Apr 23, 2012, 11.34 AM | Source: Moneycontrol.com

Buy IndusInd Bank; target of Rs 419: Motilal Oswal

Motilal Oswal is bullish on IndusInd Bank (IIB) and has recommended buy rating on the stock with a target of Rs 419 in its April 20, 2012 research report.

Motilal Oswal is bullish on IndusInd Bank (IIB) and has recommended buy rating on the stock with a target of Rs 419 in its April 20, 2012 research report.

“IndusInd Bank's (IIB) 4QFY12 PAT grew 30% YoY to INR2.23b (in-line with our estimate). While non-interest income was 3% below our estimate, lower-than-expected meant that PAT was in-line.”

“Strong traction in savings account growth: SA customer acquisition increased 14% QoQ and 82% YoY to 0.15m in the quarter. Post deregulation of savings deposits rates, proportion of SA to overall deposits has increased to 11.1% vs 8.6% as on 1HFY12. Growth in SA deposits was robust at+18% QoQ and 53% YoY. Fee income - a key RoA driver: Fee income growth (+60% YoY ) remains strong across all categories. Share of fee income to average assets in 4QFY12 has increased to 1.9% vs 1.5% a year ago - a key ROA driver. Margin performance impressive: Margins remained largely stable (+4bp QoQ) at 3.29% as 11bp increase in cost of funds was offset by 12bp QoQ increase in yield on loans. In a stressed liquidity situation and with a higher proportion of wholesale deposits (50%) in the balance sheet, a largely stable margin QoQ is impressive. Other highlights: (a) High yielding CFD grew ~10% QoQ and 48% YoY and contributed 60%+ of the incremental yearly loan growth. Share of CFD improved further to 49.2% v/s 48.4% in 3QFY12 and 44.4% as of FY11 (b) In absolute terms, GNPA increased 4% QoQ to INR3.5b; Annualized slippage ratio stood at 1.28%”

“IIB's superior margins, focused fee income strategy and control over cost-to-income ratio will keep core operating profitability strong. While asset quality remains strong, we model higher credit cost of 70-80bp over FY13-14 v/s average of 45bp in FY12, to factor in possible rise in delinquencies. However, levers for margin improvement and strong fee income growth will keep RoAs strong at 1.6%+ over FY12/14. Maintain Buy,” says Motilal Oswal research report. 

Institutional holding more than 40% in Indian cos

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