RESULTS REVIEW 4QFY19 23 MAY 2019

IndusInd Bank BUY

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

Back on track (almost) As expected, IIB’s P&L was significantly hit by its exposure to the stressed IL&FS group. However, core operating metrics remain largely intact. The exposure to other potentially stressed groups is a monitorable. Maintain BUY with a TP of Rs 1,964 (3.5x Mar-21 ABV of Rs 561). HIGHLIGHTS OF THE QUARTER IL&FS Hit: The exposure to IL&FS (~Rs 30bn, w/w ~Rs

20bn is to the hold co) slipped entirely in 4Q. Annualised slippage jumped to ~8.1%. G/NNPAs doubled sequentially to 210/121bps. The bank provided an additional ~Rs 11.5bn on the exposure, maintaining a specific coverage of ~55%. Exposure to ‘potentially stressed groups’ (1.9% of loans) could keep slippages elevated. Ergo, we have built in slippages of 1.9% over FY19-21E.

Healthy Business Growth: The loan book grew ~28/8% to ~Rs 1.86tn. The corporate book (61%) grew ~30/8%, driven by exponential growth in MFI Loans. ~80% of IIB’s MFI exposure was towards BHAFIN. The retail segment grew ~27/7%. High yielding unsecured and CE loans grew the fastest. Post BHAFIN-integration, we expect loan CAGR of ~28% to persist over FY19-21E.

Reversals Impact NIMs: At 3.59%, NIMs dipped ~24bps QoQ, with a 53bps dip in corporate yields. Interest reversals due to the slippage of IL&FS were ~Rs 1.53bn. Ex-IL&FS, NIMs were ~3.87% and corporate yields were ~9.87%. At, 4.3%, we have factored in higher NIMs over FY19-21E, with the higher yielding BHAFIN consolidation. Management guided for NIMs of 3.8% over FY19-21E (ex-BHAFIN).

Near term outlook: The stock should remain buoyant with near term worries on embedded stress mostly having played out.

STANCE Worries on asset quality post the IL&FS exposure are mostly in the price now. The (1) Lower than feared exposure to potentially stressed groups, (2) Contracted SMA II, and (3) Alleviation of concerns on fee income recognition are heartening. We thus retain our target multiple at 3.5x. The acquisition of a hi-growth, hi-yielding business (BHAFIN) holds profitable and synergistic promise. Leadership succession is also a medium term monitorable.

Financial Summary (Rs mn) 4QFY19 4QFY18 YoY (%) 3QFY19 QoQ (%) FY18 FY19P FY20E* FY21E* Net Interest Income 22,324 20,076 11.2% 22,881 -2.4% 74,974 88,462 121,931 152,477 PPOP 20,677 17,689 16.9% 21,170 -2.3% 66,561 80,882 108,039 131,790 PAT 3,601 9,526 -62.2% 9,850 -63.4% 36,060 33,011 49,019 67,685 EPS (Rs) 6.0 15.9 -62.4% 16.4 -63.5% 60.1 54.8 70.8 97.8 ROAE (%) 16.5 13.3 16.1 18.0 ROAA (%) 1.80 1.32 1.56 1.73 Adj. BVPS (Rs) 379 400 476 561 P/ABV (x) 4.01 3.80 3.19 2.71 P/E (x) 25.3 27.7 21.4 15.5 Source: Bank, HDFC sec Inst Research. Note: * incl. BHAFIN merger.

INDUSTRY BANKS CMP (as on 22 May 2019) Rs 1,519 Target Price Rs 1,964 Nifty 11,738 Sensex 39,110 KEY STOCK DATA Bloomberg IIB IN No. of Shares (mn) 603 MCap (Rs bn) / ($ mn) 916/13,141 6m avg traded value (Rs mn) 3,745 STOCK PERFORMANCE (%) 52 Week high / low Rs 2,038/1,333 3M 6M 12M Absolute (%) 3.8 (0.7) (20.2) Relative (%) (5.2) (12.5) (33.1) SHAREHOLDING PATTERN (%) Dec-18 Mar-19 Promoters 16.8 16.8 FIs & Local MFs 11.6 11.6 FPIs 53.7 53.5 Public & Others 17.9 18.1 Pledged Shares - - Source : BSE

