We downgrade our rating on Indusind Bank from BUY to Market Performer with revised TP of 1693 on worries of higher credit cost than guided by the bank and likely change in the mgmt. For Q4FY19, the bank reported PAT of 3.6 bn which was down by 62% yoy led by higher provisioning on IL&FS; exposure while operating profit growth was strong at 34%. Importantly, the bank has exposure to the troubled cos including names like Essel Group and Reliance ADAG Group. Jet Airways is 1.9% or 35.4 bn while these are yet to be recognized as NPAs. In our view, there is outsized possibility of these assets turning into NPAs leading to higher credit cost. In our view, credit cost estimate could be at 1.2% for FY20 vs. mgmt. guidance of 0.6%....

loan book. Bank has strongly expanded network strength adding new 107 branches in Q4FY2019, raising the branch count to 1665 at end March 2019. The NPAs of the bank have increased with the jump in fresh slippages to Rs 3688 crore with the classification of exposure of Rs 3004 crore to IL&FS; group as NPA. The bank has also identified...

The loans and advances of the bank grew by 29% on a YoY basis, led by Indusind Bank, a part of the transnational consumer (27% YoY) and microfinance (227% YoY) growth. conglomerate Hinduja Group, was incorporated in In Q4FY19, the deposit base of the bank has increased by 29% YoY, 1994. It was set up particularly to mobilize funds with a CASA growth of 26% YoY, and the CASA mix forms around 43%. Net Interest Margin (NIM) declined 13bps YoY and 38bps sequentially, due to declining yield on advances and rising cost of funds. Ex. IL&FS;, healthy operating performance, with operating profit and...

Worries on asset quality post the IL&FS exposure are mostly in the price now. The (1) Lower than feared exposure to potentially stressed groups, (2) Contracted SMA II, and (3) Alleviation of concerns on fee income recognition are heartening. We thus retain our target multiple at 3.5x. The acquisition of a hi-growth, hi-yielding business (BHAFIN) holds profitable and synergistic promise. Leadership succession is also a medium term monitorable. As expected, IIBs P&L; was significantly hit by its exposure to the stressed IL&FS; group. However, core operating metrics remain largely intact. The exposure to other potentially stressed groups is a monitorable. Maintain BUY with a TP of Rs 1,964 (3.5x Mar-21 ABV of Rs 561).

Asset quality took a hit on back of fresh slippages worth | 3688 crore of which | 3000 crore was for exposure to IL&FS.; Absolute GNPA & NNPA increased ~101% & 118% QoQ to | 3947 & | 2248 crore, respectively. Accordingly, GNPA & NNPA ratio were at 2.1% & 1.21%, respectively. The bank has maintained higher provisions for IL&FS; at | 1650 crore (55% of exposure) (holdco (70%) & SPV (25%)). The bank's exposure towards other stressed company was (ADAG, Essel & DHFL) at ~1.9% of the loan book. On the back of classification of IL&FS; as NPA, the bank reversed | 153 crore...

IndusInd Bank (IBL) reported its 4QFY19 results with the key takeaways being: (1) IBL took provision cover on IL&FS; parent exposure to ~70%, disclosed exposure to key stressed corporates and guided for credit costs of <60 bps for FY20 (2) Interest reversal on IL&FS; exposure compressed NIM to 3.59%, down 24 bps QoQ but was flat excluding this impact (3) Growth was broad-based with vehicle finance, other core consumer finance and corporate loans ex MFI all growing within a range of 20-31%. (See detailed analyst meet takeaways from page 2) Per se, on the key P&L; items, IBL delivered NII growth of 11% at Rs 22,324mn, PPOP growth of 17% at Rs 20,677mn and PAT decline of 62% YoY to Rs3,601mn, respectively. We have revised...

With IL&FS; pain now largely behind, momentum in balance sheet continued with a loan/ deposit growth of 29% driven by across segments. NII growth remained muted at 11% due to a one-off interest reversal, whereas, non-interest income came in strong at a 29% YoY growth. As guided by the bank earlier, it intended to start FY20 afresh, hence it recognized its entire IL&FS; exposure as NPA and provided heftily for the same. Following the blow, GNPA/NNPA detoriated to 2.1/1.2% by 97/62bps sequentially. Although the quarter took a one time hit and turned out to be a drag on the bottom-line, there are not many uncertainties left to cast a hang on the book in the new financial year. Its exposure to Zee, DHFL and ADAG along with a few others stands at...

18%/22%, while PAT declined 8.5% YoY to INR33b. Total income increased 18% YoY, led by healthy other income growth of 29% YoY. Core fees rose 28% YoY, led by forex income and loan processing fees. Opex growth (+19% YoY) was slightly higher, leading to PPoP growth of 17% YoY. IIB guided for a C/I ratio improvement of 150bp to 42% over FY20. Loan growth stood at 29% YoY, led by robust traction across both corporate and consumer portfolios. The share of retail loans in total book stands at 39% (52% incl. MFI & business banking). Deposit growth, too, picked up...

Both CA & SA has seen strong growth of 26% much better than peers IIB's earnings were below estimates at Rs3.6bn mainly on bank providing incrementally Rs11.2bn on recognizing IL&FS; which had been indicated...

The GNPA/NNPA ratios are increased marginally to 1.13%/0.59% on YoY basis due to higher slippages from corporate and an additional contingent provisioning for IL&FS; exposure. We value the bank at 2.7x BV of FY21 and maintain our Hold rating with a...

