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Wednesday, 17 January 2018



INDUSIND BANK LTD - Q3 FY18

INDUSIND BANK LTD reported expected double digit growth with PAT growing at 25% YOY and 6% sequentially. PAT came at Rs. 9363 Mn in the current quarter compared to Rs. 7506 Mn corresponding quarter previous year. Net Interest Income, difference between interest earned and expended also maintained its double digit growth momentum rising 20% YOY at Rs. 18950 Mn against Rs.15780 Mn in Q3 FY17. Net Interest Margin (NIM) came a tad lower than its usual 4% level due to mild pressure on corporate side and was reported at 3.99% in December quarter FY18. Other income which accounts 22% of total income for the bank climbed 17% YOY & constant sequentially in Q3 FY18. Core fee maintained its growth momentum of 22% yearly & 6% sequentially at Rs. 10770 Mn. Gross NPAs and Net NPAs stood at 1.16 % and 0.46% in Q3 FY18 compared to 0.94% & 0.39% respectively same period previous year. GNPA ratio witnessed an uptick of about 22 basis points YOY and 8 basis points sequentially.  NNPA ratio was slower, moving up by 7 & 2 basis points YOY & quarterly respectively. One basis point is equal to 0.01%. Provisions & contingencies continued with their sequential improvement with a 20% decline, whereas on yearly basis, there was a jump of 9%. Provisions & Contingencies were reported at Rs. 2362 Mn against Rs. 2169 Mn same period previous year. With respect to segment revenue, double digit growth was evident in Retail, other banking business & treasury whereas Corporate slowed down to 2% YOY. Retail outpaced Corporate growing at 23% where as Other banking business was highest at 67% growth rate YOY. Treasury income grew at 11% YOY and declined 16% QOQ due to hardening of yields in the December quarter. CASA ratio stood at 42.90% rising 580 basis points YOY supported by savings accounts which jumped 1.7 times YOY. The Bank aims to achieve CASA ratio of about 45% by 2020. In absolute terms CASA rose 42% YOY at Rs. 626160 Mn against Rs. 441620 Mn corresponding period previous year. Advances grew at a higher rate of 25% & deposits at 23% YOY. The corporate loan book grew faster than retail in the current quarter, though retail income tends to be higher due to differential of about 5% between retail and corporate yields. IndusInd Bank is also witnessing strong traction through its digital initiatives in savings accounts, personal loans, credit cards & mobile banking business.

 IndusInd Bank has announced its merger with Bharat Financial on 14th October 2017. The bank has received approval from Competition Commission and is awaiting RBI nod. With double digit profitability growth, stable CASA, provisions reined in, credit growth above industry average, strong core fee, lower slippages & credit costs and Bharat Financial Inclusion in its stable, IndusInd Bank has fortified its position in private sector banking. Thus, we recommend BUY for the stock for medium and long term investment with target price of Rs.1925.

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