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Prabhudas Lilladher
IndusInd Bank (Buy)
CMP: ₹1,566.45
Target: ₹1,765
Quick pointers: a) Bank has created another ₹250 crore of contingent provisions over and above ₹350 crore held from earlier quarter on IL&FS.
b) Savings account deposits growth was slower (18 per cent y-o-y/ -2.1 per cent q-o-q) and saw decline on absolute basis sequentially.
IndusInd Bank’s earnings of ₹985 crore (PL estimate: ₹996 crore) was largely in-line with estimates but PPOP of ₹2,120 crore (PL estimate: ₹2,080 crore) beat estimates on strong treasury gains. It continued to make contingent provisions of ₹250 crore (₹275 crore in Q2FY19) on IL&FS exposure, taking total provisions to >₹600 crore (30 per cent PCR).
Management guided that there could be some acceleration in provisions ahead to get PCR to desired level of 40-50 per cent as clarity on haircut & asset cover on holdco is emerging, while there could be classification towards NPA ahead as account is in SMA1&2. Operationally bank continues to cruise smoothly with steady NIMs, robust loan growth and improving operational metrics. Hence we retain ‘buy’ with revised TP of ₹1,765 (from ₹1,750) based on 3.2x Sep-20 P/ABV.
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