>INDUSIND BANK: Q3FY10 (IDFC SSKI)

HIGHLIGHTS
IndusInd reported a PAT of Rs880m – up 95% yoy – in Q3FY10 ahead of our estimate of Rs768m. The outperformance was led by a strong momentum in NII, in turn a function of expansion in margins and strong business volumes.

• Strong NII growth; margins continue to expand: NII was up by 104% yoy and 14% qoq to ~Rs2.4bn, driven by a steep 100bp yoy and 8bp qoq expansion in NIMs to 2.94%. Improvement in NIMs was driven by ~60bp qoq reduction in funding costs owing to stable wholesale borrowing rates and uptick in CASA. (exhibit 1 and 2)

• Healthy core-fee income; treasury profits remain muted: Core-fee income grew by 41%yoy to Rs1.1bn. However, total other income declined by 13% yoy primarily due to lower treasury profits and recoveries during the bank during the quarter. Treasury profits declined by 76% yoy (at Rs106m) while recoveries stood at Rs30m (against Rs178m in Q3FY09). The bank continues to see strong traction in income from third party distribution (insurance as well as MF products). Transaction banking and processing fee also continued to display strength on the back of management focus to gain meaningful contribution from these heads. (exhibit 3)

• Credit growth remains strong; CD-ratio remains stable: IndusInd’s loan book grew by ~33% yoy and 9% qoq to ~Rs191bn. Corporate banking continued to lead overall growth (at 66% yoy). Growth in retail book also exhibited revival at 3% qoq. At the same time, deposits grew by a healthy ~20% yoy to Rs247bn, leading to ~700bp yoy (stable qoq) improvement in the CD ratio to 77%.

• CASA continues to inch up: CASA ratio improved by 400bp yoy and 130bp qoq to 22.5%. Over the quarter, savings deposits displayed healthy traction. (exhibit 2)

• Gross NPAs decline qoq….: IndusInd’s asset quality remains high with gross NPAs declining by ~50bp yoy to 1.34%. More importantly, Gross NPAs declined even on an absolute basis to Rs2.5bn (against Rs2.6bn in Q2FY10). Net NPAs stood at 0.67% (against 1.3% in Q3FY09). The bank did not undertake any additional restructuring in the quarter, with total restructured ad vances being insignificant at 0.3% of the book. (exhibit 5)

To read the full report: INDUSIND BANK