Darpin Shah darpin.shah@hdfcsec.com +91-22-6171-7328 Aakash Dattani aakash.dattani @hdfcsec.com +91-22-6171-7337

INDUSIND BANK : RESULTS REVIEW 4QFY19

Page | 2

Five Quarters At A Glance Rs mn 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 YoY Growth QoQ Growth Net Interest Income 20,076 21,224 22,033 22,881 22,324 11.2% -2.4% Non-interest Income 12,080 13,016 13,173 14,689 15,590 29.1% 6.1% Treasury Income 950 1,366 990 2,030 1,400 47.4% -31.0% Operating Income 32,156 34,240 35,206 37,569 37,914 17.9% 0.9% Operating Expenses 14,467 15,129 15,281 16,400 17,237 19.1% 5.1% Pre Provision Profits (PPOP) 17,689 19,111 19,924 21,170 20,677 16.9% -2.3% Provisions And Contingencies 2,820 2,090 2,000 3,060 20,040 610.6% 554.9% NPA Provisions 2,820 2,090 2,000 3,060 18,537 557.3% 505.8% PBT 14,333 15,611 14,022 15,103 5,070 -64.6% -66.4% Provision for Tax 4,808 5,254 4,819 5,253 1,469 -69.4% -72.0% PAT 9,526 10,357 9,203 9,850 3,601 -62.2% -63.4% Balance Sheet items/ratios Deposits (Rs bn) 1,516 1,589 1,682 1,757 1,949 28.5% 10.9% CASA Deposits (%) 44.0 43.4 43.6 43.6 43.1 -86 bps -43 bps Advances (Rs bn) 1,450 1,507 1,631 1,732 1,864 28.6% 7.6% CD Ratio (%) 95.6 94.8 97.0 98.6 95.7 6 bps -291 bps CAR (%) 15.03 14.70 14.28 14.19 14.16 -87 bps -3 bps Tier I (%) 14.58 14.29 13.86 13.78 13.70 -88 bps -8 bps Profitability Yield On Advances (%) 11.08 11.15 11.44 11.52 11.25 17 bps -27 bps Cost Of Deposits (%) 5.98 6.20 6.54 6.74 6.80 82 bps 6 bps NIM (%) 3.97 3.92 3.84 3.83 3.59 -38 bps -24 bps Cost-Income Ratio (%) 45.0 44.2 43.4 43.7 45.5 47 bps 181 bps Tax Rate (%) 33.5 33.7 34.4 34.8 29.0 -457 bps -580 bps Asset quality Gross NPA (Rs bn) 17.05 17.41 17.81 19.68 39.47 131.5% 100.6% Net NPA (Rs bn) 7.46 7.62 7.88 10.29 22.48 201.5% 118.4% Gross NPAs (%) 1.17 1.15 1.09 1.13 2.10 93 bps 97 bps Net NPAs (%) 0.51 0.51 0.48 0.59 1.21 70 bps 62 bps Delinquency Ratio (%) 2.52 1.29 1.07 1.92 8.21 569 bps 629 bps Restructuring O/s (%) 0.05 0.05 0.11 0.11 0.09 4 bps -2 bps Coverage Ratio (%) 56.3 56.2 55.8 47.7 43.0 -1322 bps -466 bps Change In Estimates

Rs mn FY20E FY21E

Old New Change Old New Change NII 124,900 121,931 -2.4% 156,695 152,477 -2.7% PPOP 103,293 108,039 4.6% 130,896 131,790 0.7% PAT 49,689 49,019 -1.3% 67,704 67,685 0.0% ABV (Rs) 489.3 475.8 -2.8% 573.9 561.3 -2.2% Source: HDFC sec Inst Research

Led by loan growth of ~28/8%, NIMs contracted ~38/24bps, largely on a/c of interest reversals (Rs 1.53bn on IL&FS)

Of the total slippages of ~Rs 36.9bn, corp. slippages amounted to ~Rs 32.3bn (incl. IL&FS of Rs 30bn); Retail slippages were~ Rs 4.6bn i.e. 2.5% ann.

