- Asset quality: Gross slippages amounted to Rs 20.88bn (annualized slippage ratio of 3.5%) and recoveries and upgrades amounted to Rs 9.97bn
- Margin picture: NIM at 4.20% inched up 10 bp QoQ aided by lower cost of funds
- Asset growth: Advances grew 4.6%/12.4% QoQ/YoY driven sequentially by large corporates and retail loans
- Opex control: Total opex rose 3.8%/13.6% QoQ/YoY, employee expenses rose 6.2%/10.7% QoQ/YoY and other expenses rose 3.0%/14.6% QoQ/YoY
- Fee income: Core fee income rose 8.2%/9.0% QoQ/YoY driven sequentially by distribution fees and loan processing fees
Our view – Microfinance and vehicle loans continue to cause asset quality niggles
Microfinance and vehicle finance contributed the most to total slippages, which were elevated in the absolute sense but lower on sequential basis: The microfinance and vehicle finance books contributed Rs 8.15bn and Rs 5.53bn to total slippages, respectively. Annualised slippage ratio had been 4.7% in 3QFY22. Provisions were Rs 14.6bn, down by -11.5% QoQ and -21.6% YoY. The bank continues to hold contingent standard asset provisions of Rs 33.28bn. All provisions taken together provide a cover of 152% over GNPA or 3.5% of loan book. The credit cost guidance is for 120-150 bps. Restructured book was 2.6% of advances, down from 3.3% of advances.
Management reiterated prior guidance of NIM being in the range of 410-425 bps, stating high share of fixed rate book may not be an impediment in a rising rate environment: The share of fixed rate book is about 50% of overall loan book. Despite higher share of fixed rate book, the bank still sees upward repricing in fixed rate segments when new loans come in. Furthermore, the bank will also benefit from changing loan segment mix whenever required including in favour of microfinance. Also, the share of used vehicles within overall vehicle loans has been rising, aiding yield.
In FY23, the bank would aim to achieve growth in line with the 15-18% guidance for planning cycle 5: For the quarter, consumer finance loan growth at 5.3% QoQ outpaced wholesale loan growth of 3.8% QoQ. Within consumer finance, microfinance loans bounced back, growing 11.5% QoQ. Utility vehicle loans grew 8.3% QoQ and home, personal and gold loans grew 10.8% QoQ. Within wholesale loans, small corporate loans jumped 79% QoQ to occupy 3.7% of overall loan book.
We maintain ‘Buy’ rating on IIB with a revised price target of Rs 1186: We value the bank at 1.8x FY23 P/BV for an FY23E/24E RoE profile of 13.7/14.5%.
Shares of IndusInd Bank Limited was last trading in BSE at Rs. 1019.00 as compared to the previous close of Rs. 978.20. The total number of shares traded during the day was 271036 in over 9399 trades.
The stock hit an intraday high of Rs. 1025.95 and intraday low of 968.00. The net turnover during the day was Rs. 274014500.00.