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UBS Investment Research
IndusInd Bank
Strong quarter
�� Revenue beat estimates, Profit slightly ahead
IndusInd Bank reported NII of Rs 3.6 bn (up 58% Y/Y) and Net profit of Rs 1.5 bn
(up 75% Y/Y), ahead of UBS estimates. Key highlights of the quarter were 1)
Strong loan growth of 31% while deposits grew lower at 24% 2) NIM improved 20
bps QoQ to 3.6% 3) Strong core fee income growth of 49% Y/Y 4) Total branches
now at 258 (from 238 in Q2) 5) Stable asset quality
�� NIM at 3.6% on lower cost of funds, higher CD ratio
Margins during Q3FY11 improved 20 bps QoQ to 3.6% on back of improvement
in CASA ratio (26.8%), free fund effect of Rs 11 bn raised late September and
higher CD ratio of 82%. However adjusting for equity float NIM improvement
would have been flat QoQ as per our estimate. Going forward we expect NIMs to
be stable at 3.5% in the near term however with increasing proportion of CASA we
expect NIMs to reach 3.7% by FY12.
�� Strong fee income; cost to income at 48%
Buoyed by forex and investment banking income, overall core fee income grew by
49% Y/Y. Bank continues to target growing fee income higher than balance sheet
growth and expects trade, forex and IB related fee to be the key drivers. The bank
opened ~20 branches and is likely to take total network to 300 by March’11. Cost
to income ratio has remained stable at 48%.
�� Valuation: Maintain BUY
We raise our estimates for FY11/12/13 by 3/5/4% respectively on back of strong
NIMs and high fee income. We maintain our BUY rating and PT of Rs 300.
�� IndusInd Bank
IndusInd, a private sector bank, was established in 1994 and merged
with Ashok Leyland Finance in 2004. It has representative offices in
Dubai and London. It had 210 branches and 427 ATMs in 168 cities in
India as of March 2010. Its asset base was US$7.8bn and vehicle
financing, which is its biggest business, constituted 40% of its loan
book in FY10. Its major shareholder holds 22.2% of its outstanding
stock capital.
�� Statement of Risk
We believe a sustained economic slowdown could impact the banking
and finance sector on several fronts: lead to slowdown in credit,
increase in NPL risk, impact fee income and exert pressure on NIM.
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