Indusind Bank: Picture Perfect
Indusind Bank: Picture Perfect
Indusind Bank: Picture Perfect
13 OCT 2016
IndusInd Bank
BUY
INDUSTRY
CMP (as on 10 Oct 2016)
Target Price
BANKS
Rs 1,222
Rs 1,334
Nifty
8,709
Sensex
28,082
IIB IN
596
728/10,944
1,408
Rs 1,256/799
3M
6M
12M
Absolute (%)
10.6
23.8
29.1
Relative (%)
8.9
11.6
25.4
16.7
13.3
FIIs
48.7
21.3
Source : BSE
Parul Gulati
[email protected]
+91-22-6639-3035
Darpin Shah
[email protected]
+91-22-6171-7328
Picture perfect
IndusInd Bank (IIB) continues to report strong
operating performance across parameters: (1) strong
and diversified loan growth of 26%, (2) continued
sequential uptick in margins, (3) strong CASA
accretion, (4) stable asset quality with slippages of Rs
2.6bn i.e. 1.1% ann., (5) healthy fee growth of 23%
and (6) stable C-I ratios even as bank continues to
invest into the future growth. Core and net earnings
were inline with estimates.
We believe IIBs return ratios will continue improve
led by sustained strong and diversified loan growth
(27% CAGR), stable contribution from core fees,
healthy margins (driven by changing loan mix,
improving proportion of low cost deposits, though
capital consumption will keep margins flat) and
impeccable asset quality. Maintain BUY with TP of Rs
1,334 (3.25x Sept-18 ABV of Rs 412).
Financial Summary
(Rs mn)
Net Interest Income
PPOP
PAT
EPS (Rs)
ROAE (%)
ROAA (%)
Adj. BVPS (Rs)
P/ABV (x)
P/E (x)
2QFY17
14,603
12,817
7,043
11.8
2QFY16
10,943
10,065
5,600
9.5
YoY (%)
33.4%
27.3%
25.8%
24.8%
FY16
45,166
41,414
22,864
38.4
16.6
1.82
285
4.28
31.8
FY17E
56,155
50,974
29,496
49.4
15.9
1.88
327
3.74
24.7
FY18E
69,215
63,645
37,336
62.5
17.4
1.92
380
3.22
19.5
FY19E
84,844
78,365
45,582
76.4
18.2
1.89
444
2.75
16.0
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters
2QFY16
10,943
7,835
1,102
18,778
8,713
10,065
1,581
1,204
8,484
2,884
5,600
3QFY16
11,734
8,390
1,131
20,124
9,514
10,610
1,771
1,414
8,839
3,029
5,810
4QFY16
12,682
9,128
1,386
21,810
10,298
11,512
2,137
1,485
9,375
3,172
6,204
1QFY17
13,564
9,730
1,911
23,294
10,956
12,338
2,305
1,444
10,033
3,419
6,614
808
281
783
96.8
16.52
15.72
864
302
822
95.1
16.43
15.64
930
327
884
95.1
15.50
14.92
1,018
350
937
92.1
15.42
14.81
1,123
410
989
88.1
15.32
14.68
38.9%
46.1%
26.4%
-875 bps
-120 bps
-104 bps
10.4%
17.1%
5.6%
-395 bps
-10 bps
-13 bps
12.35
7.37
3.88
46.4
34.0
12.07
7.15
3.91
47.3
34.3
12.04
7.06
3.94
47.2
33.8
12.07
6.93
3.97
47.0
34.1
11.86
6.60
4.00
47.3
34.0
-49 bps
-77 bps
12 bps
87 bps
5 bps
-21 bps
-33 bps
3 bps
24 bps
-4 bps
6.0
2.4
0.77
0.31
1.0
0.6
60.0
6.8
2.7
0.82
0.33
1.3
0.6
59.9
7.8
3.2
0.87
0.36
1.3
0.5
58.6
8.6
3.6
0.91
0.38
1.1
0.5
58.7
9.0
3.7
0.90
0.37
1.1
0.4
58.9
49.3%
53.3%
13 bps
6 bps
8 bps
-19 bps
-108 bps
4.5%
3.8%
-1 bps
-1 bps
-3 bps
-5 bps
24 bps
Change In Estimates
(Rs mn)
Old
NII
56,155
PPOP
50,974
PAT
29,496
Adj. BVPS (Rs)
327.5
