Last Updated : Jan 08, 2019 12:09 PM IST | Source:

IndusInd Bank Q3: Brokerages say profit may take a hit on IL&FS exposure

Motilal Oswal, which has buy call on the stock with a price target at Rs 2,000, expects strong loan growth of around 35 percent YoY in Q3FY19, significantly ahead of system loan growth.

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Private sector lender IndusInd Bank is expected to report muted growth in Q3 profit as provisions may remain elevated due to exposure to IL&FS that defaulted on interest payments to bondholders. However, the growth in net interest income, loan, other income and operating profit could be strong.

The bank will announce its third-quarter earnings on January 9. Brokerage houses expect single digit to negative growth in profitability for the quarter.

"IIB's earnings could be under pressure as it does higher provisions on IL&FS similar to last quarter but we are likely to not see any recognition of IL&FS in NPA. Hence we expect asset quality to be maintained," said Prabhudas Lilladher which expects 6.5 percent on year growth in Q3 profit.

The research house adjusted its earnings for the bank to factor in higher provisions on the infra account – IL&FS where it has exposure to the holding company and SPVs keep credit cost higher and earnings under pressure. Hence, it has reduced target price for the stock to Rs 1,750 from Rs 2,000 earlier while maintaining buy call.

Motilal Oswal expects 1 percent growth in profit but Elara Capital sees a massive 37 percent fall in profit.

Operational earnings of the lender are expected to remain strong as brokers expect 20 percent plus growth in loan, net interest income, net income and operating profit.

"Operationally the bank will continue to deliver strong performance on loan growth (up 31 percent YoY), margins and pre-provisioning operating profit (PPOP) with a continued 25 percent YoY growth," Prabhudas Lilladher said, adding net interest income growth may be at 21.4 percent YoY.

Motilal Oswal, which has a buy call on the stock with a price target at Rs 2,000, expects strong loan growth of around 35 percent YoY in Q3FY19, significantly ahead of system loan growth.

"Deposit growth should be strong at around 21 percent YoY. We expect non-interest income to grow around 26 percent YoY, supported by healthy fee income growth. Stronger third-party distribution fees and treasury gains will further support non-interest income," the research house said.

Reliance Securities expects net interest income growth of 41 percent and PPOP 44 percent YoY in Q3. "Slippages and credit costs could increase marginally."

Key things to watch out for in December quarter would be the impact on the commercial vehicle portfolio particularly after the slowdown in commercial vehicle sales and corporate asset quality.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
First Published on Jan 8, 2019 12:09 pm
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