Core fee growth accelerated to ~28/12%, driven by a ~44/19% growth in loan processing fees and a ~47/5% growth in forex fees

Ex-IL&FS, LLPs were ~Rs 3.53bn; IIB provided ~70% on its exposure to the hold co and ~25% on its exposure to SPVs

Retail advances (CFD) grew ~27/7% to constitute ~39% of advances while corporate (CCB) advances grew ~30/8%

Dipped, as deposit growth picked up

Raised additional Tier 1 capital of ~Rs 15bn

Corporate yields were ~9.3% and retail yields were ~14%; ex-IIFL, overall yields were 11.6% and corporate yields were ~9.9%

INDUSIND BANK : RESULTS REVIEW 4QFY19

Page | 3

Robust business traction

At ~28/9%, IIB’s loan growth was broad based, with the corporate book growing ~30/8% to constitute ~61% of loans. In spite of ~Rs 67bn worth of sell-downs, growth remained healthy. The retail book grew ~27/7%.

Within the corporate book, MFI loans grew ~3.3x/80% to ~Rs 135bn. As IIB is to acquire BHAFIN, it is in the process of taking over its loans to other institutions. 80% of the MFI exposure is towards BHAFIN. Ex-MFI loans, corporate advances grew ~20/3%.

Within the high yielding retail book, unsecured products like PL (+48/12%) and CC (+63/24%) grew

the fastest on a small base. Together, they constitute ~5.6% of the overall loan book. Vehicle and equipment loans grew ~26/5% to constitute ~28.6% of the overall book.

After lagging loan growth for several quarters, deposit growth accelerated to ~29/11%. CASA deposits (43%) grew ~26/10% driven by CA growth of ~42/12%. Term deposits grew ~31/12%.

The bank is focused on reducing deposit concentration. As at FY18, Top 20 depositors contributed to ~23.8% of deposits. (11.4% for AXSB, 6.2% for ICICBC). Commentary indicates the presence of lumpy deposits from PSUs.

Robust Loan Growth Of ~29% YoY Loan Book Mix (%): Sequentially Stable

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

The loan book continues to be tilted towards the Corp segment (61% of loans) Within the corp. book, MFIs constituted ~7.3% of total exposure, gems and jewelry and real estate constituted ~3.9% each The rapid increase in the MFI exposure was on a/c of acquisition of loans to BHAFIN 60% of the real estate exposure is to commercial projects The real estate exposure is to ~70 projects with an ATS of ~Rs 1bn

20%

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100300500700900

1,1001,3001,5001,7001,9002,100

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Advances (Rsbn) YoY Growth (RHS)Rsbn % YoY

58

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Corp. CFD

INDUSIND BANK : RESULTS REVIEW 4QFY19

Page | 4

CFD (Retail) Mix: CC And PL Contiue To Gain Share CASA Ratio: Dips ~40bps QoQ

Source: Bank, HDFC sec Inst Research Source: Bank, HDFC sec Inst Research

NII Dips QoQ Due To Interest Reversals

Led by interest reversals of Rs 1.53bn, core earnings dipped 2% QoQ to ~Rs 22.3bn, even as the book grew ~8% QoQ.

Consequently, yields/ NIMs dipped ~27/24bps QoQ to ~11.25/3.59%. Ex-IL&FS, yields and margins were ~11.6% and 3.87%. High yielding MFI and business banking loans resulted in rich corporate yields (vs. peers) of ~9.3%, (ex. IL&FS at ~9.87%). The core Corporate yields were lower at ~9.06%, in line with dispelling concerns on the credit rating of borrowers. Retail yields dipped ~7bps QoQ to ~14.05%.

Lower interest reversals and the on boarding of BHAFIN’s high yielding book should keep NIMs buoyant. We have built in NIMs of 4.3% over FY19-21E.

