Indusind Bank's advances growth has continued to remain healthy in the range of 25%-30%
for several quarters. However, prolonged weakness in the economic environment accompanied with tightening in the monetary policy stance, would limit the bank's ability to keep up with the current pace of growth. The bank's consumer finance division comprising mainly of loans to CV and UV segment have begun to show signs of slowdown. However, demand may revive in the rural areas owing to good monsoons. Growth in corporate loan book is expected to taper down as borrowings from mid corporates have started diminishing. In FY14e, the management expects loan book to grow in the range of 20%-25%. We are building in loan growth at 20% for FY14E. * Higher funding costs to squeeze margin by 50bps over FY14E * Indusind's deposit profile comprises higher proportion of wholesale deposits (approximately 45-50% of deposits). Given the recent increase in the short term rates coupled with tighter liquidity situation, the wholesale deposits will get re-priced at higher cost by ~200 bps. This would increase the blended cost by ~100 bps. On the assets front, the management expects 80% of corporate loan book (50% of loan book) to get re-priced upwards by ~100 bps. This would increase yields by ~40 bps, consequently the overall NIM could see a contraction of ~50 bps in FY14e. The management expects NIM to hover around 3.2% in FY14e. * Growth in core fee income to exceed b/s growth * Indusind's core fee income grew at a healthy rate of 36% in FY13. In the current year the management expects slowdown in the distribution based fee income, led by insurance business. Nevertheless, forex based fee income is expected to maintain growth momentum owing to addition in its retail customer base due to branch expansion coupled with further penetration into existing wholesale clients. We expect core fee income growth rate to decline from 36% to 23% in FY14e. * Asset Quality to remain stable; Credit costs guidance at 60bps in FY14E * Indusind's asset quality continues to remain manageable with gross NPA and net NPA at 1.21% and 0.26% respectively, and PCR of 80% (inclusive of INR500 mn floating provision). The management envisages some stress stemming in mid-corporate loans and has added more borrowers in its watch list. In the CV segment, the bank is experiencing some delays in payment, but the NPAs generated are more technical in nature. So overall in FY14e, the bank expects to restrict its credit cost to 60-65 bps. We are building in credit costs at 80bps for FY14E. * Valuation and outlook * In light of challenging macro environment we are cutting our earnings estimates by 10% in FY14e and 11% in FY15e to reflect declining loan growth and pressure on NIM. -- -- NIFTYVIEWS.COM NOW A FREE OPEN SOURCE WEBSITE. http://www.niftyviews.com/ Disclaimer :- "The opinions expressed by the members on this board are based on their individual experience and perceptions and to share information with other members with the best of intentions to help fellow members in investment decisions as equity investment is a risky venture.The administrator of www.Niftyviews.com just provide a platform for the authors to express their opinion and take no gurantee for the genuineness of the same." --- You received this message because you are subscribed to the Google Groups "TEAM STOCKRESEARCHERS" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. For more options, visit https://groups.google.com/groups/opt_out.
