IndusInd Bank Q3 Results Review - Delivering On The Guided Path: ICICI Securities

IndusInd Bank has reported 1.87% return on asset and more than 15% return on equity in Q3 FY23.

<div class="paragraphs"><p>An IndusInd Bank branch in Bengaluru. (Photo: BQ Prime)</p></div>
An IndusInd Bank branch in Bengaluru. (Photo: BQ Prime)

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ICICI Securities Report

IndusInd Bank Ltd. has reported 1.87% return on asset and more than 15% return on equity in Q3 FY23, thereby improving visibility of it being able to deliver more than 5% pre-provision operating profit/loans, 1.9% RoAs and 16% RoEs by FY24E.

What surprised positively-

Despite flat micro finance institution portfolio, acceleration in retail advance growth to 18.4% YoY (versus 13.7% / 12.9% / 6.6% in Q2/Q1 FY23 / Q4 FY22) aided overall advance growth at 4.6% QoQ and 19% YoY. Broad-based and highest ever vehicle finance disbursements (up 19% QoQ / 44% YoY) reinforced growth in vehicle financing portfolio at 6.7% QoQ / 18% YoY.

Credit card portfolio on a low base scaled up 8.7% QoQ / 45.5% YoY and business loan/personal loan/affordable housing was up 12.7% QoQ /46.7% YoY. Corporate loan book was up 4% QoQ/20% YoY led by 11% QoQ growth in small corporates.

What was not encouraging-

MFI portfolio was just flat QoQ lagging an improvement (up 8% YoY). MFI gross non-performing asset also rose to 3.75% versus 2.91%. Management expects it to normalise in one-two quarters.

Despite utilising contingency buffer of Rs 4.6 billion, credit cost settled at 1.6%. Credit cost guidance of 1.2-1.5% through FY23 seems stretched now.

What to expect going forward-

IndusInd Bank is now carrying provisioning of 2.7% against stress pool (NPA plus restructuring plus special mention account-I/II plus net SRs) of 4.3%, which suggests credit cost trajectory should normalise to less than 1.7%. This may be partially offset by pressure on net interest margins given the dominance of fixed-rate portfolio and focus on retail term-deposit mobilisation.

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ICICI Securities IndusInd Bank Q3FY23 Results.pdf
IndusInd Bank Q3 Results: Net Profit Jumps 58%, NII Rises 18.5%

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