REFER & EARN ₹ 500 Voucher
Follow IIFL:
OTHER GROUP COMPANIES
Home » Top News » IndusInd Bank (Q3 FY13)
market

IndusInd Bank (Q3 FY13)

Recommend BUY with 9-month target of Rs515.

January 01, 1970 5:30 IST | India Infoline News Service
CMP Rs435, Target Rs515, Upside 18.4%

  • Advances continue to grow by strong 31% yoy and 8% qoq on the back of robust momentum in Consumer Financing (CF) book (38% yoy and 6% qoq) and growth acceleration in Corporate & Commercial Banking (CCB) segment (24% yoy and 9% qoq). Sequential growth in CV financing (largest piece in CF segment contributing 45%) moderated to 2% while growth in other products (CE/UV/2W/Car financing, Credit Card and LAP) was robust. Improved growth in the CCB book could have been driven by lower wholesale funding rates. IndusInd’s loan mix shifted towards the CCB segment; its share increased to 49% from 48% in Q2 FY13. 
  • Savings growth was impressive at 16% qoq and 55% yoy; net addition to savings balance was Rs8.5bn v/s Rs1.7bn in Q2 FY13. During the quarter, IndusInd acquired 0.14mn savings accounts. Strong traction in savings deposits is attributable to substantial new branch roll-outs (added 203 branches in preceding two years), improving maturity of recently opened branches and competitive pricing (bank has been offering a rate of 6% on savings balance). The share of savings deposits improved to 12% (100bps qoq) enhancing CASA ratio to 28.7%. 
  • NIM improved by better-than-expected 21bps on qoq basis to reach 3.46%. Bank’s cost of funds declined by sharp 25bps qoq due to beneficial re-pricing of bulk deposits and lower incremental wholesale borrowing cost. Lending yield in both segments CF and CCB declined by 20bps qoq; suggesting that margin expansion was partially driven by more productive deployment of resources during the quarter. Correction in CF yield could be largely attributed to change in product mix within the segment, while decline in CCB yield was driven by easing of short term rates. We believe that benign wholesale rates, fixed-rate nature of CF book, CASA improvement and recent equity raising would drive further margin expansion in the medium term.

  • Core fee income growth continues to be robust at 32% yoy/11% qoq driven by development of new streams. Trading gains were modest at Rs177mn. Opex growth accelerated to 33% yoy/12% qoq due to substantial network expansion. C/I ratio stood at 49.4% and is likely to move in the band of 47-49% in the medium term.
  • Asset quality remained healthy notwithstanding the slippage of Deccan Chronicle (~Rs1bn) account. Excluding this, delinquency ratio for the quarter stood at modest 0.8%. Slippages in the CF segment continue to be benign at 1.5%; has been in the range of 1.4-1.9% over past 2.5 years despite sharp macro slowdown and higher interest rates. Bank restructured few small accounts during the quarter taking the outstanding restructured assets to 0.26% of advances. Bank provided ~Rs400mn on the Deccan Chronicle account and recovered ~Rs600mn by selling to ARC. Credit cost for the quarter and 9m FY13 stood at 16bps and 37bps respectively. Signifying stable asset quality outlook, IndusInd upgraded its credit cost guidance for the year to below 50bps from earlier below 60bps.
  • Despite one-off provisioning for aforementioned reason, RoA improved sequentially by 4bps driven by margin expansion. Further margin improvement and benign credit cost should drive further RoA expansion. We expect the ratio to be sustained in the range 1.6-1.7% over the next two years. Recent capital raising of Rs20bn via QIP has enhanced Tier-1 ratio to near 15%. With this, IndusInd Bank is sufficiently capitalized for a robust asset growth over the next three years.
  • In our view, IndusInd Bank would be amongst the very few banks that are likely to deliver 25-30% earnings growth and sustain higher RoAs over FY12-15. Robust long‐term outlook would drive further valuation re‐rating. Recommend BUY with 9-month target of Rs515.
Result table
(Rs mn) Q3 FY13 Q2 FY13 % qoq Q3 FY12 % yoy
Total Interest Income 18,005 17,279 4.2 13,897 29.6
Interest expended (12,227) (12,182) 0.4 (9,591) 27.5
Net Interest Income 5,778 5,097 13.4 4,307 34.2
Other income 3,558 3,205 11.0 2,651 34.2
Total Income 9,336 8,302 12.5 6,958 34.2
Operating expenses (4,614) (4,104) 12.4 (3,465) 33.2
Provisions (787) (491) 60.3 (428) 83.7
PBT 3,935 3,708 6.1 3,064 28.4
Tax (1,262) (1,205) 4.7 (1,005) 25.6
Reported PAT 2,673 2,503 6.8 2,060 29.8
EPS 20.5 21.3 (3.9) 17.6 16.0
 
Business (Rs m) Q3 FY13 Q2 FY13 % qoq Q3 FY12 % yoy
Advances 424,260 394,270 7.6 324,260 30.8
Consumer Finance 216,910 204,340 6.2 156,950 38.2
% share 51.1 51.8 - 48.4 -
Corporate & Comm Banking 207,350 189,930 9.2 167,310 23.9
% share 48.9 48.2 - 51.6 -




Deposits 510,980 477,650 7.0 405,580 26.0
Current 84,890 80,530 5.4 67,800 25.2
Savings 61,620 53,120 16.0 39,770 54.9
Term Deposits 364,470 344,000 6.0 298,010 22.3

Key  Ratios  Q3 FY13  Q2 FY13 chg qoq  Q3 FY12 chg yoy
NIM (%) 3.5 3.3 0.2 3.3 0.2
Yield on Advances (%) 13.7 13.9 (0.2) 13.8 (0.1)
Cost of Deposits (%) 8.4 8.7 (0.3) 8.2 0.3
CASA (%) 28.7 28.0 0.7 26.5 2.1
C/D (x) 0.83 0.83 0.00 0.80 0.03
Non-interest income (%) 38.1 38.6 (0.5) 38.1 0.0
Non-interest in/Int exp (%) 29.1 26.3 2.8 27.6 1.5
Cost to Income (%) 49.4 49.4 (0.0) 49.8 (0.4)
Provisions/Avg Advances (%) 0.19 0.13 0.06 0.14 0.06
BV (Rs) 139.5 106.8 32.7 94.6 44.9
RoE (%) 17.4 20.5 (3.1) 19.1 (1.8)
RoA (%) 1.6 1.6 0.0 1.6 0.1
CAR (%) 15.0 11.8 3.3 13.4 1.6
Gross NPA (%) 1.0
Live Market

OPEN A DEMAT ACCOUNT & Get
 FREE Benefits Worth ₹ 5,000

LIVE NEWS
KNOWLEDGE CENTRE

FEATURED ARTICLE

Markets trade lower amid weak cues; Nifty around 17,500 as Banking stocks under pressure
Markets trade bearish amid weak global cues; Nifty below 17,650
Markets on a cautious note, trades flat ahead of Federal meeting outcome

BLOGS

Open Demat Account
  • ₹0

    Per Order for ETF & Mutual Funds Brokerage

  • ₹20

    Per Order for Delivery, Intraday, F&O, Currency & Commodity