IndusInd: Steady despite weak CV financing show

Analysts expect the bank to sustain growth rates and asset quality

IndusInd Bank's June 2014 quarter (Q1) results were in line with Street estimates, marked by strong loan growth, consistent fee-income growth, resilient asset quality and healthy profitability.

Loan growth of 24 per cent (higher than estimates of 22 per cent) led the 18 per cent increase in net interest income to Rs 801 crore. The bank posted a 26 per cent year-on-year growth in net profit to Rs 421 crore, versus consensus Bloomberg estimates of Rs 419 crore. While stable asset quality helped, the bank provided Rs 20 crore (double the amount required) towards unhedged forex exposures of its corporate clients which restricted its profit growth. Adjusted for these, the net profit would have been up by 29-30 per cent in line with its run-rate of past 24 quarters, according to the management.

Continued weakness in commercial vehicle (CV) finance (16 per cent of total loan book; 38 per cent of consumer finance book), though, stood out as a sore thumb.

The bank's consumer finance business grew just nine per cent year-on-year driven largely by non-vehicle loans. However, the markets should improve September onwards, the management said.

Corporate banking (57 per cent of total loans), which grew 38 per cent year-on-year, boosted loan growth. This, along with higher costs, however, meant that net interest margins were down marginally (six to nine basis points) for the quarter.

The bank's core fee-income growth was robust at 38 per cent to Rs 486 crore, ahead of 28 per cent growth witnessed in the March 2014 quarter. Strong traction in investment banking (up 74 per cent), loan processing fees (up 56 per cent) and foreign exchange income (up 46 per cent) fuelled this growth. Going forward as well, fee-income growth should outpace loan growth.

The increase in restructured advances (total loans) from 0.33 per cent in March quarter to 0.4 per cent (due to one customer account) appears to be a one-off. The management remains positive on asset quality and hopes to maintain it at current levels.

Though the stock fell by 1.65 per cent post results on a weak day, most analysts remain positive.