IndusInd Bank share gains 25% in a month post announcement of Q1FY23 results

IndusInd Bank incorporated in April 1994 derives its name from the Indus Valley civilisation. Srichand P Hinduja, the leader of the Hinduja Group and a non-resident Indian businessman, had the vision for the bank. With approximately 2,000 branches nationwide, over 5,000 distribution sites, and over 2.5 crore customers, IndusInd Bank is a among the leading private sector banks in India.

IndusInd Bank announced their Q1FY23 results on 20^th July 2022, where they reported a high double-digit YoY growth in profits supported by healthy NII, GNPAs, NNPAs and PPOP etc. Even IndusInd Bank share price has gained almost 25% in the past one month after the announcement of Q1FY23 results. So, let’s now analyse their Q1FY23 results and look for future investment gains.

Key Highlights of IndusInd Bank Q1FY23

• Net Interest Income (NII) grew by 16% YoY to Rs 4,125 crores from Rs 3,564 crores
• NIM improved to 21% as compared to 4.06% as of Q1FY22, and 4.20% as of Q4FY22
• Other income grew by 12% YoY to Rs 1,932 crores in Q1FY23 from Rs 1,723 crores in Q1FY22
• Net Profit grew by 61% YoY to Rs 1,603 crores from Rs 975 crores in Q1FY22
• Deposits grew by 13% YoY to Rs 3,02,719 crores from Rs 2,67,233 crores
• CASA grew by 16% YoY, savings deposits grew by 19% YoY to Rs 95,243 crores from Rs 79,928 crores
• Gross NPA and Net NPA ratios improved to 35% and 0.67% from 2.88% and 0.84% YoY respectively and PCR (Provision coverage ratio) at 72% as of Q1FY23

IndusInd Bank results Q1FY23: PAT grew 64% YoY supported by 16% growth in NII

IndusInd Bank reported 64% YoY rise in standalone net profit to Rs 1,603 crore from Rs 975 crores in Q1FY22 on a 9% increase in total income to Rs 10,111 crore in Q1FY23 over Rs 9,291 crores in Q1FY22. On a sequential basis PAT grew 17.7% from Rs 1,361 crores in Q4FY22 while revenue grew 3.5% QoQ from Rs 9,760 crores in Q4FY22. This has been supported by robust growth in Interest income and NII.

Interest income of IndusInd Bank can be further divided into following sub-heads. Their main source of Income is Interest received on Advances or Bills, followed by income on Investments.

Net Interest Income (NII) improved by 16% to Rs 4,125 crore in Q1FY23 from Rs 3,564 crore in Q1FY22. Net Interest Margin (NIM) for Q1FY23 stood at 4.21% as against 4.06% for Q1FY22. NIM improved marginally to 4.21% in 1QFY23. Sequentially margins remained flat at 4.21%.

While other income rose 12% YoY as the bank reported treasury gains of Rs 150 crores. Core fee income grew strongly at 9% QoQ. IndusInd’s operating profit rose by 10% YoY to Rs 3,431 crore in Q1FY23. Provisions & Contingencies during the period under review amounted to Rs 1,251 crore, down 30% YoY.

Retailisation of liabilities continues with 16% growth in CASA, 17% growth in Retail deposits as per LCR resulting in overall deposit growth of 13%. All key profitability metrics across NIMs, core PPOP margin, ROA and ROE have maintained a positive trajectory.

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IndusInd Bank results Q1FY23: Corporate Book – remains healthy

On the business front, loans grew 3.7% QoQ, while 17.7% YoY, led by both Consumer Finance 3.0% QoQ and corporate book 4.5% QoQ. In the Consumer business, disbursement growth picked up in the Vehicle/MFI segments. The Tractor and Utility Vehicle segments maintained healthy momentum at 4% and 10% QoQ, respectively, while Credit Card book grew 17% QoQ.

Retail-to-Wholesale mix stood at 54:46. Deposit growth was at 13% YoY with CASA mix at 43.1% and Retail deposit mix at 41% as per LCR.

Sumanth Kathpalia, managing director & CEO, IndusInd Bank said: “The Q1 FY23 witnessed turbulent operating environment with interlinkages of inflation, reversal of accommodative monetary policy and Russia-Ukraine conflict playing out. The first quarter of a financial year is also a seasonally weak quarter for some businesses.

IndusInd Bank results Q1FY23: Asset quality deteriorated QoQ due to slippages from the restructuring book

On the asset quality front, fresh slippages stood at Rs 2,250 crores led by Rs 900 crores worth of slippages from the restructuring book. As a result, restructuring book declined to 2.1% from 2.6% in Q4FY22. Sequentially, GNPA/NNPA ratio increased marginally by 8bp/3bp QoQ to 2.35%/0.67%, respectively.

Provision Coverage Ratio was consistent at 72% as of 30 June 2022. IndusInd Bank holds contingent provisions of Rs 3000 crores (1.2% of loans). While deposits as on Q1FY23 end were Rs 3,02,719 crore as against Rs 2,67,233 crore in Q1FY22, an increase of 13% YoY. Advances as of Q1FY23 end were Rs 2,47,960 crore as against Rs 2,10,727 crore, an increase of 18% YoY over Q1FY22.

Technical Analysis of IndusInd Bank Share Price

The IndusInd Bank share price reached a 52 weeks of 1242 in October 2021. After that it has corrected significantly and reached its 52 weeks low of 763 last month only prior to the delaration of Q1FY23 results. Post announcement, the IndusInd Bank share price has gone up by almost 25% and is trading at almost 15% below its 52 weeks high. Even the 50 EMA has crossed the 100 and 200 EMA from below in August 2022, highlighting its entry into long term bullishness. Long term investors therefore, might be considering investing in this IndusInd Bank stock as long as technical indicators remain bullish on a long term time frame to earn decent returns from this banking stock.

Share khan said, “IndusInd Bank (IIB) expects to have recovered from the past challenges and has taken learnings from the past to improve and put adequate risk controls in place for future. The bank is guiding for a strong loan growth momentum outlook across consumer and corporate book. The bank intends to achieve a loan mix of 60:40 (retail-corporate) from the current mix of 54:46. However, the restructured book (2.1% of advances) is higher for the bank, given the higher share of CV and microfinance portfolio. We maintain Buy on IndusInd Bank stock with a revised TP of Rs. 1,270.”

Motilal Oswal said, “We estimate PAT to grow at 35% CAGR over FY22-24 leading to 15.2% ROE in FY24. We maintain our BUY rating on IndusInd Bank stock with a TP of INR1,300 (premised on 1.7x FY24E ABV).”

ICICI Direct said, “IndusInd Bank’s share price has gained 1.7x in the past 2 years. We believe the bank is poised to report improved business traction coupled with robust ROA. Trajectory. We retain our BUY rating on the IndusInd Bank stock with a TP of 1150”

Our view

IndusInd Bank’s management has indicated that it would continue to focus on strengthening its liability franchise. The bank has been improving the granularity of its deposit book. Retail LCR (Liquidity Coverage Ratio) has gone up from 26% in FY2019 to 41% in FY2022. This signifies bank’s growing core strength. Whereas overall stress from the restructured book is likely to be 15-20%. 70% of this book is forecasted to run down by Q3FY23. The bank maintains its guidance of 15-18% loan growth, PPOP margin of >5%, credit cost of 120-150bp and C/I ratio of ~41-43%.

The verdict on the Univest App says that IndusInd Bank has strong fundamentals. It is bullish on both short as well as long term time frame indicators. Therefore, it suggests investors to “Buy” or increase their holdings in IndusInd Bank stock.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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