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Earnings in line; growth outlook remains healthy

* IndusInd Bank (IIB) reported an in-line 3QFY24 performance with PAT growing 17% YoY at INR23b (in line), aided by healthy revenue growth and lower provisions (aided by drawdown of INR2.2b of contingent provisions).

* Loan growth was healthy at 20% YoY to INR3.3t, with healthy traction in both Corporate and Consumer Finance books. Deposits grew 13.4% YoY to INR3.7t, led by term deposits. CASA ratio moderated 92bp QoQ to 38.5%.

* Fresh slippages rose ~20.5% QoQ to INR17.7b, primarily driven by a rise in slippages in the corporate book to INR3.12b (INR1.4b pertaining to one large account) and elevated slippages from the Vehicle Finance book of INR6b. GNPA/NNPA ratios remained stable at 1.92%/0.57%, aided by ARC sale of INR3.1b. Restructured book declined 6bp QoQ to 0.48%.

* We estimate IIB to deliver a ~21% earnings CAGR over FY24-26, leading to RoA/RoE of 2.0%/16.2% by FY25. We reiterate our BUY rating on the stock with a TP of INR1,900.

PPoP in line; NIMs remain stable at ~4.3%

* IIB reported 3QFY24 PAT of INR23b (up 17% YoY; in line), aided by healthy NII growth (up 18% YoY), healthy other income (up 15.4% YoY), and lower provisions (down 9% YoY). ? NII rose 18% YoY to INR52.9b (in line), while ‘other income’ grew 15.4% YoY, with treasury income of INR2.3b (vs. INR1.6b in 2QFY24). Total revenue grew 17% YoY to INR76.9b. NIM remained stable at 4.29%.

* Operating expenses rose 26.5% YoY to INR36.5b. The C/I ratio increased 56bp QoQ to 47.4% and the bank expects it to stabilize to ~41-43% in the next two years. PPoP grew 10% YoY in 3QFY24 to INR40.4b (in line).

* On the business front, loans grew 3.7% QoQ (up 20% YoY), led mainly by the Consumer Finance segment (up 4.7% QoQ). In the Consumer business, growth picked up in the Vehicle segment, with disbursements of more than INR137b in 3QFY24. Utility vehicle/credit card segments clocked healthy growth of 11.4%/8.2% QoQ. The Microfinance business grew 4.1% QoQ. The bank’s Retail-to-Wholesale mix was stable at 55:45. Deposits grew 13.4% YoY (up 2.6% QoQ), with the CASA mix moderating 92bp QoQ to 38.5% and the Retail deposit mix as per LCR increasing slightly to 45%.

* Fresh slippages increased ~20% QoQ to INR17.7b in 3QFY24 from INR14.7b in 2QFY24. GNPA/NNPA ratios remained stable at 1.92%/0.57%, while PCR stood at 71%. The bank utilized INR2.2b of contingent provisions and now holds INR13b of contingency buffer. Restructured book declined 6bp QoQ to 0.48%.

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