MOSL: INDUSIND BANK (Buy)-IL&FS exposure an overhang-Negligible divergence provides comfort

IndusInd Bank: IL&FS exposure an overhang; Negligible divergence provides comfort

(IIB IN, Mkt Cap USD13.7b, CMP INR1601, TP INR1900, 19% Upside, Buy)

• IndusInd Bank’s (IIB) PAT grew by a muted 5% YoY to INR9.8b in 3QFY19 due to contingent provision of INR2.55b (toward infra group). NII grew 21% YoY, while NIM was largely flat at 3.83% on account of a rise in cost of funds.
• Total income increased 22% YoY on the back of healthy other income growth of 24% YoY. Core fees grew 18% YoY, led by higher forex income and loan processing fees. Opex growth (+16% YoY) trailed total income growth, resulting in robust 27% YoY growth in PPoP.
• Loan growth came in at 35% YoY, led by robust growth in the corporate segment. Consumer portfolio grew 28% YoY (+7% QoQ), led by strong traction in CV loans, equipment financing and credit card segments. The share of retail loans in total book stands at 39% (45% including business banking). MFI book stood at INR75.2b (4.34% of loans).
• GNPA/NNPA increased 10.5%/30.7% QoQ to INR19.7b/10.3b. Fresh slippages stood at INR8.06b, led by higher slippages in the corporate portfolio (three accounts slipped in mid-corporate segment); however, higher write-offs at INR3.45b limited the increase in NPL ratios. GNPA ratio, thus, increased to 1.13% (+4bp), while PCR declined significantly by 808bp, resulting in an increase in NNPA ratio to 0.59% (+11bp). IIB sold INR1.34b of loans to ARCs, while restructured advances stood at INR1.86b (11bp).