Steady performance IndusInd Bank:: HDFC Sec

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Steady performance
IndusInd Bank (IIB) reported yet another stable
quarter with inline core & net earnings and steady
asset quality. The pickup in CV segment, continued
strong contribution from core fees, healthy SA
traction and stable PCR were key positives. However,
we were slightly disappointed with a mere 4bps QoQ
NIM improvement and high capital consumption.
IIB’s performance across parameters remains in the
top quartile amongst the PVT Banks. Incremental
shift towards the high yielding & fixed consumer
finance (CF) book, rising CASA ratio and fall in
wholesale rates augurs well for a NIM improvement.
Further, the continued traction in core fees and
stable asset quality performance remains key ROA
drivers. IIB trades at a premium (2.9x FY17E ABV) to
its peers. We believe the rich valuation is justified
given the bank’s proven credentials and improving
return ratio. Maintain BUY with a TP of Rs 924 (3.3x
FY17EABV).
 Book further tilts towards the corp segment : IIB’s
loans grew ~22% led by 32% growth in the corporate
loans (~58% of total loans). CF book grew ~4% QoQ
driven by a sharp rise of 12% QoQ in the non-vehicle
finance book (16.5% share). On a positive note the
bank’s CV portfolio grew ~4% QoQ (highest in last 9-
quarters). We expect a loan CAGR of 25% over FY14-
17E. CASA ratio at 34% was up 18bps QoQ driven by
strong SA deposits growth (+7% QoQ) despite the bank
reducing rates on SA deposits below Rs 1Lakh.
 Flat NIM; expected to improve : The NIM expansion
was restricted at a mere 4bps QoQ largely due to high
growth in the low yield corporate book. With decline in
wholesale deposit rates, continued traction in CASA
and expected growth in the high yielding CF portfolio,
we anticipate improvement in NIM. We factor (calc.)
NIM increase of ~10bps to avg. 4.1% over FY15-17E.
 Asset quality remains steady: Headline asset quality
was broadly stable with G/NNPA up ~3% each QoQ to
form 1.1/0.3% of loans respectively. Delinquencies
stood at 1% ann., marginally higher QoQ, led by the
rise in slippages (2.1% ann. vs. 1.7% QoQ.) within CF
book. Restructured pool stood at a mere 55bps. We
expect a better NPL trend once CV cycle picks up. We
factor avg. 90bps slippages over FY16-17E.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010682