IGI Logo

Recoveries on track to achieve pre-covid levels

IndusInd Bank (IIB), a part of the Hinduja Group, provides loans for vehicles, property, etc. in its consumer finance division, while the corporate banking division offers a wide range of products to SMEs and large enterprises.

• Standalone NII this quarter reached Rs. 3,658cr (+11.6% YoY) with NIM at 4.07% (vs. 4.06% in Q1FY22). PBT jumped 69.9% YoY to Rs. 1,471cr as provisions dipped 13.3% YoY.

• GNPA/NNPA improved to 2.7%/0.80% (vs. 2.88%/0.84% in Q1FY22) respectively. Restructured advances reached 3.6% this quarter as compared to 2.7% in Q1FY22.

• Decline in cost of deposits, coupled with the expected increase on yields from advances in the long run will result in improving interest spreads. The bank is well positioned to protect its balance sheet. We remain positive on the stock and retain our BUY rating with a revised target price of Rs. 1,352 using 1.9x FY23E BVPS.

PAT momentum continues with conservative provisioning

Interest income saw a moderate growth of 6.6% YoY to Rs. 7,650cr driven by 8.24%/14.32% yields on advances for corporate/retail banking respectively. Interest expense inched up slightly this quarter to Rs. 3,992cr (+2.4% YoY) leading to net interest income of Rs. 3,658cr (+11.6% YoY) with NIM at 4.07% (-9bps YoY, +1bps QoQ). Non-interest income recorded a healthy growth this quarter to Rs. 1,837cr (+18.2% YoY) pushed up by incomes from General Banking (+90.2%), Loan Processing fees (+100.0% YoY) and Investment Banking (+195.7% YoY). Pre-provisioning profit for the quarter was at Rs. 3,174cr (+12.2% YoY) as PBT jumped 69.9% YoY to Rs. 1,471cr on account of lower provisioning in the quarter of Rs. 1,703cr (-13.3% YoY).

Loan loss provisions well provided for as asset quality improves

Granular retail deposits drove the overall deposits growth to Rs. 275,288cr (+20.6% YoY) with cost of deposits declining 73bps YoY to 4.85%. CASA ratio remained intact at 42.0% in line with last quarter. Loan book remains well diversified across consumer and corporate products as total advances grew 9.7% YoY to Rs. 220,808cr in Q2FY22. GNPA/NNPA improved to 2.77% / 0.80% respectively (vs. 2.88% / 0.84% in Q1FY22). Total loan loss provisions were at 138.0% of GNPA (3.9% of total loans vs. 3.6% in the last quarter). Liquidity Coverage Ratio (LCR) remains healthy at 148%.

Key concall highlights

• Customers opted for restructuring being cautious during 2nd wave of COVID-19. The vehicle finance restructured book increased to Rs. 3,696cr (vs. Rs. 3,089cr in Q1FY22). In Microfinance, 55% of the restructured customers have completed at least 3 loan cycles and 81% have completed at least 2 loan cycles.

• Collection efficiency excluding Kerala and West Bengal is close to pre-Covid levels, as collection efficiency for the quarter was at 94.7%.

Outlook & Valuation

Increase in deposits with low cost of deposits is expected to enhance the yield on advances in the coming quarters. The bank is well positioned to cover any loan losses and keep the balance sheet intact. With collections returning to pre-covid levels, we remain positive on the stock. Hence we retain our rating to BUY with a revised target price of Rs. 1,352 using 1.9x FY23E BVPS.

To Read Complete Report & Disclaimer Click Here

For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer 

SEBI Registration Number: INH200000345

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