IndusInd Bank Ltd's Q1FY19 standalone net profit rises 23.8% yoy to Rs1,035.70cr : In-line with Estimates

The bank’s standalone NII stood at Rs2,122.40cr, up 19.64% yoy and 5.72% qoq.

Jul 11, 2018 04:07 IST India Infoline Research Team

IndusInd Bank Ltd Q1FY19

Standalone Results Q1FY19: ( cr)

Q1FY19 YoY (%)
NII 2,122.40 19.6
NPA (%) 1.2 6
Provisions 350 12.9
Net Profit (adjusted) 1,035.70 23.8
***NPA change is bps
IndusInd Bank’s (IIB) NII has improved by 19.6% yoy to Rs2,122.4cr against Rs1,774cr. The net profit was in-line with estimates, which has improved by 23.8% to Rs1,035.7cr against Rs836.5cr yoy. GNPA for Q1FY19 stood at 1.15% against 1.17% qoq, which has declined by 2bps. NNPA for the quarter was flat qoq at 0.51%.

• The loan growth for the quarter is at 29% yoy, which is attributed to higher growth in vehicle finance (+28% yoy).
• IIB delivered 30% yoy growth in corporate credit and 28% yoy growth in retail credit in Q1FY19. Growth in corporate credit was aided by re-finance of loans resolved under NCLT, while retail credit growth was broad-based.
• Although yields in the corporate and retail segments declined yoy, there was a sequential improvement in yields in both segments due to an increase in MCLR during the quarter.
• Compression in NIMs was due to faster increase in cost of deposits as compared to yields.
• Although yields in the corporate and retail segments declined yoy, there was a sequential improvement in yields in both segments due to an increase in MCLR during the quarter.
• Core fee income growth was healthy at 20% yoy. Within core fee income, third party distribution (+32% yoy) and investment banking (+19% yoy) were responsible for driving growth.
• Lower operating expenses led to ~180bps yoy drop in the cost/income ratio. Management is targeting a cost/income ratio of 44% on a sustained basis.
• Provisions included Rs86cr of MTM bond losses in the quarter. The bank has not utilized the RBI dispensation allowing banks to spread the losses over four quarters.
• CASA ratio increased sharply yoy on the back of SA growth at 51% yoy driven by increase in government deposits in Q2FY18. CA and term deposits, on the other hand, witnessed muted growth at 12% yoy and 8% yoy respectively.
• Lower slippage ratios in both corporate and retail loans necessitated lower provisions.
• Capital adequacy ratio of the bank as of Q1FY19 stood at 14.7%. Total CAR reduced by 33bps on a sequential basis. Of this, 25bps was on account of growth in the loan book which is at the normal run rate and 8bps was on account of dividend payment.
• Management stated that credit growth was picking up. The bank saw loans grow at 30% for the corporate book (despite a sale of Rs8,000cr) and 28% for the retail book. Both vehicle loans and other retail loans grew at a similar pace.
• Real estate loans stood at 3.44% of the loan book for IIB. The bank stated that it is being selective and lending only to strong sponsors.
• IIB participated in 4 cases of NCLT refinancing in the quarter based on comfort with the sponsor and turnaround prospects. The bank’s approach is to underwrite the loans, retain 20% and sell-down the balance portion of the loans. Management expects more opportunities to arise as accounts get resolved.
• Of the total loan portfolio, 40% is MCLR linked (~60% of the corporate portfolio).
• Margins declined 5bps sequentially to 3.92% as of 1QFY19 as cost of funds increased to a greater extent than yield on assets. Management indicated that it expects NIMs to remain in the range of 3.9-4.0%.
• IIB added 10 new branches in 1QFY19. The pace of branch addition is expected to ramp up, with a further 190 branches slated to be opened in the remainder of FY19.
• BHAFIN merger: The transaction is in the final stages and IIB expects to file for approvals with the NCLT in the coming weeks. There will be a 3-month process post filing.
• Management expects a reduction in credit cost for the vehicle finance portfolio going forward, based on its new disclosure of Weighted Average Risk Score (WARS) for portfolios with a long history which it uses as a 6-month lead indicator of asset quality.

Technical View:

IndusInd Bank Ltd is currently trading at Rs. 1,934.75, down by 19.85 points or 1.02% from its previous closing of Rs. 1,954.60 on the BSE.
The scrip opened at Rs. 1,994 and has touched a high and low of Rs. 1,994 and Rs. 1,924.40 respectively. So far 26,23,276 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 50 DMA.

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