MOSL: INDUSIND BANK (Buy)-One-off provision mars strong operating performance

​Indusind Bank: One-off provision mars strong operating performance

(IIB IN, Mkt Cap USD13.1b, CMP INR1423, TP INR1700, 19% Upside, Buy)

• IndusInd Bank's (IIB) 4QFY17 PAT grew 21% YoY (in-line) to INR7.5b. Provisions were elevated at INR4.3b as they included one-off amount of INR1.22b on a bridge loan for a cement M&A transaction (account remains standard), where the receivable is in June (likely to get reversed in 1QFY18). Adjusted for this, PAT grew 34% YoY (9% beat). For FY17, PAT growth was healthy at 30% YoY.
  
• NII grew 31% YoY, led by strong loan growth (+28% YoY) and 6bp YoY improvement in NIM. Coupled with strong fee income performance (+29/13% YoY/QoQ) and controlled opex (+27% YoY), IIB reported impressive core PPoP growth of 34% YoY. For FY17, NIMs have improved 15bp YoY to 4%.
  
• Both corporate (+30% YoY) and consumer (+28% YoY) loans exhibited robust growth. IIB compensated for lower yet healthy growth in vehicle finance (+20% YoY) with strong growth of ~40% YoY in retail non-vehicle loans.
  
• Led by robust SA mobilization (+57/7% YoY/QoQ), CASA deposits grew 42% YoY (CASA ratio stable at 37%). The bank retained 35% of CASA accumulated during demon, and incremental growth was driven by new-to-bank customers.
  
• Slippages in CCB increased more than 4x to INR4.57b. As a result, CCB GNPAs increased 15% in absolute terms. Asset quality in CFD was largely stable.