MOSL: INDUSIND BANK (Buy)-Steady quarter-earnings visibility remains strong

​INDUSIND BANK: Steady quarter; earnings visibility remains strong

(IIB IN, Mkt Cap USD15.9b, CMP INR1743, TP INR2000, 15% Upside, Buy)

• IndusInd Bank's (IIB) 2QFY18 PAT grew 25% YoY (in-line) to INR8.8b. Strong loan growth of 24% YoY (+26% YoY in corporate loans) and a steady NIM of 4% helped keep NII growth steady at 25% YoY.
  
• Robust NII, coupled with steady fee income growth of 22% YoY, enabled the bank to deliver impressive core PPoP growth of 28% YoY. Opex continues to trail total income growth, as IIB sees improving productivity at its branches.
  
• Both corporate (+26% YoY) and consumer (+22% YoY) loans exhibited healthy growth. Vehicle loan growth recovered to 17% YoY, and was well supported by ~40% YoY growth in retail non-vehicle loans.
  
• GNPA/NNPAs increased 6% sequentially; however NPA ratios remained stable. Fresh slippages declined to INR4.98b (1.7% annualized, INR6.08b in 1QFY18), led by relatively high slippages in the corporate segment. The bank indicated that the impact of demonetization and NCLT referrals has resulted in relatively high slippages over the past couple of quarters. Restructured book declined to 16bp of loans (INR1.94b), while O/s SR stood at INR4.07b. IIB mentioned that it has provided INR360m toward six accounts that appear on the second list from the RBI, and now carries ~65% provision on these accounts.
  
• Other highlights: (1) CASA ratio improved sharply to 42.3% (ahead of 40% target), led by 95% YoY growth in SA deposits. (2) IIB has total exposure of ~INR3.85b toward six accounts that appear on the RBI's second list. (3) IIB expects INR1.5/share impact on EPS from fee income recognition changes under Ind-AS.