MOSL: INDUSIND BANK (Buy)-In-line performance-divergence higher, but already dealt with

Indusind Bank: In-line performance; divergence higher, but already dealt with

(IIB IN, Mkt Cap USD17.1b, CMP INR1834, TP INR2150, 17% Upside, Buy)

• IndusInd Bank’s (IIB) 4QFY18 PAT grew 27% YoY to INR9.53b (in-line). NII rose 20% YoY on stable margins and robust advances growth of 28% YoY.
• Total income grew 12% YoY due to relatively low other income, as treasury gains stood at a modest INR0.95b v/s INR2.15b in 4QFY17. However, controlled opex growth of 9% YoY (CI ratio declined 100bp QoQ to 45%) led to PPoP growth of 13% YoY (+6% QoQ).
• Advances growth was led by robust growth in large and small corporates, driving 30% YoY growth (+16% QoQ) in the corporate advances portfolio. Consumer portfolio grew 26% YoY (+8% QoQ), led by strong traction in the CV loans, equipment financing and credit card segments. Retail book stood at 39.5% of total advances (46% after including the business banking segment).
• GNPA/NNPA increased 14% (+26% QoQ), as IIB reported gross divergence of INR13.5b, which includes a large cement M&A bridge loan of INR5.18b that has already been fully repaid. The net effect of this divergence amount has been addition of INR1.86b to GNPLs, of which IIB expects INR1.04b to get converted to standard assets. O/s restructured assets fell 60% QoQ to 5bp of loans, while o/s SR portfolio stood at 0.37% of total loans. IIB's exposure to 40 NCLT cases is INR3.85b, and the bank has already provided 65% on this.
• Other highlights: (1) Robust CASA accretion continued with 70% YoY S/A growth, driving a 110bp QoQ improvement in the CASA ratio to 44%. (2) Tier-1 ratio declined 75bp QoQ to 14.6% (CET1: 13.4%). (3) The bank hopes to conclude the merger with BHAFIN by early 2QFY19.