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Last Updated : Oct 09, 2019 11:25 AM IST | Source:

A healthy Q2 likely for IndusInd Bank; asset quality will be closely watched

Edelweiss Securities expects the bank to report a YoY jump of 65.2 percent in its core PAT, which may come at Rs 1,520.5 crore for the September quarter.

Nishant Kumar @Nishantopines
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Private lender IndusInd Bank is expected to report a strong operating performance for the July-September quarter of the financial year 2020 on October 10.

But, other than the numbers, investors will also focus on the magnitude of deterioration in asset quality and a revision of the watchlist due to the emergence of new stressed names, brokerages have said.

The bank's merger with Bharat Financial Inclusion may have aided its loan growth, while deposit growth is also expected to come on a stronger side.


"We expect loan growth of about 29 percent year-on-year (YoY), aided by Bharat Financial merger. Deposit growth will remain strong at nearly 25 percent YoY. Margins are also likely to expand to about 4.1 percent, driven by a high-yielding book of Bharat Financial," brokerage firm Motilal Oswal Financial Services said.

It expects the bank's credit cost to remain elevated following higher slippages and increased provision on the stressed groups.

Motilal estimates IndusInd Bank's net interest income (NII) to see a YoY jump of 43.8 percent to Rs 3,167.8 crore in the quarter against Rs 2,203.3 crore in the corresponding quarter in the previous year.

Net profit may see a 43.5 percent YoY jump. The bank's net profit may be around Rs 1,320.6 crore in the said quarter against Rs 920.3 crore in the same quarter of the last financial year, the brokerage said.

Gross NPA percentage may climb to 2.1 percent in Q2FY20 against 1.1 percent in Q2FY19. Net NPA percentage may inch up 1.1 percent in the September quarter against 0.5 percent in the same quarter previous year.

Brokerage house Prabhudas Lilladher expects IndusInd Bank to continue reporting strong operating performance partly led by merged Bharat Financial.

The brokerage estimates a 66.5 percent YoY growth in PAT to Rs 1,532.2 crore, while margins will come at 4.07 percent in the quarters against 3.84 percent in the corresponding period in the previous year.

Provisions are likely to dip 16.1 percent YoY and NII may jump 38.2 percent YoY to Rs 3,045.4 crore.

The gross NPA percentage may come at 2.12 percent in the September quarter against 1.09 percent in Q2FY19, a YoY jump of 103 percent, Prabhudas Lilladher said.

"We estimate the bank will use the majority of reduced tax rate towards provisions and hence, credit cost will look up and improve provision coverage ratio (PCR). We don’t see major slippages," the brokerage said.

Edelweiss Securities estimates the bank may report a YoY jump of 65.2 percent in its core PAT, which may come at Rs 1,520.5 crore for the September quarter, but the loan growth is expected to moderate at around 20-22 percent given some slowdown in vehicle financing.

The estimates of Kotak Securities show the bank may report a 31.4 percent YoY jump in net interest income. Adjusted PAT may see a YoY jump of 56.4 percent to Rs 1,439.6 crore.

"We expect the bank to make higher provisions, especially with the benefit of a lower tax rate. Asset quality on CV portfolio would be a key monitorable. We would look at their guidance on credit costs given the exposures they have to select companies that are currently under stress," Kotak Securities said.

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First Published on Oct 9, 2019 11:25 am
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