19 April 2017
4QFY17 Results Update | Sector: Financials
Indusind Bank
Buy
BSE SENSEX
29,337
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
9,104
IIB IN
595.8
847 / 13.1
1,445/966
4/14/30
1,540
85.0
CMP: INR1,423
TP: INR1,700 (+19%)
One-off provision mars strong operating performance
IndusInd Bank’s (IIB) 4QFY17 PAT grew 21% YoY (in-line) to INR7.5b. Provisions
were elevated at INR4.3b as they included one-off amount of INR1.22b on a
bridge loan for a cement M&A transaction (account remains standard), where
the receivable is in June (likely to get reversed in 1QFY18). Adjusted for this,
PAT grew 34% YoY (9% beat). For FY17, PAT growth was healthy at 30% YoY.
NII grew 31% YoY, led by strong loan growth (+28% YoY) and 6bp YoY
improvement in NIM. Coupled with strong fee income performance (+29/13%
YoY/QoQ) and controlled opex (+27% YoY), IIB reported impressive core PPoP
growth of 34% YoY. For FY17, NIMs have improved 15bp YoY to 4%.
Both corporate (+30% YoY) and consumer (+28% YoY) loans exhibited robust
growth. IIB compensated for lower yet healthy growth in vehicle finance (+20%
YoY) with strong growth of ~40% YoY in retail non-vehicle loans.
Led by robust SA mobilization (+57/7% YoY/QoQ), CASA deposits grew 42% YoY
(CASA ratio stable at 37%). The bank retained 35% of CASA accumulated during
demon, and incremental growth was driven by new-to-bank customers.
Slippages in CCB increased more than 4x to INR4.57b. As a result, CCB GNPAs
increased 15% in absolute terms. Asset quality in CFD was largely stable.
Valuation and view:
IIB’s key focus is to scale up on its retail operations, led by
higher share of non-vehicle retail loans by FY20. The bank is targeting 25-30%
loan growth, driven by continued branch expansion (+800 branches addition)
and strong customer acquisition (2x increase to 20m). Strong core profitability
(3% of avg. assets v/s private banks’ avg. of 2.5% and HDFCB’s 2.7%), an
improving CASA ratio (best among mid-sized private banks) and healthy return
ratios (RoA of 1.9%+ and RoE of 16-18%) are the key positives. We upgrade
estimates by 4-5% to account for higher growth. Maintain Buy with a target
price of INR1,700 (3.8x FY19 BV).
FY16
2Q
3Q
10,943
11,734
31.3
36.2
7,835
8,390
18,778
20,124
8,713
9,514
10,065
10,610
38.9
37.1
1,581
1,771
8,484
8,839
2,884
3,029
5,600
5,810
30.2
29.9
FY17
2Q
14,603
33.4
9,704
24,307
11,491
12,816
27.3
2,139
10,677
3,635
7,042
25.7
FY16
3Q
15,784
34.5
10,168
25,952
12,319
13,633
28.5
2,169
11,465
3,959
7,506
29.2
4.0
37.9
25.1
37.0
4.2
0.4
9.7
0.9
4Q
16,675
31.5
12,113
28,788
13,065
15,722
36.6
4,301
11,421
3,905
7,516
21.2
4.0
36.1
27.9
36.9
4.2
0.4
10.5
0.9
45,166
32.1
32,970
78,135
36,721
41,414
33.7
6,722
34,693
11,828
22,865
27.5
3.9
25.4
28.5
35.2
4.7
0.5
7.8
0.9
FY17
60,626
34.2
41,715
102,341
47,831
54,510
31.6
10,913
43,597
14,918
28,679
25.4
36.1
27.9
36.9
4.2
0.4
10.5
0.9
Financials & Valuations (INR b)
Y/E Mar
2017 2018E 2019E
NII
60.6
74.3
91.1
OP
54.5
66.4
80.8
NP
28.7
36.5
44.4
NIM (%)
4.2
4.2
4.2
EPS (INR)
47.9
61.0
74.3
EPS Gr. (%)
24.8
27.1
21.8
BV/Sh. (INR)
339
389 450.6
ABV/Sh. (INR)
334
383 442.6
RoE (%)
15.3
16.7
17.7
RoA (%)
1.8
1.9
1.9
P/E (X)
29.7
23.3
19.2
P/BV (X)
4.2
3.7
3.2
P/ABV (X)
4.3
3.7
3.2
Quarterly Performance
1Q
9,807
22.5
7,616
17,423
8,196
9,227
23.2
1,233
7,994
2,744
5,250
24.7
4Q
12,682
37.1
9,128
21,810
10,298
11,512
35.4
2,137
9,375
3,172
6,204
25.3
1Q
13,564
38.3
9,730
23,294
10,956
12,338
33.7
2,305
10,033
3,419
6,614
26.0
Net Interest Income
% Change (YoY)
Other Income
Net Income
Operating Expenses
Operating Profit
% Change (YoY)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (YoY)
Operating Parameters
NIM (Reported,%)
3.7
3.9
3.9
3.9
4.0
4.0
Deposit Growth (%)
21.6
22.5
24.6
25.4
31.0
38.9
Loan Growth (%)
23.1
30.6
28.7
28.5
29.7
26.4
CASA Ratio (%)
34.7
34.7
35.0
35.2
34.4
36.5
Asset Quality
OSRL (INR b)
4.6
4.9
4.8
4.7
4.6
4.4
OSRL (%)
0.6
0.6
0.6
0.5
0.5
0.4
Gross NPA (INR b)
5.7
6.0
6.8
7.8
8.6
9.0
Gross NPA (%)
0.8
0.8
0.8
0.9
0.9
0.9
E: MOSL Estimates; Quarterly calculated margins based on total assets, yearly on interest earning assets
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
Subham Banka
(Subham.Banka@MotilalOswal.com); +91 22 6129 1567
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.