Shares of IndusInd Bank were trading in red ahead of its fourth quarter ended result for March 31, 2017.

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Read results here: IndusInd Bank Q4 net profit at Rs 752 crore up 21% yoy

At 1002 hours, the stock price of IndusInd Bank was trading at Rs 1,429.20 per piece on BSE down Rs 3 or 0.18%. However, the stock opened at Rs 1,440.30 per piece on the index. 

Presently India's entire banking system is suffering from single-digit loan growth, excess liquidity, weak NII and lack of resolution to its non-performing assets (NPAs) problem.

Q3FY17 of IndusInd Bank

Surpassing analysts estimates in Q3, IndusInd Bank reported net profit of Rs 750.64 crore, a whopping 29.19% rise compared to Rs 581.02 crore in the corresponding period of previous year. 

The bank's net interest income stood at Rs 1578.42 crore, clocking growth of 34.51% year-on-year (YoY)  and 8.08% quarter-on-quarter (QoQ) basis.

Provisions and contingencies were at Rs 216.85 crore, increasing by 22.45% yoy and 1.38%. On the other hand gross non-performing assets (GNPA) stood at 0.94%, expanding by 10 basis points yoy and 4 basis points qoq.

What can be expected in Q4? 

Many analysts are quite optimistic about IndusInd Bank's Q4FY17 result. 

Nilesh Parikh, Kunal Shah and Prakhar Agarwal analsyst 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. Asset quality trends will likely be stable."

A Motilal Oswal report said, "We expect strong loan growth of 24% in 4QFY17 – significantly ahead of system loan growth. Deposit growth would be strong at 32% on year-on-year basis, aided by demonetization in 3Q. Continued market share gains in VF would remain a key factor to monitor."

Net Interest Income (NII)  which is currently expected to be hampered for entire banking system in Q4 led by banks credit growth which has reached to 60-year low, will not be the case for IndusInd Bank. 

Analysts at Motilal Oswal said, "We expect NII to grow 20%, supported by healthy fee income growth of 24%. The management expects stronger contribution of third-party distribution fees owing to increased inflows into mutual funds and insurance industry."

While HDFC Securities expect NII of IndusInd Bank to grow by 30.6 % to Rs 1,655 crore compared with Rs 1,268 crore.

However, net interest margin is seen to decline sequentially (by 5bp QoQ), but would remain in the range between 3.8-3.9%. The quantum of CASA (current account and savings account) retained would be a key factor.

On the other hand, operating expense for the bank is expected to remain higher by 30% yoy against 25% growth in total income. 

Meanwhile, Motilal said, " Healthy purchasing power parity (PPP) growth which is expected to be more than 19% on yoy basis and controlled credit costs would keep earnings growth strong at 22% on yoy basis."

Key issues that will be closely watch by investors this Q4 would be IndusInd Bank's continued CV/CE growth, corporate asset quality, traction in the non-vehicle consumer lending portfolio.

Also the bank is expected to announce its strategy for the next 3 years as the last planning cycle is ending in FY17. Hence, net interest margin and loan growth guidance will be keenly watched.

Considering above factors, HDFC Securities expect IndusInd Bank to report healthy growth in last quarter of financial year 2016-17. Net profit is expected to increase 26.3 % yoy to Rs 783.5 crore.

Motilal expects net profit of Rs 761.7 crore in Q4 increasing by 22.77% yoy and 1.47% qoq, while net interest income is seen at Rs 1,620.5 crore rising by 27.77% yoy and 2.66% qoq. 

Overall, HDFC Securities said, "If net interest margin comes above 3.8 % (against 4 % in Q3 FY17), gross non-performing assets below 1 % (0.94 %) and credit cost below 20bps (14bps) then that will be considered positive."