IndusInd Bank Q1FY18: Strong loan growth, stable NII may boost earnings

Key Highlights: 

• IndusInd Bank likely to report 25% yoy rise in PAT
• IndusInd Bank's loan and deposit growth may be at 25% yoy and 29% respectively
• IndusInd Bank's gross NPAs stood at Rs 1,054.87 crore in FY17

IndusInd Bank will announce its results for the first quarter ended June 30, 2017 (Q1FY18) on Tuesday. 

Bharat Chhoda, Ankit Panchmatia and Cheragh Sidhwa, analysts at ICICI Securities believe that retail focus banks, which includes IndusInd, will deliver healthy set of numbers during this quarter.

Nilesh Parikh, Kunal Shah and Prakhar Agarwal, analysts at Edelweiss Financial Services said, “Loan growth to be higher than industry, with the continued tilt towards consumer finance division. Fee income trends to continue superior performance."

Analysts at Motilal Oswal expects loan growth to be significantly ahead of system loan growth at 25% in Q1FY18. Deposit growth is also seen strong at 29% year-on-year (YoY).

Analysts at Kotak Institutional Equities said, “We expect loan growth at 22% yoy, led by steady growth in retail business. NIM will remain stable qoq supported by higher share of retail loans.”

On Net Interest Income (NII), Motilal estimates it to grow by 17% aided by healthy fee income growth which is seen at 21% yoy growth. Also stronger contribution of third party distribution fees owing to increased inflows into MFs and insurance industry should continue to support higher third-party distribution fees.

However, Kotak expects growth in fee income to slow down for IndusInd.

Kotak further said, “We see limited asset-quality stress but provisions will decline qoq as a stressed asset will be upgraded following the recent completion of a transaction (M&A) involving sale of assets.”

The trio at Edelweiss further said, “Asset quality trends will likely be stable (provision benefi t likely to percolate from recent deal in cement segment).”

In last quarter of FY17 (Q4FY17), IndusInd Bank made provisions of Rs 122 crore on exposure to JP Associate. For this, ICICI Securities said, “The one off provision made in Q4FY17 on exposure to JP Associate would be reversed in Q1FY18E, which would aid earnings.”

In FY17, gross NPAs of IndusInd was at 0.93% higher from 0.87% in Q4FY16. In value terms it stood at Rs 1,054.87 crore against Rs 776, 82 crore a year ago same period.

Overall, IndusInd in Q1FY18, is expected to see 23.78% year-on-year (YoY) and 8.92% quarter-on-quarter (QoQ) growth in its bottom-line (PAT) at Rs 818.7 crore. While NII is estimated to be at Rs 1,696.2 crore, up by 25.05% yoy and 1.72% qoq, as per Motilal.