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INDUSIND BANK
OUTPERFORMER (RS210, MCAP: RS86BN / US$1.9BN)
• Margins to sustain: IndusInd Bank’s management is confident of maintaining current margin levels (3.6%) over the
next couple of quarters. Cost of funds has been on an uptrend, but the bank has been successfully passing it on.
Healthy traction in CASA deposits has also cushioned the impact on margins. The management expects asset repricing
to gain pace in Q4FY11, which should support margins in the near term. Also, the bank is targeting a NIM of
~4% over the next 10 quarters, catalyzed by an expansion in CASA ratio.
• Branch rollout to aid CASA accretion: IndusInd intends to maintain a healthy flow of CASA deposits to fortify the
bank’s liability base. It has added 48 branches this fiscal year (20 in Q3FY11). More branches are likely to be rolled out
in Q4FY11, taking the total to ~300 by March 2011. These are expected to significantly contribute to CASA in FY12. The
bank expects CASA ratio to steadily scale up to ~35% over the next 10 quarters and remain steady thereafter.
• Loan growth to remain robust: The management expects loan growth to remain robust in the near term. Consumer
loans are expected to outpace corporate credit over the next couple of quarters. Also, the bank has diversified to fill
the missing pieces in its product profile, which should incrementally support growth. New products include high-end
credit cards, personal loans and loans against property.
• Vehicle loans to be financed by CASA and long-term borrowings: Over the next couple of years, the bank aims to
finance vehicle loan book (~45% of total advances) through consumer CASA and long-term funding sources.
Meanwhile, corporate loans, which have relatively short tenures, are to be funded by corporate liabilities (deposits
and borrowings). This, according to the management, would help manage asset liability better and support NIMs in
an adverse interest rate environment.
• Corporate segment to drive fee income: The management sees significant potential to scale up fee income led by
corporate fees. Trade and remittances are likely to form a significant portion of fee income going forward owing to
increased focus on cross-sales. Investment banking fees (primarily debt syndication, debt structuring and advisory)
are expected to lead the traction. The bank is tapping clients with which it has established fund-based relationships.
• Upside in RoA: Increasing fee income (especially corporate fee income and investment banking fees) and margins are
expected to further increase the banks RoA, which grew 10bp qoq to 1.5% in Q3FY11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
INDUSIND BANK
OUTPERFORMER (RS210, MCAP: RS86BN / US$1.9BN)
• Margins to sustain: IndusInd Bank’s management is confident of maintaining current margin levels (3.6%) over the
next couple of quarters. Cost of funds has been on an uptrend, but the bank has been successfully passing it on.
Healthy traction in CASA deposits has also cushioned the impact on margins. The management expects asset repricing
to gain pace in Q4FY11, which should support margins in the near term. Also, the bank is targeting a NIM of
~4% over the next 10 quarters, catalyzed by an expansion in CASA ratio.
• Branch rollout to aid CASA accretion: IndusInd intends to maintain a healthy flow of CASA deposits to fortify the
bank’s liability base. It has added 48 branches this fiscal year (20 in Q3FY11). More branches are likely to be rolled out
in Q4FY11, taking the total to ~300 by March 2011. These are expected to significantly contribute to CASA in FY12. The
bank expects CASA ratio to steadily scale up to ~35% over the next 10 quarters and remain steady thereafter.
• Loan growth to remain robust: The management expects loan growth to remain robust in the near term. Consumer
loans are expected to outpace corporate credit over the next couple of quarters. Also, the bank has diversified to fill
the missing pieces in its product profile, which should incrementally support growth. New products include high-end
credit cards, personal loans and loans against property.
• Vehicle loans to be financed by CASA and long-term borrowings: Over the next couple of years, the bank aims to
finance vehicle loan book (~45% of total advances) through consumer CASA and long-term funding sources.
Meanwhile, corporate loans, which have relatively short tenures, are to be funded by corporate liabilities (deposits
and borrowings). This, according to the management, would help manage asset liability better and support NIMs in
an adverse interest rate environment.
• Corporate segment to drive fee income: The management sees significant potential to scale up fee income led by
corporate fees. Trade and remittances are likely to form a significant portion of fee income going forward owing to
increased focus on cross-sales. Investment banking fees (primarily debt syndication, debt structuring and advisory)
are expected to lead the traction. The bank is tapping clients with which it has established fund-based relationships.
• Upside in RoA: Increasing fee income (especially corporate fee income and investment banking fees) and margins are
expected to further increase the banks RoA, which grew 10bp qoq to 1.5% in Q3FY11.
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