~29/6% growth in non-interest income was driven by a ~28/12% growth in core fees. Loan processing fees (+44/19%) and forex income (+47/5%) were major drivers of fee income. Transaction banking fees grew ~24/22%.The additional disclosures on granularity of core fees provide confidence on their sustainability.

As core earnings dipped QoQ (-2%), the C-I ratio rose (+180bps QoQ) to ~45.5% even as opex growth was contained. Ex-treasury, the C-I ratio rose ~100bps QoQ to ~47%.

With an improvement in core earnings and sustained fee growth, we expect an improvement of ~240bps in the C-I ratio over FY19-21E.

Within the retail book, CC (+63/24% YoY/QoQ) and PL (+48/12%) displayed robust growth on a small base; consequently, their share increased to 14% of CFD loans Vehicle and equipment loans constituted ~73% of the retail book and ~28.6% of total advances w/w CVs a/c for ~38.5% of retail loans followed by car loans at ~9% Healthy SA and Retail TD growth was led by improved traction in the consumer banking segment IIB added 1.1L SA customers with an avg balance of Rs 65k CASA ratio dipped sequentially to ~43%

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CV UV 3W 2W Car Equip. Fin CC LAP PL

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SA % CA %

INDUSIND BANK : RESULTS REVIEW 4QFY19

Page | 5

NIM Dip QoQ Due To Interest Reversals C-I Ratio: Up 180bps QoQ

Source: Bank, HDFC sec Inst Research Source: Bank, HDFC sec Inst Research

Fee Income Mix: Share of Processing Fees Up QoQ Fee Income As % Of Loans Dips ~10bps QoQ

Source: Bank, HDFC sec Inst Research Source: Bank, HDFC sec Inst Research

We have factored in calc. NIMs of ~4.3% over FY19-21E NIMs dipped 24bps QoQ to 3.59% due to interest reversals Fee Income Break-up: • Distribution (20%) • Retail Loan processing

(13%) • Corp FX Fees (10%) • Corp trade & remittance

fees (10%) • Retail FX Fees (8%) • IB Syndication (8%) • IB Structured Finance (7%) • Corp Loan Processing (7%) Opex grew ~19/5% YoY/QoQ driven by other opex at ~25/5% YoY/QoQ The reversal of int. income largely contributed to the sequential rise in the C-I ratio (+180bps) to 45.5% Ex-interest reversals, the C-I ratio was stable QoQ at ~43.7%

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Yield on Advances Cost of Deposits NIM (RHS)

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Trade & Remit. Processing fees FX IncomeTPP distribution IB Fee General fees

Rs bn 3.6%

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INDUSIND BANK : RESULTS REVIEW 4QFY19

Page | 6

IL&FS Slips IIB’s exposure to IL&FS (Rs 30bn w/w ~Rs 20bn is to

the hold co.) slipped in 4Q. The calc. slippage ratio jumped to ~8.2% ann. Ex-IL&FS slippages were ~1.5%.

Ex-IL&FS, corporate slippages were ~Rs 2.3bn (-57/50%). Retail slippages were ~43/32% higher at ~Rs 4.58bn i.e. 2.5% ann.

Reductions in corporate NPAs were ~2.4/4.3x YoY/QoQ at ~Rs 13.45bn led by w/o of ~Rs 10bn (IL&FS).

Retail NPAs (1.18%) were up ~32/12%, driven by a rise in commercial vehicle (125bps, +50/18%) and cards NPAs (187bps, +86/21%). The rise is retail GNPAs doesn’t worry us.

With a total of 45 a/cs, SMA I & II was ~66bps. The overall PCR dipped ~470bps QoQ to ~43% as a

result of higher write-offs.

The mgt claimed that the total exposure to ‘potentially stressed groups’ (presumably Essel Group, ADAG and DHFL) is ~1.9% of the book. Further, the entire amount is performing.

In spite of the higher slippage in FY19 itself, our slippage assumptions over FY19-21E remain elevated at 1.9%. We have conservatively factored in higher slippages, based on the exposure to ‘potentially stressed groups’.

