Buy Indusind Bank; target of Rs 1150:Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Indusind BankIIB’s 3QFY16 PAT grew 30% YoY (in-line) to INR5.8b led by strong core PPoP growth (+38% YoY, +6% QoQ) and largely stable credit costs (70bp v/s 64bp in 2Q) despite regulatory clean-up action (marginal impact and now fully compliant) undertaken during the quarter. While loans grew 29% YoY (+5% QoQ), fee income growth remained strong at 39% YoY (+8% QoQ) led by significant jump in loan processing fees (+28% QoQ, 43% YoY) – 77% of incremental fee growth. Fees to assets remains elevated at 2.3% (private sector average of 1.6%) - a key driver of superior ROA vs Peers Consumer finance division (CFD) grew by 7% QoQ (27% YoY) and accounted for ~60% of incremental loan growth. Strong growth in CV (~37% of incremental CFD growth), LAP (44% YoY) and unsecured loans (1.1x YoY) led to the share of CFD division increasing to 44% of adjusted for G&J Acquisition loan book (43% in 2QFY16). Including small corporate loans (6.6% of loans), CFD division share in overall loans stood at ~48% (in-line with guidance given earlier). In planning cycle 3, IIB’s key focus is to build scale with 3Ds strategy—Dominate (among the top three banks in home markets), Differentiate (extensive use of technology and cross sell) and Diversify (new product addition, payment solution, etc.). Strong core profitability (3% of avg. assets v/s private banks’ average of 2.5% and HDFCB’s 2.7%), improving CASA ratio (best among mid-sized private banks) and healthy return ratios (RoA of 1.9%+ and RoE of 16-17%) are key positives. Slowdown in CV recovery, sharp moderation in FX and IB fees remain the key risks to our estimates. Maintain Buy. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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