Growth Outlook: Management seemed less cautious than Kotak bank and
expects to grow ~25-30% in FY13. Management is still seeing opportunities in
building up a 2nd hand vehicle, car and LAP business. IIB has stayed away from
mortgages given low yields but is increasing focus on LAP and expects to build a
significant book though competition is increasing in the LAP space.
Margins‐ Worst behind us: Like most retail banks, IIB believes that worst in
terms of margins is behind and easing rates should aid in improving margins. IIB
has seen its NIMs come off for 5 qtrs now and lower funding costs will aid ROAs
going forward.
Fee income traction to continue: Fee income/assets for IIB has already reached
industry best levels of 2% but management expects the growth to still continue.
They believe on the corporate side, FX and IB business still have significant room
for growth and outstrip B/S growth. On the retail side, increasing distribution
will add to cross sell opportunities which has been limited.
Asset quality sanguine: Falling CV rentals have been our concern echoed by
Kotak/HDFCB but IIB is not seeing any material stress in their CV portfolio
currently though diesel price hike can be a risk to this portfolio. Corporate book
is working capital linked and with no Infra exposure, management expects
strong trend to continue. Overall IIB continues to guide 60-70bps of credit costs
v/s our 75-80bps credit cost assumption.
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