Provisions were up ~4.7/2.5x, with a 7.1/6.5x rise in LLPs to ~Rs 20bn. IIB provided an additional ~Rs 11bn in 4Q towards its exposure to IL&FS. Overall PCR on the exposure was ~55% with coverage of ~70% on the hold co. We continue to factor in significantly higher LLPs of ~1.2% over FY19-21 (vs. the guidance of 60bps) to build higher coverage (62% at FY21E) and higher provisions on exposure to potentially stressed groups.

Slippages Spike Led By IL&FS Asset Quality: Deteriorates Sequentially

Source : Bank, HDFC sec Inst Research Source: Bank, HDFC sec Inst Research

Slippages jumped to ~8.2% vs. 1.9% QoQ Ex-IL&FS, slippages were ~Rs 1.92% IL&FS contributed to ~Rs 30bn of total corporate slippages of ~Rs 32.3bn W/offs were elevated in 4Q, due to the w/off of a large chunk of the exposure to IL&FS The mgt guided for LLPs of ~60bps for FY19 Average PCR on the exposure to IL&FS was ~55%, with coverage of ~70% on the exposure to the hold co and ~25% on SPVs The mgt expects to recover ~90-100% of the amount due from IL&FS’ SPVs

0.8%

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10.015.020.025.030.035.040.045.0

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Gross NPA Net NPA Gross NPA % (RHS) Net NPA % (RHS)

Rs bn

INDUSIND BANK : RESULTS REVIEW 4QFY19

Page | 7

Asset Quality Segment-Wise Corp 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 GNPA 0.65% 0.74% 0.76% 0.73% 0.79% 0.81% 0.98% 1.12% 1.21% 1.20% 1.23% 1.07% 1.14% 2.72% Slippages (Ann.) 0.96% 0.85% 0.70% 0.51% 0.75% 2.87% 2.03% 1.55% 0.75% 2.46% 0.92% 0.37% 1.74% 11.36% LLP (Ann.) 0.66% 0.56% 0.48% 0.52% 0.51% 1.17% 0.63% 0.78% 0.40% 0.72% 0.36% 0.25% 0.62% 6.72%

CFD 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 GNPA 1.08% 1.08% 1.14% 1.17% 1.16% 1.12% 1.25% 1.06% 1.10% 1.14% 1.05% 1.13% 1.12% 1.18% Slippages (Ann.) 1.68% 1.90% 1.69% 1.90% 1.63% 1.60% 2.18% 1.72% 2.00% 2.24% 1.77% 2.05% 2.05% 2.52% LLP(Ann.) 0.77% 0.88% 0.85% 0.79% 0.73% 0.62% 0.89% 0.68% 0.88% 0.99% 0.88% 0.91% 0.90% 0.95% Source: Bank, HDFC sec Inst Research Consumer Finance: GNPAs

3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 CV 1.05% 1.03% 1.05% 1.03% 0.96% 0.94% 1.10% 1.05% 1.01% 1.08% 0.97% 1.06% 1.13% 1.04% UV 1.00% 1.22% 1.30% 1.18% 1.09% 1.14% 1.47% 1.42% 1.31% 1.33% 1.43% 1.38% 1.37% 1.35% CE 1.45% 1.31% 1.44% 1.45% 1.28% 1.23% 1.11% 1.00% 1.11% 1.13% 0.92% 0.75% 0.79% 0.75% 3W/SCV s 0.81% 0.98% 1.10% 1.00% 0.86% 0.93% 1.35% 1.13% 1.24% 1.28% 1.14% 1.32% 1.35% 1.43% 2Ws 2.95% 3.06% 3.20% 3.74% 3.78% 3.55% 3.62% 3.63% 3.98% 3.95% 3.81% 4.02% 3.86% 3.88% Cars 0.39% 0.52% 0.50% 0.50% 0.76% 0.67% 0.76% 0.69% 0.64% 0.68% 0.71% 0.82% 0.85% 0.81% LAP/PL/HL 0.57% 0.76% 0.92% 1.00% 1.15% 1.26% 1.46% 0.54% 0.83% 0.91% 0.62% 0.96% 0.68% 0.71% Cards 1.48% 1.54% 1.79% 1.80% 1.71% 1.43% 1.32% 1.56% 1.73% 1.74% 1.87% 1.52% 2.02% 2.07% Source: Bank, HDFC sec Inst Research RoAA Stable QoQ With Higher Treasury Gains

