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IndusInd Bank reported strong numbers today – PAT of Rs 1.93 bn (45%
y/y growth, a 5% beat vs. JPMe). The key surprise was fees (37% y/y
growth) – overall, NIM was almost flat q/q and asset quality continues to
be very robust with credit costs at 60bp. Unlike its peers, IIB is driving
PAT growth from ROA improvement vs. asset growth (the latter modest at
29%), creating the base for 22-23% potential ROEs in the long term we
believe.
Credit costs resilient. The slowdown does not seem to have had an
impact on credit costs – delinquency stayed very low and credit costs
positively surprised at ~60bp. Despite consistent improvement from the
bank, we are penciling in higher credit costs going forward, given our
concerns on the economy.
NIM bottoming out. NIM stabilized after a 10bps contraction in 1Q –
we think it steadily improves from here as deposit cost stresses ease and
CASA ratio starts to improve. CASA balances grew 7% q/q - we think
there is scope for continuous CASA ratio improvement, given the low
SA/branch ratio. The savings balance momentum slowed this quarter -
we think it is temporary and management is confident of a strong 2H.
Branch addition continues. Branch addition continues strongly – the
bank added ~25 branches this quarter to take the network to ~350. That,
along with significant investments in systems, drove the cost-income up
~150bp. This does not worry us: revenue growth should soon cover these
costs.
Stays top pick. We upgrade earnings, with FY12-14 upgrades of 1-4%.
The earnings changes are relatively small and our Mar-12 PT stays at
Rs325. The stock’s shown strong resilience in a weak market – we think
it will continue to improve its ROAs via fee growth. We believe high and
improving profitability supports the premium valuations. We maintain
our OW - it remains one of our top picks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IndusInd Bank reported strong numbers today – PAT of Rs 1.93 bn (45%
y/y growth, a 5% beat vs. JPMe). The key surprise was fees (37% y/y
growth) – overall, NIM was almost flat q/q and asset quality continues to
be very robust with credit costs at 60bp. Unlike its peers, IIB is driving
PAT growth from ROA improvement vs. asset growth (the latter modest at
29%), creating the base for 22-23% potential ROEs in the long term we
believe.
Credit costs resilient. The slowdown does not seem to have had an
impact on credit costs – delinquency stayed very low and credit costs
positively surprised at ~60bp. Despite consistent improvement from the
bank, we are penciling in higher credit costs going forward, given our
concerns on the economy.
NIM bottoming out. NIM stabilized after a 10bps contraction in 1Q –
we think it steadily improves from here as deposit cost stresses ease and
CASA ratio starts to improve. CASA balances grew 7% q/q - we think
there is scope for continuous CASA ratio improvement, given the low
SA/branch ratio. The savings balance momentum slowed this quarter -
we think it is temporary and management is confident of a strong 2H.
Branch addition continues. Branch addition continues strongly – the
bank added ~25 branches this quarter to take the network to ~350. That,
along with significant investments in systems, drove the cost-income up
~150bp. This does not worry us: revenue growth should soon cover these
costs.
Stays top pick. We upgrade earnings, with FY12-14 upgrades of 1-4%.
The earnings changes are relatively small and our Mar-12 PT stays at
Rs325. The stock’s shown strong resilience in a weak market – we think
it will continue to improve its ROAs via fee growth. We believe high and
improving profitability supports the premium valuations. We maintain
our OW - it remains one of our top picks.
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