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UBS Investment Research
IndusInd Bank
Another strong quarter
„ Numbers broadly as expected
Indus Ind Bank reported strong Q4 number with Net interest income growth of
42% Y/Y (in line) and net profit growth of 75% Y/Y (above estimates). The beat in
earnings primarily came from stronger than expected other income (due to sale of
investments). NPAs declined sequentially due to lower additions (0.9%), while
NIMs came off slightly on account of increase in cost of deposits. CASA mix
continued to improve (now at 27%) while core fee income grew 47% Y/Y.
„ DB credit card acquisition to be accretive in year 1
Indus Ind Bank acquired Deutsche Bank credit card business in India which has
200,000 card customers. The loan book is ~ Rs 2.5 bn (1% of IIB loan book) and
the deal is at slight premium to the book value. As per management the loan book
is yield accretive and with cost reduction initiatives would be profitable over next
12 months. In our view this transaction is complementary and will add strength to
IIB’s retail franchise.
„ Scaling up profitably is banks strategy over next three years
IIB management emphasized its strategy of growing at 25-30%, reaching CASA
mix of 35%, growing fee income faster than loan growth, more than doubling the
consumer book and funding it through CASA, improving RoA further from current
levels of 1.55% over a period of next three years.
„ Valuation: Maintain BUY
We like Indus Ind Bank for its improving liability franchise and dominant vehicle
finance portfolio. We derive our PT of Rs 290 using residual income
Q 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.
Q Statement of Risk
We believe a economic slowdown could impact the banking and finance sector
on several fronts: lead to slowdown in credit and deposits, increase in NPL risk,
impact fee income and exert pressure on NIM.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
IndusInd Bank
Another strong quarter
„ Numbers broadly as expected
Indus Ind Bank reported strong Q4 number with Net interest income growth of
42% Y/Y (in line) and net profit growth of 75% Y/Y (above estimates). The beat in
earnings primarily came from stronger than expected other income (due to sale of
investments). NPAs declined sequentially due to lower additions (0.9%), while
NIMs came off slightly on account of increase in cost of deposits. CASA mix
continued to improve (now at 27%) while core fee income grew 47% Y/Y.
„ DB credit card acquisition to be accretive in year 1
Indus Ind Bank acquired Deutsche Bank credit card business in India which has
200,000 card customers. The loan book is ~ Rs 2.5 bn (1% of IIB loan book) and
the deal is at slight premium to the book value. As per management the loan book
is yield accretive and with cost reduction initiatives would be profitable over next
12 months. In our view this transaction is complementary and will add strength to
IIB’s retail franchise.
„ Scaling up profitably is banks strategy over next three years
IIB management emphasized its strategy of growing at 25-30%, reaching CASA
mix of 35%, growing fee income faster than loan growth, more than doubling the
consumer book and funding it through CASA, improving RoA further from current
levels of 1.55% over a period of next three years.
„ Valuation: Maintain BUY
We like Indus Ind Bank for its improving liability franchise and dominant vehicle
finance portfolio. We derive our PT of Rs 290 using residual income
Q 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.
Q Statement of Risk
We believe a economic slowdown could impact the banking and finance sector
on several fronts: lead to slowdown in credit and deposits, increase in NPL risk,
impact fee income and exert pressure on NIM.
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