28 April 2020
4QFY20 Results Update | Sector: Financials
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
282.5 / 3.5
1695 / 236
TP: INR700 (+72%)
Balance sheet cleansing continues; Liability franchise showing
signs of stability
Credit cost set to moderate, but concerns persist
Financials & Valuations (INR b)
FY19 FY20 FY21E
88.5 120.6 126.5
80.9 108.3 110.9
33.0 44.6 49.8
54.9 68.8 71.0
EPS Gr. (%)
BV/Sh. (INR) 439.8 498.4 574.4
ABV/Sh. (INR) 413.7 479.4 553.3
13.2 14.7 13.3
16.4 14.3 16.3
Div. Yield (%)
Shareholding pattern (%)
FII Includes depository receipts
IIB’s results reflect asset quality pressure with elevated slippages at INR20.6b,
which resulted in a sharp spike in credit cost to 4.7% annualized (240bp for
FY20). PCR, thus, improved sharply (2,030bp) during FY20 to 63.3%. Further,
business growth remained sluggish in the corporate/CV portfolio while
margins expanded owing to continued improvement in the asset mix.
Management has suggested GNPA impact of 80bp due to the COVID-19
pandemic and created floating provisions of INR2.6b during 4QFY20.
Due to better-than-expected core operating performance and an improving
credit cost outlook, we have revised our PAT estimates by 10%/3% for
4QFY20 PAT of INR3.1b (12%/76% YoY/QoQ decline) was affected by higher
provisions of INR24.4b. Thus, credit cost stood elevated at 4.7%
(annualized). NII grew 45% YoY to INR32.3b as margins expanded 10bp QoQ
to 4.25%. Overall, PPoP grew 38% YoY to INR28.6b.
grew 36%/34%/35% YoY.
Advances growth at 10.9% (flat QoQ) moderated sharply to ~INR2.1t.
Corporate banking/CV portfolio declined 4% QoQ each while the MFI
portfolio grew 16.7% QoQ. Management has guided for corporate loans to
grow in single digits and consumer loan growth to range between 10-15%.
Deposits declined 6.8% QoQ (+3.7% YoY) to INR2.0t. CASA ratio declined to
40.4% (v/s 42.4% in 3QFY20) led by withdrawal of government deposits.
However, liability traction has improved in Apr’20 and is witnessing healthy
Fresh slippages increased to INR20.6b (INR12.5b corporate slippage),
resulting in 12.4% QoQ increase in GNPA, while higher provisions led to a
13% QoQ decline in NNPA. PCR in 4QFY20, thus, improved to 63.3% (v/s
52.5% in 3QFY20).
COVID-19 impact: The bank has assessed its portfolio and expects GNPA rise
of up to 80bp and additional credit cost of 50bp. IIB has created INR2.6b
additional floating provision buffer, INR750m toward telecom exposure and
INR230m toward dpd accounts where it has availed standstill benefit.
The bank has proactively recognized few stressed accounts during the
quarter. Also, exposure to the three stressed groups now stands at ~30bp.
We expect loan growth to moderate led by a weak environment due to the
COVID-19 outbreak, which should drive a slowdown in consumer spending.
Further, we expect asset quality to deteriorate due to rising stress in
corporate/MFI/CV/CE portfolio. Thus, we estimate credit cost to remain
elevated at 2% for FY21E. IIB should deliver FY21E RoA/RoE of 1.5%/13.3%.
with a PT of INR700 (1.3x Sep’21 ABV).
Higher provisions drag earnings; slippage trajectory remains elevated
Highlights from management commentary
Valuation and view
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020