Emkay Global Financial's report on IndusInd Bank
IIB reported a profit of Rs5.1bn (est. of Rs3.3bn), mainly led by strong NIMs and low opex. The bank made additional Covid-19-related contingent provisions of Rs9bn. Cumulative provisions now stand at Rs12bn (0.6% of loans), lower than larger peers (over 1%). The moratorium rate fell from 60% in Phase 1 to 16% (14% ex-MFI) in Phase 2 (retail at 19% vs. 75%, corporate at 9% vs. 22%). 10% of retail customers in Phase 1 have still not started paying and thus, remain under high risk. IIB optimistically guides for a 92bps jump in the GNPA ratio (from 80bps) and LLP to 190bps (65bps over BAU LLP in FY20) in FY21. The bank has approved a Rs33bn preferential issue from promoters and other investors at Rs524 per share, which should add 126bps to its Tier I ratio of 14.5%. We cut our estimates for FY21/FY22 by 12/8% and now expect RoA at 1.3%/1.5% in FY21/FY22E.
The bank’s recent move to shore up its capital buffer is comforting, but we believe that the bank needs to further accelerate its contingent provisioning buffer as well in line with large peers and continue to focus on building a granular retail deposit base. We retain Hold with a TP of Rs550 (based on 0.8x Sep 22E ABV).
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