Emkay's research report on IndusInd Bank (IIB)
IndusInd Banks’ (IIB) earning of Rs5.3bn (25% yoy) was 4% above estimate. While NII (+22% yoy) was in-line with estimate, strong fees (23% yoy; 5% above estimate) and better trading gains helped earnings. Core PPP growth was healthy at 21% yoy
Asset quality was stable qoq with slippages trending lower to Rs1.3bn (annualized slippage ratio of 0.9% v/s 3.3% in 4QFY15 and 1.2% in 9MFY15). Restructured loan increased qoq however overall net stress loans were contained at 94bp
Loan growth was healthy at 23% yoy driven by healthy corporate loan growth (+5% qoq and 27% yoy). Importantly, growth in CV financing picked up (7% qoq and 18% yoy) and traction continued in non-vehicle retail portfolio (11% qoq and 63% yoy)
Upgrade to Accumulate: We believe IIB is likely to emerge stronger in this cycle with (1) strong capitalization, (2) better reach (811 branches v/s 300 in FY11) and (3) improved growth outlook in retail business. Strong fees (not-linked to balance-sheet growth) and robust asset quality is likely to keep earnings momentum strong at 29% CAGR. We upgrade our earnings estimate by 5% each for FY16/17E to factor benefits of capital infusion. Hence, also revise our target price to Rs 1,050 (3.2x FY17 BV). Accumulate the stock with a target price of Rs 1050", says Emkay Global Financial Services research report.
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