Comments
Motilal Oswal
IndusInd Bank (Buy)
CMP: ₹1,474.4
Target: ₹1,830
IIB reported merged PAT of ₹1,430 crore (standalone: ₹1,220 crore) for 1QFY20, largely led by lower provisions of ₹430 crore (our estimate: ₹810 crore). NII stood at ₹2,840 crore (about 3 per cent miss; standalone: +14 per cent YoY to ₹2,420 crore), while the net interest margin improved to 4.05 per cent from about 3.6 per cent in 4QFY19.
Loan growth stood at 28 per cent y-oy (standalone: +26 per cent y-o-y), led by robust growth across both the corporate and consumer portfolios. The share of retail loans in total book increased to 54 per cent, as IIB classified its MFI and business banking portfolio under the consumer finance segment.
Valuation and view: Merger with Bharat Financial has strengthened the earnings profile and further boosted the return ratios. However, we conservatively factor in higher credit cost of 100 bps/ 80 bps for FY20/21 due to our concerns on prevailing economic slowdown and elevated stress in select lending segments. The clarity on management succession is going to be critical though we nevertheless estimate FY20/21 return on assets of 1.9 per cent/2.1 per cent, buoyed by merger with Bharat Financial. We value the stock at ₹1,830 based on 2.8x FY21E BV.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.