IndusInd Bank projected to post solid Q4 growth, but may see slight drop in NIM
NEW DELHI: Private lender IndusInd Bank is all set to disclose fourth quarter earnings on Wednesday. The lender is seen reporting strong profit and loan growth, but a minor fall in net interest margin (NIM) during the quarter. Traction in the non-vehicle consumer lending portfolio, updates on merger talks with Bharat Financial and corporate asset quality would be three key things investors would watch out for.
Brokerage Motilal Oswal Securities said the Hinduja group-controlled bank may report a 22.8 per cent rise in net profit at Rs 761.7 crore for the quarter. This would be lower than 29.2 per cent growth witnessed in December quarter and 25.7 per cent YoY growth seen in September quarter. Net interest income (NII) is projected to grow 34.5 per cent YoY to Rs 1,578 crore. Overall, interest income is seen at Rs 3,848 crore.
“We expect strong loan growth of 24 per cent in Q4FY17, which would be significantly ahead of the system loan growth. Deposit growth would be strong at 32 per cent. Continued market share gain in vehicle financing would be a key factor to watch,” the brokerage said.
NIM may inch 5 basis points lower on a sequential basis and is seen at 3.8-3.9 per cent.
The quantum of Casa retained would be one key factor, say analysts. Brokerage JM Financial is positive on the stock. It believes in case the NBFC is merged with IndusInd Bank, it would expand the bank’s RoA by 30 bps due to higher margins and lower effective tax rate on the merged entity.
“Going forward, margins would reduce partly due to negative carry on CRR/SLR and tax rate would normalise, and a more sustainable RoA expansion would be 15-20 bps. The ROE would initially compress as BHAFIN’s leverage is currently 4 times while the bank can lever its capital at least 10-15 times. In the medium term, higher leverage would drive RoE for the combined entity,” the brokerage said.
Motilal Oswal Securities said the lender trades at 3.2 times FY19E BV and 19.7 times FY19E EPS, which is best-in-class.
Brokerage Motilal Oswal Securities said the Hinduja group-controlled bank may report a 22.8 per cent rise in net profit at Rs 761.7 crore for the quarter. This would be lower than 29.2 per cent growth witnessed in December quarter and 25.7 per cent YoY growth seen in September quarter. Net interest income (NII) is projected to grow 34.5 per cent YoY to Rs 1,578 crore. Overall, interest income is seen at Rs 3,848 crore.
“We expect strong loan growth of 24 per cent in Q4FY17, which would be significantly ahead of the system loan growth. Deposit growth would be strong at 32 per cent. Continued market share gain in vehicle financing would be a key factor to watch,” the brokerage said.
NIM may inch 5 basis points lower on a sequential basis and is seen at 3.8-3.9 per cent.
The quantum of Casa retained would be one key factor, say analysts. Brokerage JM Financial is positive on the stock. It believes in case the NBFC is merged with IndusInd Bank, it would expand the bank’s RoA by 30 bps due to higher margins and lower effective tax rate on the merged entity.
“Going forward, margins would reduce partly due to negative carry on CRR/SLR and tax rate would normalise, and a more sustainable RoA expansion would be 15-20 bps. The ROE would initially compress as BHAFIN’s leverage is currently 4 times while the bank can lever its capital at least 10-15 times. In the medium term, higher leverage would drive RoE for the combined entity,” the brokerage said.
Motilal Oswal Securities said the lender trades at 3.2 times FY19E BV and 19.7 times FY19E EPS, which is best-in-class.
