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IndusInd Bank – Q4 benefits of restructuring

April 19, 2010

Updated: IndusInd Bank reported 4QFY10 net profit of Rs981mn (+11% qoq, +94% yoy). This was driven by 1) 89% growth in NII to Rs2.73bn (3% ahead of our estimate) on margin expansion (NIMs at 3.2%, +25bp qoq) and higher volumes (up 8% qoq, +30% yoy), and 2) noninterest income (i.e., net fee) which was 9% ahead of our estimate on thirdparty product distribution and recovery of NPAs of Rs181mn. Some of this was offset by higher loan loss provisions, as the bank accelerated provisions to meet RBI coverage requirement (now at 70% including technical write-offs), leading to lower net NPAs at 0.5% (0.67% in 3Q). Gross NPLs remained flat qoq and yoy, while net NPLs declined 21% qoq.

IndusInd Bank will continue to reflect the benefits of restructuring in the form of higher CASA, NIMs and fees. Core fee income growth remained strong at 35% YoY (flat qoq). Capital gains & recoveries contribution to PBT ticked up to 19% from 8% in the
previous quarter.

EPS expectations for FY 11 and FY 12 are 10.83 and Rs 13.89 respectively.

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