Indusind Bank – Post Decent September Numbers

Indusind bank was the first bank to kick start the result season for the banking space. The bank posted decent September quarter numbers, as it posted a good bottom line growth while faced some headwinds on the asset quality front. The stock post the announcement of the numbers, corrected 2.6 per cent to the levels of Rs 357 per share and currently also is trading at the same level. The following are the key financial parameters of the bank.

Net Interest Income (NII) of the bank increased by 22 per cent to Rs 509.73 crore while the Net profit grew at the handsome rate of 30 per cent to Rs 205.25 crore. Other Income grew at 34 per cent to Rs 320 crore, helping the bank to post good bottom-line growth. Core fee Income (contributes around 90 per cent of other Income) grew at a stupendous rate of 40 per cent to Rs 296 crore. Provisions of the bank stood at Rs 49.07 crore against Rs 46.97 crore in the similar period last year.

Indusind bank faced some headwinds on the Asset quality front which worsened slightly. Gross NPA and Net NPA increased by 6 and 2 basis points to 1.03 and 0.29 per cent respectively on a sequential basis. As on 30th September 2012, Capital Adequacy Ratio (CAR) decreased by 256 basis points to 11.76 per cent and the Tier 1 CAR stands at 9.93 per cent. Net Interest Margin (NIM) contracted by 10 basis points to 3.25 per cent on YoY basis, however improved marginally by 3 basis points on a sequential basis.

Bank witnessed a strong business growth. As on 30th September 2012, Deposits increased by 25 per cent to Rs 47765 crores while the Advances grew by 31 per cent to Rs 39427 crore which is way above the RBI estimates of 15 and 17 per cent respectively for FY2013. CASA ratio remained almost stable at 27.98 per cent.

The loan book is well diversified as lending to consumer finance is 52 per cent and the remaining 48 per cent is in the form of loans to corporates. Of the consumer finance segment majority of around 82 per cent are given as vehicles loans (Utility and commercial vehicles, small CV, two wheelers and car loans) which we believe going ahead would be slightly risky. This is after Automobile Industry body SIAM recently has revised the growth substantially lower for the sector. We believe the more exposure to single sector which seems to be having headwinds in terms of growth could increase the banks NPA going ahead.

On the segment front, Wholesale banking witnessed a good growth, as revenue from the same increased by 46 per cent to Rs 859 crore while profit increased by 32 per cent to Rs 138 crore. While though revenue from Treasury increased by 20 per cent to Rs 436 crore profit from the same declined by 4.31 per cent to Rs 21.55 crore.

On a half yearly basis, Net Interest Income (NII) increased by 23 per cent to Rs 993.83 crore while Net Profit stood at Rs 486.51 crore against Rs 373 crore, registering a growth of 30 per cent on YoY basis.

As on 30 September, 2012, Branch network stood at 350 Branches and 666 ATMs against 441 branches and 796 ATMs in the similar period last year. On the valuation front the bank is currently available at Trailing Price to earning multiple of 18.19 times and Price to book value of 3.33 times. We believe the Indusind bank is available slightly on the higher valuation, and hence would advise our readers to invest in a staggering manner keeping in mind long term horizon to garner better returns.