldfarb, Inc. -3.11m -2.m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 8

Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15 FY16E FY17E Interest Earned 2,545.9 2,698.9 2,969.5 3,3.8 Interest Expended 1786.5 1891.5 269.7 237.4 Net Interest Income 759.4 87.4 899.8 993.5 growth (%) 21.7 6.3 11.4 1.4 Non Interest Income 279.9 44.1 47.3 528.1 Net Income 139.2 1211.5 137.1 1521.6 Staff cost 185.6 21.3 242.2 278.5 Other Operating expense 272.6 319.4 344.8 386.5 Operating profit 581. 681.8 783.1 856.5 Provisions 167.4 182.5 23.1 194.6 Taxes 66.5 126. 156.6 175.4 Net Profit 347.1 384.1 423.4 486.5 growth (%) 7.8 1.7 1.2 14.9 EPS ( ) 6.4 6.4 7.1 8.2 Key ratios (Year-end March) FY14 FY15 FY16E FY17E Valuation No. of Equity Shares 54.3 59.7 59.7 59.7 EPS (Rs.) 6.4 6.4 7.1 8.2 BV (Rs.) 37.3 45.1 51.1 58.1 ABV (Rs.) 33.6 41.2 47. 53.2 P/E 13.6 13.5 12.2 1.6 P/BV 2.3 1.9 1.7 1.5 P/ABV 2.6 2.1 1.8 1.6 Yields & Margins (%) Net Interest Margins 3.3 3.2 3.2 3.1 Yield on assets 11. 1.6 1.5 1.3 Avg. cost on funds 8.3 8.1 8. 7.8 Yield on average advances 13.3 12.7 12.6 12.5 Avg. Cost of Deposits 8.2 8. 7.9 7.8 Quality and Efficiency (%) Cost to income ratio 44.1 43.7 42.7 43.5 Credit/Deposit ratio 73.1 74.6 74.4 73.6 GNPA 1.8 1.9 2.2 2.2 NNPA 1.2 1.3 1.2 1.3 ROE 18.9 15.9 14.9 15.1 ROA 1.4 1.4 1.4 1.5 Balance sheet Crore (Year-end March) FY14 FY15 FY16E FY17E Sources of Funds Capital 54.3 59.7 59.7 59.7 Reserves and Surplus 197.7 2635.9 2989.5 346.2 Networth 224.9 2695.5 349.1 3465.9 Deposits 2216.9 2475. 27268.4 31137.4 Borrowings 35. 168.8 196.3 228.4 Other Liabilities & Provisions 647. 931.8 985.6 15.2 Total 24993.8 27871.1 31499.4 35881.8 Applications of Funds Fixed Assets 183. 21.4 225.9 237.4 Investments 5953.6 6365.3 7289.3 8348. Advances 1696.8 17965.5 2277.8 22911.2 Other Assets 58.9 793.2 928.9 1314.3 Cash with RBI & call money 2179.6 2536.8 2777.5 37.9 Total 24993.8 27871.1 31499.4 35881.8 Growth (%) (Year-end March) FY14 FY15 FY16E FY17E Total assets 8.7 11.5 13. 13.9 Advances 5.6 11.6 12.9 13. Deposit 8.4 9.3 13.3 14.2 Total Income 14.8 9.8 11. 11.4 Net interest income 21.7 6.3 11.4 1.4 Operating expenses 22.5 15.6 1.8 13.3 Operating profit 11. 17.4 14.9 9.4 Net profit 7.8 1.7 1.2 14.9 Net worth 23. 33.2 13.1 13.7 EPS 7..7 1.2 14.9. ICICI Securities Ltd Retail Equity Research Page 9

ICICIdirect.com coverage universe (Banking) CMP M Cap EPS ( ) P/E (x) P/ABV (x) RoA (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E Bank of India (BANIND) 134 125 Sell 8,27 26 18 26 5.2 7.6 5..8.8.8.3.2.3 6 4 6 Bank of Baroda (BANBAR) 162 19 Hold 35,926 15 19 21 1.6 8.7 7.7 1.2 1.1 1..5.6.6 9 1 1 Punjab National Bank (PUNBAN) 129 129 Hold 23,326 17 16 19 7.8 8.2 6.7 1.1 1..9.5.5.5 8 8 9 State Bank of India (STABAN) 237 3 Buy 176,9 16 19 22 14.6 12.7 11. 1.8 1.5 1.4.6.7.7 1 11 11 Indian Bank (INDIBA) 129 174 Buy 5,525 21 23 28 6.2 5.7 4.6.6.5.5.5.5.6 7 7 9 Axis Bank (AXIBAN) 469 6 Buy 111,364 31 35 42 15.1 13.5 11.2 2.6 2.2 1.9 1.7 1.7 1.7 18 17 17 City Union Bank (CITUNI) 87 15 Buy 5,195 6 7 8 13.5 12.2 1.6 2.1 1.8 1.6 1.4 1.4 1.5 16 15 15 DCB Bank (DCB) 87 92 Sell 2,245 7 6 4 12.7 15.2 2.9 1.7 1.6 1.5 1.3.9.6 15 1 7 Federal Bank (FEDBAN) 55 6 Hold 9,484 6 5 5 9.4 11.7 1.2 1.3 1.3 1.2 1.3.9.9 14 1 11 HDFC Bank (HDFBAN) 1,14 1,22 Buy 275,888 41 49 61 27.1 22.4 18.1 4.6 3.9 3.3 1.9 1.9 1.9 19 18 19 IndusInd Bank (INDBA) 915 1,5 Buy 53,267 34 39 5 27. 23.2 18.5 4.6 3.1 2.7 1.8 1.9 2. 18 16 15 Jammu & Kashmir Bk(JAMKAS) 86 98 Hold 4,176 1 16 2 8.2 5.3 4.3.9.8.7.7 1. 1.1 9 12 14 Kotak Mahindra Bank (KOTMAH) 664 66 Hold 121,475 14 8 13 48.6 82.7 5.8 5.8 5.6 5.2 1.5.8 1.1 12 6 1 South Indian Bank (SOUIN) 21 23 Hold 2,786 2 3 3 9. 7.7 6.6.9.9.8.5.6.6 9 1 11 Yes Bank (YESBAN) 744 85 Buy 31,17 48 57 67 15.5 13. 11.1 2.7 2.3 2. 1.6 1.6 1.6 21 19 19 ICICI Securities Ltd Retail Equity Research Page 1

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 11

ANALYST CERTIFICATION We /I, Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities Limited (ICICI Securities) is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. 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