Source: HDFC sec Inst Research
FY17E
New
56,155
50,974
29,496
326.5
FY18E
Change
0.0%
0.0%
0.0%
-0.3%
Old
69,425
63,855
37,485
381.2
New
69,215
63,645
37,336
379.8
Change
-0.3%
-0.3%
-0.4%
-0.4%
Page | 2
CFD
41
41
41
42
41
42
41
42
43
43
45
30%
47
32%
49
Rsbn
28%
51
51
53
55
57
57
58
59
58
59
58
59
59
59
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
24%
1QFY14
26%
22%
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
20%
2QFY15
1,100
1,000
900
800
700
600
500
400
300
200
100
49
Advances (Rsbn)
1QFY15
4QFY14
3QFY14
2QFY14
1QFY14
Page | 3
Saving deposits/branch
improved to Rs 199mn vs. Rs
176mn YoY and Rs 190mn
QoQ
Margins were up 3bps QoQ,
supported by lower CoF and
stable yields in CFD, despite
sharp decline in C-D ratio
Overall yields declined ~20bps
QoQ to 11.9% led by 26bps
fall in corporate book. The
yields in the CFD book were
flat QoQ at 14.6%
3W
2W
Car
Equip. Fin
LAP
SA %
PL
CA %
17%
17%
17%
16%
17%
16%
18%
17%
18%
19%
19%
19%
19%
18%
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
16%
17%
17%
2QFY15
17%
17%
1QFY15
16%
16%
4QFY14
16%
16%
3QFY14
16%
16%
16%
2QFY14
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1QFY15
10%
14%
20%
1QFY14
30%
18%
40%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
4QFY14
UV
3QFY14
CV
2QFY14
1QFY14
0%
Page | 4
47.3
47.0
47.2
47.3
46.4
47.0
48.8
3QFY15
46.3
49.2
2QFY15
3.3%
9%
44.2
3.5%
11%
45.6
44.9
46.5
47.4
3.7%
3.1%
2.9%
7%
2.7%
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
1QFY15
4QFY14
3QFY14
3.4%
3.6%
3.4%
3.6%
3.6%
3.4%
3.6%
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1QFY15
4QFY14
3QFY14
2QFY14
1QFY14
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1QFY15
3.1%
3.2%
3.3%
3.4%
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-
3.6%
3.7%
Processing fees
IB Fee
3.4%
2QFY14
1QFY14
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1QFY15
4QFY14
3QFY14
2.5%
2QFY14
5%
4QFY14
3.9%
13%
3QFY14
NIM (RHS)
Cost of Deposits
4.1%
2QFY14
Yield on Advances
15%
1QFY14
1QFY14
Page | 5
0.2%
2QFY17
1QFY17
4QFY16
3QFY16
1QFY16
4QFY15
0.0%
1QFY14
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1QFY15
4QFY14
2QFY14
0.4%
3QFY15
0.8%
0.8%
0.6%
2QFY15
1.1%
1.0%
0.8%
1QFY15
1.1%
1.0%
4QFY14
1.3%
1.4%
1.2%
3QFY14
1.1%
1.0%
1.3%
1.0%
1.4%
Net NPA
Net NPA % (RHS)
Rs bn
2QFY14
1.5%
1QFY14
2.7%
1.2%
2QFY16
3QFY14
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
0.93% 1.09% 1.16% 1.02% 1.01% 1.00% 0.93% 0.58% 0.53% 0.54% 0.65% 0.74% 0.76% 0.73%
0.47%
0.77%
0.84%
0.54%
0.74%
0.04%
0.24%
3.27%
0.13%
0.66%
0.96%
0.85%
0.70%
0.50%
0.48%
0.42%
0.26%
0.32%
0.48%
0.19%
0.55%
0.42%
0.38%
0.63%
0.66%
0.56%
0.48%
0.52%
CFD
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
GNPA
1.21% 1.14% 1.23% 1.25% 1.25% 1.22% 1.23% 1.15% 1.15% 1.10% 1.08% 1.08% 1.14% 1.17%
Slippages
1.50% 1.55% 2.11% 2.41% 1.66% 1.71% 2.11% 1.92% 1.64% 1.50% 1.68% 1.90% 1.69% 1.85%
(Ann.)
LLP(Ann.)
