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IndusInd Bank (IIB) Q1FY12 profits showed a robust growth of
~52% yoy to Rs.1.8bn on account of healthy growth in business,
interest income, improvement in CASA and robust fee income.
Interest income grew by 50.9% yoy & 11% qoq due to healthy CD
ratio & focus towards high yielding portfolio. CASA grew at a
robust ~49% yoy & 6.6% qoq. The business of IIB recorded a
strong growth of ~30% yoy and by ~5% qoq. Deposits grew by
~29% yoy & ~3% qoq while the advances grew by ~31% yoy & by
~9% qoq. This led to improve in the CD ratio for IIB and the NIM
of the bank improved from 3.32% in Q1FY11 to 3.41% in
Q1FY12. We maintain our “Buy” rating on the stock.
Strong business growth
The business of IIB recorded a strong growth of 28.1% yoy and by
8.7% qoq. The deposits of the bank grew by a healthy 25.3% yoy &
by ~12.1% on a sequential basis. The advances of IIB grew by a
healthy 27.3% yoy & by 4.7% on a qoq basis. The credit-deposit
ratio of IIB increased to 80.5% in Q1FY12 from 78.9% in Q1FY11. In
Q4FY11, the CD ratio was at 76.1%.
Robust growth in net profit
Net interest income (NII) of IIB showed a healthy growth of 31.9%
yoy, mainly on account to increase in the share of high yielding
CFD business and robust growth in CASA. The CFD business now
stands at 44.75% of the total advances as against ~41.5% last year.
CASA on the other hand improved from 24.3% in Q1FY11 to 28.2%
in Q1FY12. The growth in CASA was more on the SA side, which
grew by a robust 58% yoy & by ~6% qoq and CA grew by a healthy
45% yoy & by 7% qoq. The C/I ratio was at 48.5% in Q1FY12 as
against 49.5% last year. IIB has made lower provisions than last
year. All this led to a 52% increase in net profits yoy to Rs.1.8 bn.
Consistent improvement in NIM and return ratios
IIB’s net interest margin (NIM) improved to 3.41% in Q1FY12 from
3.32% in Q1FY11. The improvement in NIM was mainly on account
of increase in the share of CASA, improvement in CD ratio & shift
towards high yielding portfolio. While the corporate book
increased by ~24% yoy, CFD book increased by ~42% yoy. The CFD
book was driven by robust growth in commercial vehicle (40% yoy
& 8% qoq). The incremental CASA contributed to ~68% of the
incremental deposits on a qoq basis. For Q1FY12, the return ratios
of IIB were at a healthy level. The RoAA was at 1.59% (against
1.33% last year) & RoAE was at 18.4% (against 21.9% last year).
Asset quality faltered, but under control
The asset quality of IIB faltered, but it was under control. The
GNPA increased by ~12% yoy in absolute value & formed 1.08% of
the loan book as against 1.26% in Q1FY11. The NNPA increased by
~2% yoy in absolute value & formed 0.3% of the loan book as
against 0.36% in Q1FY11. The PCR was at ~73% as against ~70% yoy.
The credit cost decreased to 14bps in Q1FY12 vs 22bps in Q1FY11.
Valuation
Currently at Rs.287, the stock is available at price to adj book
value (P/ABV) of ~2.6x of FY13E. We maintain our “Buy” rating on
the stock.
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