Near term outlook: We expect the stock to remain range bound given the uncertainty surrounding the recognition of and provision for the IL&FS exposure. IIBs 3Q was characterized by robust business growth and healthy operating performance ( PPOP up 27/6% YoY/QoQ). NIMs were sequentially stable at ~3.8% (down ~16bps). Driven by treasury gains (2x QoQ), other income grew ~12%. CASA remained sequentially stable at ~44%, w/w SA dipped ~2% QoQ. Fees (% of loans) dipped by 10bps QoQ to 3%. While overall asset quality deteriorated sequentially, (GNPAs at 1.13%, ~Rs 19.7bn, +11% QoQ) the exposure to IL&FS; remained std (Rs 30bn). Even as IIB additionally provided ~Rs 2.55bn (total provisions ~Rs 6bn incl. floating provisions), it will have to incur further provisions of at least ~Rs 4bn toward the holdco exposure. Our constructive thesis on IIB remains unaltered as it continues to display strong growth and operating performance, which we expect will continue. While asset quality will be adversely impacted by its exposure to IL&FS;, in the near term; we expect IIB to be back on track to achieve RoAAs of 1.62% by FY21E post its acquisition of BAFIN. Maintain BUY with a TP of Rs 1,935 (3.5x Dec-20 ABV of Rs 553).

IndusInd Bank (IBL) reported its 3QFY19 results with the key takeaways being: (1) IBL took provision cover to IL&FS; parent exposure to ~30% and expects a cumulative provision requirement of 40-50% on this exposure to IL&FS; parent (2) NIM was largely flat, contracting 1 bp QoQ with management guiding for stable to improving margin (3) Corporate loan growth (ex MFI) at 34% YoY continued to outpace consumer finance growth at 28% YoY. (See detailed conference call takeaways from page 2) Per se, on the key P&L; items, IBL delivered NII, PPOP and PAT growth of 21%, 27% and 5% YoY to Rs22,881mn, Rs21,170mn and Rs9,850mn, respectively. We have retained Buy rating on IBL and revised our target price to Rs2,107 (from Rs2,139 earlier)....

The asset quality of the bank has remained nearly stable and healthy, while net interest margins (NIM) was also healthy at 3.83% in Q3FY2019. The non-interest income growth of the bank was strong driven by healthy growth for both core fee income as well as treasury income. Bank has recorded strong 35% growth in the loan book. Bank has strongly expanded network...

Momentum in balance sheet growth has further picked up with loan growth of 35% driven by across segments. While NII growth of 21% is in line with our expectations, PAT growth of 5% is tad above our expectations. While ILFS exposure of Rs30bn is still standard, bank has made standard asset provision of Rs2.5bn during the quarter in addition to Rs2.8bn made during last quarter. We have cut our earnings by 5% for FY19, factoring in additional provision for ILFS in Q4. We retain our BUY rating with a TP of Rs1,935 (Rs1,980 earlier)...

IndusInd Bank's (IIB) Q3FY19 PAT grew 5.2% YoY to Rs 9.9bn driven by 21%/24% growth in NII/non-interest income. Higher corporate slippages caused GNPAs to inch up to 1.13%. IIB made additional contingent provisions towards its Rs 20bn exposure to the IL&FS; holdco which increased its coverage to 30%; management plans to raise this to 40-50% ahead. Overall PCR dropped to ~48% as fully provided NPAs worth Rs 3.5bn were written...

Asset classification of IL&FS; has been kept Standard'. However, the bank continued to make additional contingency provisions of ~| 255 crore in Q3FY19 (| 275 crore in Q2FY19). Accordingly, total provision in relation to exposure to IL&FS; is nearly | 600 crore Higher provision continued to impact earnings with PAT growth of 5% YoY to | 985 crore. Excluding contingent provision, PAT grew higher at ~23% YoY. Q4FY19 provisions to stay higher due to IL&FS; Business growth remained strong. Healthy growth in auto portfolio...

ff It made additional contingency provisioning to the tune of Rs2.6bn towards exposure to IL&FS; Holdco (exposure at Rs20bn), taking the total provisioning on this account to 30%. Further, haircuts could be ~40-50% on this exposure and the Bank will make additional...

IIB's earnings of Rs9.85bn (PLe: Rs9.96bn) was largely in-line with estimates but PPOP of Rs21.2bn (PLe: Rs20.8bn) beat estimates on strong treasury gains. It continued to make contingent provisions of Rs2.5bn (Rs2.75bn in Q2FY19) on IL&FS; exposure, taking total provisions to >Rs6.0bn (30% PCR). Management guided that there could be some acceleration in provisions ahead to get PCR to desired level of 40-50% as clarity on haircut & asset cover on holdco is emerging, while there could be classification towards NPA ahead as account is in SMA1&2. Operationally bank continues to cruise smoothly...

9 January 2019 IndusInd Banks (IIB) PAT grew by a muted 5% YoY to INR9.8b in 3QFY19 due to contingent provision of INR2.55b (toward infra group). NII grew 21% YoY, while NIM was largely flat at 3.83% on account of a rise in cost of funds. Total income increased 22% YoY on the back of healthy other income growth of 24% YoY. Core fees grew 18% YoY, led by higher forex income and loan processing fees. Opex growth (+16% YoY) trailed total income growth, resulting in robust 27% YoY growth in PPoP. Loan growth came in at 35% YoY, led by robust growth in the corporate segment. Consumer portfolio grew 28% YoY (+7% QoQ), led by strong traction in CV loans, equipment financing and credit card segments. The share of retail loans in total book stands at 39% (45% including business banking). MFI book stood at INR75.2b (4.34% of loans).