IndusInd Bank: Good performance

Strong performance in the recent past and positive growth outlook have led to universal upgrades in earnings estimates.

IndusInd Bank posted a strong set of numbers for the September quarter, showing consistent improvement in operational parameters both sequentially as well as on a year-on-year (y-o-y) basis, where it benefits from a low base.

Net interest income increased 60 per cent y-o-y and 12 per cent sequentially, aided by 33 per cent y-o-y growth in advances, while deposits increased 37 per cent. Low cost current and savings accounts (Casa) improved to 25.4 per cent of total deposits from 24.3 per cent in the June quarter.

Net interest margins rose 55 basis points y-o-y (nine basis points sequentially) to 3.41 per cent. Market conditions were tough during the last quarter due to tight liquidity. The bank also saw yields on advances dipping marginally, while cost of deposits was flat sequentially. Net profit increased almost 80 per cent y-o-y and 12 per cent sequentially, helped by falling non-performing loans and 25-per cent rise in the core fee income.

After its recent qualified institutional placement, the bank has adequate capital to expand aggressively. It has permission to open 127 branches this year, with 28 launched already. A strong performance in the recent past and positive growth outlook have led to near universal upgrades in its earnings estimates. The stock has risen almost 16 per cent over the last month, outperforming the BSE Bankex by six percentage points. At Rs 270, the stock is valued at 3.5 times estimated 2010-11 book value and three times 2011-12 estimates, which is expensive.