Q3FY23 Review: Indusind Bank: On the right track

19 Jan 2023 , 10:05 AM

Indusind Bank (IIB) reported strong earnings growth of 58% YoY / 9% QoQ in the quarter. Core PPOP grew 20% YoY / 4 % QoQ, aided by strong loan growth, healthy fee income growth and stable cost ratios. This, along with benign credit cost (IIB utilized ~Rs4.6 billion of contingent provisions in the quarter), led to an increase in RoA to 1.87% (highest since Q2FY20). Negatives in the quarter included lower-than-expected growth along with deterioration in asset quality in the MFI segment and a second consecutive quarter of decline in SA deposits. Lack of clarity on the extension of the current MD & CEO’s term (which expires on March 23, 2023) remains an overhang. 

With consistent PPOP margin of 5.7-6.0% over last seven quarters, operating performance has remained strong. Further high provisioning with PCR of ~71% and additional provisions at 125 bps of loans would help cushion earnings. 

Analysts at IIFL Capital Services have maintained earnings estimates and expect IIB to deliver RoA/RoE of 1.8/15.3% by FY24. They value the stock at 1.7x Sep-2024 BVPS (Rs1,500/share). They have maintained their Buy recommendation on the stock.