Buy IndusInd Bank for Target Rs. 1,700 - Motilal Oswal Financial Services
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Earnings in line; growth outlook remains healthy
Guides for further moderation in slippage run rate over 2HFY24
* IndusInd Bank (IIB) reported an in-line 2QFY24 performance. PAT was up 22% YoY at INR22b, aided by healthy NII growth (up 18% YoY) and lower provisions (down 15% YoY).
* Loan growth was healthy at 21% YoY to INR3.2t, with healthy traction in both Corporate and Consumer Finance books.
* Fresh slippages rose ~7% QoQ to INR14.7b, driven by a sharp rise in slippages in the corporate book to INR2.1b from INR0.4b in 1QFY24. GNPA/NNPA ratios remained stable at 1.93%/0.57%. The restructured book declined 12bp QoQ to 0.54%.
* We estimate IIB to deliver a ~23% earnings CAGR over FY24-26 and RoA/RoE of 2.0%/16.8% by FY25. We reiterate our BUY rating with a TP of INR1,700.
PPoP in line; NIMs stable at 4.29%
* NII rose 18% YoY to INR50.8b (in line), while ‘other income’ grew 13% YoY, with treasury income of INR1.6b (vs. 0.9b in 1QFY24). Total revenue grew 17% YoY to INR73.6b. NIM remained stable at 4.29%.
* Operating expenses rose 25% YoY to INR34.5b. The C/I ratio increased 102bp QoQ to 46.9% and the bank expects it to moderate in 2H. PPoP grew 10% YoY in 2QFY24 to INR39.1b (in line).
* On the business front, loans grew 5% QoQ (up 21% YoY), led mainly by the Consumer Finance segment (up 6.4% QoQ). In the Consumer business, growth picked up in the Vehicle segment, with disbursements of more than INR128b in 2QFY24. Utility vehicle/microfinance segments clocked healthy growth of 9.3%/7.4% QoQ. Credit card business grew 5.4% QoQ. The bank’s Retail-to-Wholesale mix was stable at 55:45. Deposits grew 14% YoY (up 4% QoQ), with the CASA mix moderating 50bp QoQ to 39.4% and the Retail deposit mix as per LCR increasing to 44%.
* Fresh slippages increased by ~7% QoQ to INR14.7b in 2QFY24 from INR13.8b in 1QFY24. GNPA/NNPA ratios remained stable at 1.93%/0.57%, with healthy recoveries and upgrades during the quarter. PCR improved 70bp QoQ to 71.3%. The bank holds contingent provisions of INR15.2b and INR14b towards standard asset provisions. The restructured book declined to 54bp in 2QFY24 from 66bp in 1QFY24.
For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
