IGI Logo

Result Highlights

* Asset quality: Gross slippages amounted to Rs 16.03bn (annualized slippage ratio of 2.2%) and recoveries and upgrades amounted to Rs 9.18bn
* Margin picture: NIM at 4.28% inched up 1 bps QoQ aided by a sequentially higher loan to deposit ratio
* Asset growth: Advances grew 6.3%/21.3% QoQ/YoY driven sequentially by Small corporates and select retail segments
* Opex control: Total opex rose 6.1%/19.9% QoQ/YoY, employee expenses rose 4.6%/27% QoQ/YoY and other expenses rose 6.6%/17.4% QoQ/YoY
* Fee income: Core fee income rose 7.5%/26.9% QoQ/YoY driven sequentially by Cards and Distribution Fees and Foreign Exchange Fees

Our view – Business model transformation a work-in-progress

Slippages were still somewhat elevated for IIB, partly contributed to by a relatively chunky corporate account: Slippages for the quarter contained a corporate account worth Rs 1.75bn that slipped from the restructured book. Management guided that slippages would range between Rs 9-12bn or about 1.7% of asset book. Restructured advances were at 0.84% of total advances. Provisions were Rs 10.3bn, down by -3.3% QoQ and -29.5% YoY, which translated to a credit cost of 142 bps for the quarter compared with 156 bps in 3Q. Management guided that the credit cost would be in the range of 110-130 bps.

Management has enhanced long-term NIM guidance to a range of 425-435 bps: NIM guidance used to be 415-425 bps. Management flagged that the share of fixed rate loans is 51% implying the NIM would be relatively stable even in a down-trending rate environment. Significantly, microfinance pricing has been increased by 150 bps.

Planning cycle 6 has a wide loan growth target range of 18-23% but management seemed to suggest that the lower end is relatively less likely: For the quarter, total retail loans have grown 7% QoQ, with share rising to 54%. Within this, vehicle finance has grown 22% YoY and 5% QoQ whereas microfinance has grown 5% YoY and 9% QoQ. On the wholesale front, total corporate loans have grown 23% YoY and 6% QoQ.
Corporate loans were driven by segments such as gems and jewellery, power, services and petroleum. Core fee income has grown 27% YoY and 8% QoQ, driven by cards, distribution and loan processing. Cost to income ratio was elevated at 44.93%. 222 branches were added during the quarter, taking the total branch count to 2606.

We maintain ‘Buy’ rating on IIB with a revised price target of Rs 1410: We value thebank at 1.8x FY24 P/BV for an FY24E/25E RoE profile of 14.3%/15.2%.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer