IndusInd Bank Ltd. share price target

Apprehensions on asset quality (after the slew of defaults and downgrades over FY19) are mostly in the price. IIB has significantly lagged larger PVT peers during FY19. The (1) Reduction in the exposure to potentially stressed cos, and (2) Further contraction in SMA I & II provides mild reinforcement to our positive stance, which is founded on the strength of IIB's core metrics and execution capabilities. We are upbeat on the multi-pronged opportunities that the BHAFIN merger opens up. Management's comfort with low coverage is disappointing. Also, succession is a key monitorable. After a blip in 4Q, IIB is back on track with stable asset quality and a dip in exposure to stressed cos. In-line operating metrics and the sharp dip in provisions (72% QoQ) drove up net earnings (2.1x). Maintain BUY with a TP of Rs 2,011 (3.5x Jun-21 ABV of Rs 575).

13 July 2019 improved to 4.05% from ~3.6% in 4QFY19. Total income improved to INR45.1b (in-line), led by healthy other income growth in loan fees and addition of PSLC income due to the BHAFIN merger. Opex stood at INR19.2b (3% miss), driving a 290bp QoQ improvement in the C/I ratio to 42.5%. On a standalone basis, opex was up 18% YoY to INR17.8b, while the C/I ratio stood at 44.3% (120bp QoQ improvement). across both the corporate and consumer portfolios. The share of retail loans in total book increased to 54%, as IIB classified its MFI and Business Banking portfolio under the Consumer Finance segment.

due to lower provisions than expectations and better NII growth. Core IIB was metrics like CI & asset quality improved with stressed assets at 1.7% of loans & SMA-2 at 17bps of loans. Some merger synergies are yet to play out on...

Growth Moderation & Asset Quality Risks to Limit Upside in Valuations IndusInd Bank (IIB) has reported a better-than-expected PAT growth in 1QFY20 driven by higher treasury gains and lower-than-expected provisioning. Ex-BHAFIN loan book grew by 26% YoY, with the lowest sequential credit growth of 1.9% in the last 6 years. Consequently, while overall margins improved to 4.1% owing to the BHAFIN merger, IIB's margins at 3.7% (ex-BHAFIN) were lower than average margins of 3.9% over the last three fiscals. Asset quality was well contained, with GNPA at 2.15%, marginally higher on QoQ comparison. Deposits growth at 26% YoY was primarily driven by retail deposits, with a sequentially stable CASA. Core fee income growth...

A new avatar but near term upside limited; Maintain accumulate IIB (merged with Bharat Financial) reported a profit of ` 14bn (growing 38% YoY adjusted growth of 17% YoY). The key positive was the higher NIM of the MFI book. Advance growth remained at 28% YoY, with a material contribution from retail. The advance share between wholesale and retail is now equal. The merger ensures that its regulatory allocation to PSL and sub segments and branch distribution are met. We, therefore, believe this is likely to increase the flexibility for the bank to capture more profitable growth opportunities although, we do...

IndusInd Bank Ltd is a private-sector bank that was established in 1994. As at March, 2019, it had 1665 Branches/banking Outlets, 2545 ATMs, representative offices in Abu Dhabi, London and Dubai, an asset base of `2.75 trn, a loan book of `1.86 trn. Low-cost deposits represented 43.1% of total deposits at the end of March, 2019. IndusInd main business is Vehicle Financing which constitutes 29% of total loans....

Merger to boost NIMs, operational impact to be gradual: With the mergerof BHAFIN with IIB, NIMs will improve 30-40bps on immediate basis, taking overall NIMs to ~4.0%. This will be led by accrual on overall yields by 70-80bps. While cost of funds will be up by ~50bps, IIB can re-finance borrowings in order to cut it down, leading NIMs beyond 4.0%- into the league of top private banks. Operationally benefits of the merger will accrue over time especially on opex...

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...