0.59% 0.67% 0.77% 0.79% 0.75% 0.69% 0.86% 0.68% 0.71% 0.65% 0.77% 0.88% 0.85% 0.79%
Source: Bank, HDFC sec Inst Research
Page | 6
CV
UV
CE
3W/Small
0.83% 0.75% 0.72%
CV s
2Ws
2.87% 2.95% 2.73%
Cars
0.70% 0.44% 0.40%
LAP/PL/HL
NA
NA
NA
Cards
NA
NA
NA
Source: Bank, HDFC sec Inst Research
0.92%
0.82%
0.74%
0.90%
0.92%
1.04%
0.84%
0.81%
0.98%
1.10%
1.00%
2.50%
0.52%
NA
NA
2.49%
0.46%
0.47%
1.53%
2.42%
0.38%
0.30%
1.53%
2.36%
0.48%
0.32%
1.53%
2.53%
0.56%
0.33%
1.24%
2.65%
0.58%
0.48%
1.32%
2.83%
0.41%
0.41%
1.35%
2.95%
0.39%
0.57%
1.48%
3.06%
0.52%
0.76%
1.54%
3.20%
0.50%
0.92%
1.79%
3.74%
0.50%
1.00%
1.80%
Other income
Opex
Provision
Tax
RoAA (RHS)
2.0
7.0
1.9
5.0
1.8
3.0
1.7
1.0
2QFY17
1QFY17
4QFY16
3QFY16
2QFY16
1QFY16
4QFY15
3QFY15
2QFY15
1.4
1QFY15
(5.0)
4QFY14
1.5
3QFY14
(3.0)
2QFY14
1.6
1QFY14
(1.0)
Page | 7
Peer Valuation
BANK
ICICIBC #
KMB
AXSB
IIB
FB
CUB
DCBB
SBIN #
BOB
Ujjivan
Mcap CMP
(Rs bn) (Rs)
1,455
1,430
1,269
727
125
84
35
1,987
374
55
250
780
531
1,222
73
140
124
256
162
461
Rating
TP
(Rs)
BUY
BUY
NEU
BUY
BUY
BUY
BUY
BUY
BUY
NEU
280
854
522
1,334
85
157
136
284
174
510
FY16
113
120
212
285
42
46
58
99
72
118
ABV (Rs)
FY17E FY18E
119
136
136
155
225
261
327
380
44
50
52
60
63
71
109
127
77
116
152
169
FY16
11.9
58.1
15.4
31.8
26.3
18.8
18.1
15.3
-6.9
26.3
P/E (x)
FY17E FY18E
10.9
8.9
36.0
28.6
15.9
13.3
24.7
19.5
18.8
14.3
16.8
14.3
20.4
16.2
13.3
9.9
18.4
10.3
20.7
23.3
P/ABV (x)
FY16 FY17E FY18E
1.76
1.63
1.38
5.54
4.75
4.02
2.50
2.37
2.03
4.28
3.74
3.22
1.75
1.65
1.46
3.06
2.67
2.31
2.14
1.96
1.73
1.97
1.83
1.52
2.25
2.10
1.40
3.92
3.03
2.73
ROAE (%)
FY16 FY17E FY18E
11.1
10.7
11.6
11.0
12.9
14.4
16.8
14.2
15.0
16.6
15.9
17.4
6.0
8.0
9.8
15.5
15.2
15.7
11.9
9.5
10.6
7.9
8.5
10.3
-14.4
5.5
9.2
18.3
17.5
12.2
ROAA (%)
FY16 FY17E FY18E
1.42
1.36
1.41
1.41
1.58
1.64
1.67
1.39
1.40
1.82
1.88
1.92
0.55
0.68
0.77
1.50
1.47
1.47
1.10
0.81
0.82
0.46
0.49
0.57
-0.78
0.29
0.47
3.65
3.65
2.15
Source: Company, HDFC sec Inst Research, # Adjusted for subsidiaries value
Page | 8
Income Statement
(Rs mn)
Balance Sheet
FY15
FY16
FY17E
FY18E
FY19E
Interest Earned
96,920
115,807
145,415
181,126
226,400
SOURCES OF FUNDS
Interest Expended
Net Interest Income
62,717
34,203
70,641
45,166
89,260
56,155
111,911
69,215
141,556
84,844
Other Income
Fee Income (CEB)
Treasury Income
25,480
16,926
1,177
32,969
22,315
1,453
40,360
27,357
1,500
49,926
34,471
1,300
61,235
43,204
1,050
Total Income
59,683
78,135
96,516
119,141
146,079
28,701
36,721
45,541
55,496
Employee Expense
PPOP
9,805
30,982
12,361
41,414
15,575
50,974
3,891
3,389
27,092
6,722
5,015
34,693
9,155
17,937
(Rs mn)
FY15
FY16
FY17E
FY18E
FY19E
Share Capital
Reserves
5,295
101,151
5,950
171,010
5,969
196,362
5,969
228,436
5,969
267,593
Shareholders' Funds
