Buy IndusInd Bank; target of Rs 1809: HDFC Securities

HDFC Securities' research report on IndusInd Bank

IIB has been a  master in execution across planning cycles, despite weak macros.  We derive confidence from the mgt’s ability to beat ambitious targets  consistently  across  parameters. The bank is making all the right moves  on  either  side of the B/S, to deliver best-in -class return ratios (1.8% over FY18-20E) for the foreseeable future.The  2Q  numbers  further  vindicate  our  positive  stance,  given healthy all-round  credit  growth (+24%), robust fee growth (+23%), stable NIMs and controlled  asset  quality  (stable  G/NNPA QoQ). An exposure of merely ~Rs 3.9bn to a/cs in RBI’s second list, and conservative provisioning (65%) for the same provide additional comfort.

Outlook

With  falling  interest  rates  and  subsequent  pressure on yields, IIB is amongst   the   better-placed   banks,  with  a  greater  proportion  of  a high-yielding  fixed rate book and additional headroom for reduction in CoF (tweak  SA  rates). Maintain BUY with a TP of Rs 1809 (3.75x Sept-19 ABV of Rs 482).

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