IndusInd Bank Ltd. share price target

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).

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...

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...

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).

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...