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IndusInd Bank reported a steady, in-line quarter with profits at INR 20.4bn (46% YoY, est. INR 20.8bn). NIMs came in at 4.28% with deposit growth at 14.6% YoY and retail deposits (as per LCR) now at 43% of deposits. IIB’s cost of funds increased +20bps QoQ. Slippages were a tad higher sequentially led by microfinance delinquencies and one-off corporate slippage. Mgmt has put out its next 3-yr targets with respect to growth, profitability and asset quality and is targeting 18-23% loan growth with 1.9-2.2% RoA. IndusInd has corrected sharply given that term extension for MD & CEO has been lesser than mkt expectations, we believe core performance for IndusInd continues to trend in the right direction. Currently, stock is trading at attractive valuations of 1.5x FY25e BVPS (for expected RoEs of 16.7% FY25e) and hence makes for an attractive entry point. Maintain BUY with revised TP of 1375.

* Strong loan growth and supported by steady operating performance: Loan book witnessed an exceptional growth of +6.3% QoQ/ +21.3% YoY with corporate book growing by +4.5% QoQ/ +22.6% YoY and retail by +3% QoQ/+20.2% YoY. We expect loan growth momentum to sustain driven by broad based growth across segments and build in loan growth of 19% (CAGR) over FY22-25E in line with management commentary. Deposits witnessed a healthy traction growing at +14.6% YoY/ +3.3% QoQ. CASA stood at 40.1% (-180bps QoQ) while retail deposits grew +4% QoQ/ +19% YoY and now stand at 43% vs 42% QoQ of overall deposits. Margins were steady at 4.28% (+1bps QoQ) marginally above the management guidance of 4.15-4.25% supported by repricing of assets in tandem with liabilities. Mgmt. highlighted that 49% of the loan portfolio is floating rate and remaining being fixed rate which will aid in long term stability of NIMS. Core PPOP growth was strong at +3.9% QoQ, +18.3% YoY aided by robust NII growth of +3.9% QoQ,+17.2% YoY and strong core fee income growth (+3.9% QoQ, +17.2% YoY).

* Asset quality in fine fettle: GNPLs/NNPLs/restructuring were reported lower at 1.98%/0.59%/0.84%; -8bps/-2bps/-41bps QoQ. In 3Q23, slippages increased to INR 16bn (2.7% annualised vs 2.6% in 3Q23); on account of a single large account of INR 1.75bn in corporate banking which turned NPA and microfinance segment; while vehicle finance exhibited enhanced asset quality. IIB has kept surplus contingent provisions in addition to PCR and its PCR stands stable at 71% which should keep credit costs under control (JMFe credit costs of 140bps for FY24-25E).

* Sixth phase of planning cycle: IIB previously laid out its PC (Planning Cycle 1,2,3,4 & 5) strategy and has successfully delivered on the metrics. Similarly mgmt. has outlaid its PC6 strategy for FY23-26 with focus on a) continued retailisation by working towards increasing share of retail deposits, ramping-up customer acquisition and expanding branch network b) diversifying domain which aims to maintain or improve market leadership with special focus on these products (vehicle finance, two-wheeler, affordable housing, gems & jewellery) c) scaling sub-scale businesses like mortgages, MSME, etc. d)

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