Buy IndusInd Bank - Q4 FY2011 Update - Motilal Oswal

IndusInd Bank (IIB IN; Mkt Cap USD2.5b, CMP Rs275, Buy)

- Margins declined 10bp QoQ, led by a sharp rise in cost of deposits (up 86bp QoQ) and a decline in CD ratio (to 76% from 82% a quarter earlier).

- Other income was lower than expected as investment banking and forex income disappointed.

- Loans grew ~5% QoQ to ~Rs262b (up 27% YoY) and deposits grew 12% QoQ (up 29% YoY). During the quarter, IIB sold loans worth Rs16b.

- In absolute terms, GNPA declined 13% QoQ and in percentage terms GNPA declined 20bp QoQ. NNPA ratio declined by 8bp to 0.28%.

- Improving liability franchise, structural improvement in RoA and over 25% asset growth should help IIB to post one of the highest PAT CAGRs (~30%) among banks under our coverage. The stock trades at 2.9x FY12E BV and 2.5x FY13E BV and 17x FY12E EPS and 13.5x FY13E EPS. Buy with a target price of Rs335 (3x FY13E BV).

Source : Equity Bulls

Keywords