Indusind Bank Results’ Review

Indusind Bank has posted healthy March quarter and full financial year 2011-12 numbers. For the March quarter the net profit of the bank increased by 30 per cent to Rs 223 crore while for FY12 its net profit increased by 39 per cent to Rs 802 crore. The stock posted a 52-week high on yesterday’s trading session but closed marginally in the red, down by 0.09 per cent to Rs 345.20.

In the March quarter of 2012 the net interest income of the bank increased by 20 per cent to Rs 464 crore on a YoY basis. Also, its other income showed robust growth, increasing by 60 per cent to Rs 263 crore. This was due to higher growth from some of the segments like investment banking, foreign exchange income, distribution fees, etc. Even with the higher provisioning of around 14 per cent at Rs 46 crore, the bank was able to show good growth in its bottomline.

The net interest margin of the bank decreased by 21 basis points to 3.29 per cent on a YoY basis. However, when compared on a sequential basis it increased marginally by 4 basis points. On the asset quality front where most of the banks are facing headwinds in the current scenario, Indusind Bank has maintained its status almost at the same level. This is highly commendable. The bank also has maintained its provision coverage ratio (PCR) at around 72.72 per cent which further indicates that it may not have any problems in maintaining its asset quality. The net NPAs of the bank decreased marginally by 1 basis point to 0.27 per cent. The capital adequacy ratio (CAR) of the bank stood at 13.85 with Tier 1 CAR at 11.37 per cent.

The revenue from the retail banking segment grew by 41 per cent to Rs 952 crore as the bank has around 49 per cent of the total exposure to the consumer finance category. It was surprising to note that the treasury segment of the bank reflected de-growth of 10.67 per cent to Rs 21.69 as there were no rate hikes during the quarter and the bond yield cooled off to some extent while the bond prices inched higher. 

The result for the full financial year 2011-12 also shows good performance. The total income increased by 48 per cent to Rs 6,370 crore while the profit after tax increased by 39 per cent to Rs 802 crore. With the RBI reversing the interest rate in its monetary meet on April 17, 2012, the banking space is going to benefit in the near future. The management has clarified that the bank may also revise its rates sooner or later.

One should note that the bank is commanding very high valuation as it is available at a price to book value (P/BV) of 3.6 times which is on the higher side. One of the reasons could be the consistent performance of the bank in the past and also due to zero exposure to sectors like aviation and telecom companies (for 2G licenses). We would like to recommend investing in the scrip in a staggering manner to garner good returns, keeping in mind that there could be some downsides too.