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India Equity Research Reports, IPO and Stock News
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UBS Investment Research
IndusInd Bank
A mixed bag
Event: Q2 numbers marginally ahead of estimates
IndusInd Bank reported Net profit of Rs 1.9 bn (up 45% Y/Y) and NII of Rs 4.2 bn
(up 27% Y/Y). While Strong growth in loan book, improved investment yields,
stable credit costs and robust fee income led to the beat in numbers, high NPL
additions (1.85%) due to one-off slippage in corporate portfolio deviated from
expected trends. Gross and Net NPLs were stable due to sell down of the NPL to
asset reconstruction company. Provisioning coverage was maintained at 72%
Impact: No change in estimates
We maintain our earnings estimates for FY12 &13. NIMs have likely troughed out
in current quarter and are very favourably placed in event of declining interest rates
due to high proportion of fixed rate loan book and short duration of its term
deposits. Delinquency trends (ex one off) continue to be stable enabling low
provisioning burden in current year. Strong fee income growth continues to support
overall revenue growth; while CASA growth tracks the branch expansion.
Action: BUY, Relatively well positioned
IIB is relatively well positioned in current environment with low exposure to stress
sectors and high medium term growth (28% EPS CAGR FY11-13E). The stock has
been a strong performer in last 6 months outperforming banks and markets by 14%
and 9% respectively, as such the stock could see some weakness, which we believe
would represent an attractive buying opportunity.
Valuation: PT of 325
We like Indus Ind Bank for its improving liability franchise and dominant vehicle
finance portfolio. We derive our PT of Rs 325 using residual income
Key highlights of the quarter
Growth stronger than expected; NIM contracts 6 bps Q/Q:- Loan growth
during the quarter was 29% driven by vehicle financing book which grew by
40% Y/Y. Deposits grew by 23% Y/Y with CASA ratio of 27.7 (decline 50
bps Q/Q). NIMs declined by 6 bps to 3.35% during Q2 with lower CD ratio
and sharp rise in cost of deposits. Consumer yields have been sticky due to
high proportion of fixed rate loan book and the overall yields have been
supported by re-pricing of corporate book. In event of reversal in interest
rates (which is our base case) we believe NIM have significant positive bias
due to increased proportion of fixed rate loan book (47% in Q2) and short
maturity of term deposits.
Gross slippages increase but net slippage stable due to NPL sale: NPL
additions for the quarter increased to 1.85% (compared to 1% in FY11 and
Q1FY11) on account of one corporate account (Rs 450 mn) slippage. The
loan is secured by property and the bank has initiated the recovery process by
selling the asset to Asset Reconstruction Company which it hopes to settle in
Q3. Adjusting for this one off slippages were in line with trend. Credit costs
too continue to be stable at 66 bps (annualized) for Q2. Gross and Net NPLs
remained stable Q/Q at 1.1% and 0.3% respectively.
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 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
A mixed bag
Event: Q2 numbers marginally ahead of estimates
IndusInd Bank reported Net profit of Rs 1.9 bn (up 45% Y/Y) and NII of Rs 4.2 bn
(up 27% Y/Y). While Strong growth in loan book, improved investment yields,
stable credit costs and robust fee income led to the beat in numbers, high NPL
additions (1.85%) due to one-off slippage in corporate portfolio deviated from
expected trends. Gross and Net NPLs were stable due to sell down of the NPL to
asset reconstruction company. Provisioning coverage was maintained at 72%
Impact: No change in estimates
We maintain our earnings estimates for FY12 &13. NIMs have likely troughed out
in current quarter and are very favourably placed in event of declining interest rates
due to high proportion of fixed rate loan book and short duration of its term
deposits. Delinquency trends (ex one off) continue to be stable enabling low
provisioning burden in current year. Strong fee income growth continues to support
overall revenue growth; while CASA growth tracks the branch expansion.
Action: BUY, Relatively well positioned
IIB is relatively well positioned in current environment with low exposure to stress
sectors and high medium term growth (28% EPS CAGR FY11-13E). The stock has
been a strong performer in last 6 months outperforming banks and markets by 14%
and 9% respectively, as such the stock could see some weakness, which we believe
would represent an attractive buying opportunity.
Valuation: PT of 325
We like Indus Ind Bank for its improving liability franchise and dominant vehicle
finance portfolio. We derive our PT of Rs 325 using residual income
Key highlights of the quarter
Growth stronger than expected; NIM contracts 6 bps Q/Q:- Loan growth
during the quarter was 29% driven by vehicle financing book which grew by
40% Y/Y. Deposits grew by 23% Y/Y with CASA ratio of 27.7 (decline 50
bps Q/Q). NIMs declined by 6 bps to 3.35% during Q2 with lower CD ratio
and sharp rise in cost of deposits. Consumer yields have been sticky due to
high proportion of fixed rate loan book and the overall yields have been
supported by re-pricing of corporate book. In event of reversal in interest
rates (which is our base case) we believe NIM have significant positive bias
due to increased proportion of fixed rate loan book (47% in Q2) and short
maturity of term deposits.
Gross slippages increase but net slippage stable due to NPL sale: NPL
additions for the quarter increased to 1.85% (compared to 1% in FY11 and
Q1FY11) on account of one corporate account (Rs 450 mn) slippage. The
loan is secured by property and the bank has initiated the recovery process by
selling the asset to Asset Reconstruction Company which it hopes to settle in
Q3. Adjusting for this one off slippages were in line with trend. Credit costs
too continue to be stable at 66 bps (annualized) for Q2. Gross and Net NPLs
remained stable Q/Q at 1.1% and 0.3% respectively.
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 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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