Saturday, July 14, 2012

>INDUSIND BANK: PAT beat on higher other income (Erratum)

Key highlights
IndusInd Bank reported a PAT of INR2.36bn, marginally higher than our estimate of INR2.29bn (Street est. of INR2.31bn) on the back of higher than- expected other income. Key highlights from the quarter include:

 Loan book growth remained strong (up 31% y/y), primarily driven by 48% increase in consumer finance loans, while the corporate book increased at 20% y/y. While NII was below our estimates, strong fee
income of 42% y/y and trading gains of INR0.5bn (vs our estimate of INR 0.27bn) supported the earnings beat.

 Margins declined 7bps sequentially to 3.22% due to 35bps q/q increase in cost of funds vs 28bps q/q increase in yield on assets.

 Deposits grew at 28% y/y with savings deposits continuing to be strong, growing 9.5% q/q leading to 56bps improvement in the CASA ratio at 27.9%.

 Asset quality was largely stable with sequentially flat GNPL and NNPL ratios at 0.97% and 0.27%, respectively. The bank did not add any restructured loan during the quarter (the restructured book stands at
0.24% of the loan book). However, higher slippage of INR1.09bn vs our forecast of INR0.83bn led to LLPs of 50bps vs our estimate of 37bps.

 Total CAR was at 13.4% (including full-year profits) with Tier-I CAR at 11.2% (including full-year profits).

Outlook and key takeaways from management call
 Slippage was higher than expected as one mid-sized gems & jewellery account slipped to NPL leading to higher LLPs. Management expects to recover 50-60% of the amount within 3-6 months.

 IIB expects to cross 500 branches by FY13 end and 650 by FY14 end (currently at 421 branches). New branches opened last year average around INR70-80mn SA per branch vs INR220-230mn for matured
branches. Management expects to end FY13 with INR170-180mn of SA per branch. We are budgeting in INR125mn SA per branch by FY13 end.

 Third-party fee income growth was tepid as the bank has stopped recognising commission on non life insurance as a part of their income for the last six months. Management guides for fee income growth to
be higher than balance sheet growth for FY13.

 Management guides towards LLPs of around 50bps for FY13. We are building in LLPs of 56bps for FY13F.

 The bank expects to grow its loan book in the range of 25-30% vs our current estimate of 25%.

To read report in detail: INDUSIND BANK