Savings
Current
106,445
129,436
123,560
176,960
172,462
154,780
202,331
227,650
198,738
234,405
297,463
248,091
273,563
384,153
309,050
Term Deposit
488,348
602,761
771,971
986,657 1,266,171
67,714
Total Deposits
741,344
18,916
63,645
22,915
78,365
Borrowings
Other Liabilities
206,181
63,904
221,559
72,048
6,695
4,917
44,279
7,852
5,628
55,793
10,057
7,271
68,308
Total Liabilities
11,828
14,782
18,457
22,726
107,791
101,119
22,864
29,496
37,336
45,582
Investments
G-Secs
Advances
228,783
179,061
687,882
Fixed Assets
11,576
256,536
79,256
292,656
87,617
357,418
97,285
APPLICATION OF FUNDS
Other Assets
Total Assets
12,553
118,779
13,181
146,177
13,840
184,630
14,532
81,841
90,561
97,240 101,171 108,823
1,117,874 1,400,570 1,736,481 2,146,890 2,687,640
Page | 9
Key Ratios
FY15
FY16
FY17E
FY18E
VALUATION RATIOS
EPS (Rs)
Earnings Growth (%)
FY15
FY16
FY17E
FY18E
FY19E
ASSET QUALITY
Gross NPLs (Rsm)
5,629
7,768
8,623
10,137
13,319
2,105
0.8
3,218
0.9
3,478
0.8
3,737
0.7
4,768
0.7
0.3
62.6
0.5
0.4
58.6
0.6
0.3
59.7
0.5
0.3
63.1
0.4
0.3
64.2
0.5
FY19E
33.9
27.4
38.4
27.5
49.4
29.0
62.5
26.6
76.4
22.1
193.4
189.4
1.80
290.8
285.4
1.82
332.3
326.5
1.88
386.1
379.8
1.92
451.7
443.7
1.89
ROAE (%)
19.0
16.6
15.9
17.4
18.2
P/E (x)
36.1
31.8
24.7
19.5
16.0
ROAA TREE
P/ABV (x)
P/PPOP (x)
6.45
20.9
4.28
17.5
3.74
14.3
3.22
11.5
2.75
9.3
3.44%
3.59%
3.58%
3.56%
3.51%
0.3
0.4
0.5
0.6
0.7
2.56%
0.12%
2.62%
0.12%
2.57%
0.10%
2.57%
0.07%
2.53%
0.04%
Operating Cost
Provisions
Provisions for NPAs
2.89%
0.39%
0.34%
2.92%
0.53%
0.40%
2.90%
0.43%
0.31%
2.86%
0.40%
0.29%
2.80%
0.42%
0.30%
Tax
0.92%
0.94%
0.94%
0.95%
0.94%
1.80%
10.5
19.01%
1.82%
9.1
16.60%
1.88%
8.4
15.88%
1.92%
9.1
17.41%
1.89%
9.7
18.23%
BVPS (Rs)
Adj. BVPS (Rs)
ROAA (%)
12.5
11.8
11.6
11.5
11.5
7.1
6.6
6.5
6.4
6.4
7.4
7.7
4.8
6.7
6.8
4.9
6.8
6.7
5.0
6.8
6.5
5.0
6.8
6.5
5.0
NIM (%)
3.9
4.0
4.0
3.9
3.8
OPERATING EFFICIENCY
Cost/Avg. Asset Ratio (%)
ROAA
Leverage (x)
ROAE
Source: Bank, HDFC sec Inst Research,
2.9
2.9
2.9
2.9
2.8
49.1
47.9
47.9
47.1
46.7
24.8
28.5
27.5
26.5
26.5
22.5
25.4
28.9
27.9
27.9
92.8
9.5
15.5
34.1
12.1
11.2
95.1
12.6
20.0
35.2
15.5
14.9
94.1
11.7
17.9
35.6
14.1
13.6
93.1
10.9
16.4
35.6
13.0
12.7
92.1
10.2
15.2
35.4
12.1
11.8
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RECOMMENDATION HISTORY
IndusInd
1,500
Date
10-Oct-15
13-Jan-16
22-Apr-16
8-Jul-16
12-Jul-16
13-Oct-16
TP
1,300
1,100
CMP
940
913
971
1,108
1,124
1,222
Reco
BUY
BUY
BUY
BUY
BUY
BUY
Target
1,040
1,046
1,073
1,188
1,220
1,334
900
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
700
Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
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Any holding in stock No
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