IndusInd Bank: On growth trajectory

A decent growth in margins and interest income helped the bank post a healthy performance in the recently-concluded quarter.

IndusInd Bank has reported 94.06 per cent year-on-year (y-o-y) rise in net profit at Rs 98 crore for the fourth quarter ended March 2010 on the back 89 per cent (y-o-y) growth in the net interest income (NII) to Rs 272.8 crore.

For the full year, net profit grew 136 per cent y-o-y to Rs 350.31 crore, while the NII surged 93 per cent to Rs 886.41 core. During 2009-10, net interest margin (NIM) improved 2.88 per cent from 1.81 per cent during the previous year, getting the advantage of spread expansion by 78 basis points.

 

According to the management, with 60 per cent of revenues coming from interest income, an upward movement in NIM will be a key driver in profit growth in 2010-11. “Going ahead, led by likely improvement in current account and saving account (Casa) share to 26.5 per cent in FY11 and 28 per cent in FY12, we expect NIMs of 3.2 per cent in FY11 and 3.3 per cent in FY12,” states an Anand Rathi report.

Gross non-performing assets (NPAs) remained flat at Rs 255 crore in 2009-10. But higher NPA provisions lowered the net NPAs by 43 per cent y-o-y to Rs 102 crore. The bank is also looking to raise Tier-I capital in the current financial year and aims for a credit growth of 30 per cent in 2010-11.

Besides the core banking business, IndusInd is also focusing on remittances and selling domestic wealth products to NRIs. On the corporate banking side, it plans to start supply-chain financing to support suppliers of corporate clients.

“IndusInd has good growth prospects and will benefit from an uptick in the economy. Though expensive than its peers, it still is a good long-term bet” said Krinal Shah, analyst, Anagram Research. The stock moved up 1.1 per cent at the National Stock Exchange on Tuesday to Rs 184 and trades at around 3.5x its adjusted book value based on 2009-10.