Q1FY12 Result of IndusInd Bank

 Few Highlights

Ø  Indusind Bank (IIB) net profit grew by 52% YoY to INR 1802 Mn mainly driven by robust core fee income growth of 44% YoY. The proportion of core fee income increased due to increase in its third party products, trade and remittances, foreign exchange and Investment banking income. IIB’s net interest income has grown by 32% to INR 3900 Mn as compared to INR 2957 Mn in Q1FY11 & other income increased by 34% YoY to INR 2154 Mn.

Ø  Advances grew 31.3% YoY to INR 283.8 Bn & deposits grew by 28.7% to INR 352.6 Bn. This was stronger than the industry’s growth rate of ~20% & ~17% respectively. Improvement in deposit mix along with branch expansion (326 from 224 branches) led to higher CASA ratio of 28.2% in Q1FY12 (24.3% in Q1FY11). Reported NIM improved 9 bps YoY to 3.41%, however, on sequential basis it declined 9 bps due to sharp rise in the cost of deposits (68 bps QoQ) while yield on advances increased by 68 bps.

Ø  IIB continued to improve its asset quality and has brought down the net NPA level to 0.3% in Q1FY12 from 0.38% in Q1FY11. Gross NPA ratio fell to 1.08% in Q1FY12 from 1.26% in Q1FY11, but it increased sequentially by 7 bps and 2 bps. The NPA coverage ratio rose 288 bps YoY to 72.9%. Also the IIB maintained a healthy capital adequacy ratio (CAR) of 14.99% in Q1FY12 as against 13.71% in Q1FY11. The strong traction in CAR is likely to sustain IIB’s growth momentum in coming quarters.

Outlook & Valuation

Going forward IIB in next 3 years is planning to keep NIMs above 3.5% along with healthy bottom-line, this would be possible through 1. scaling up CASA ratio to 35% with 200 bps to 300 bps improvement every year. 2. Bank plans to take the branch network to 550 by Mar ’13. 3.  Bank is expected to expand its product suite and services to achieve higher business growth. At the CMP, stock trades at 3x FY12E BV, we have Accumulate rating on the stock with target price of INR 320.

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