Source: Bank, HDFC sec Inst Research

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NII Other income Opex Provision Tax RoAA (RHS)

INDUSIND BANK : RESULTS REVIEW 4QFY19

Page | 8

Peer Set Comparison

BANK Mcap (Rs bn)

CMP (Rs) Rating TP

(Rs) ABV (Rs) P/E (x) P/ABV (x) ROAE (%) ROAA (%)

FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E KMB# 2,854 1,495 BUY 1,481 209 236 272 47.3 37.8 31.0 5.77 5.03 4.30 12.7 13.6 14.3 1.70 1.75 1.76 ICICIBC # 2,613 405 BUY 454 138 153 172 58.6 17.7 12.3 2.22 1.97 1.72 3.3 9.2 12.0 0.36 1.07 1.34 AXSB 2,039 779 BUY 896 215 261 309 41.2 21.9 15.3 3.48 2.87 2.42 7.2 12.4 15.5 0.63 1.05 1.33 IIB* 916 1,519 BUY 1,964 400 515 561 27.7 21.4 15.5 3.80 2.95 2.71 13.3 16.1 18.0 1.32 1.56 1.73 RBL 320 667 BUY 803 169 243 268 32.8 26.3 19.9 3.95 2.74 2.49 12.2 12.5 12.7 1.22 1.31 1.34 FB 201 101 NEU 98 59 65 76 16.2 12.6 9.5 1.73 1.55 1.34 9.8 11.5 13.8 0.84 0.93 1.05 CUB 153 209 BUY 240 58 68 80 22.5 19.4 16.5 3.61 3.06 2.62 15.2 15.1 15.4 1.60 1.61 1.61 KVB 64 80 NEU 84 50 52 60 30.3 19.4 11.1 1.60 1.53 1.34 3.3 5.1 8.7 0.31 0.45 0.71 DCBB 72 231 BUY 228 87 99 114 21.9 16.6 12.5 2.65 2.33 2.02 11.0 13.0 15.2 0.99 1.09 1.20 SBIN # 3,044 341 BUY 383 146 188 222 260.4 9.1 6.2 1.72 1.33 1.11 0.4 10.6 13.9 0.02 0.64 0.84 BOB 335 126 NEU 130 99 135 162 16.7 7.1 5.3 1.28 0.93 0.78 4.9 10.6 12.8 0.27 0.56 0.67 AUBANK 208 687 BUY 680 101 128 151 52.6 37.2 26.6 6.80 5.36 4.55 14.1 15.3 17.2 1.48 1.49 1.61

Source: Company, HDFC sec Inst Research, # Adjusted for subsidiaries value, * FY20/21E is including BFI merger

INDUSIND BANK : RESULTS REVIEW 4QFY19

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Income Statement (Rs mn) FY17 FY18 FY19P FY20E* FY21E*

Interest Earned 144,057 172,807 222,612 289,261 369,876

Interest Expended 83,431 97,833 134,150 167,330 217,400

Net Interest Income 60,626 74,974 88,462 121,931 152,477

Other Income 41,715 47,501 56,467 66,253 79,130

Fee Income (CEB) 28,953 34,119 39,513 50,218 62,596 Treasury Income 2,769 3,638 5,786 3,500 2,750 Total Income 102,341 122,475 144,929 188,184 231,607

Total Operating Exp 47,831 55,914 64,047 80,145 99,817

Employee Expense 15,210 17,807 18,535 23,050 28,525 PPOP 54,510 66,561 80,882 108,039 131,790

Provisions & Contingencies 10,913 11,754 31,077 32,551 31,157

Prov. For NPAs (Incl. Std Prov.) 7,048 9,009 27,190 29,188 27,167 PBT 43,597 54,807 49,806 75,488 100,633

Provision for Tax 14,918 18,747 16,795 26,469 32,948

PAT 28,679 36,060 33,011 49,019 67,685 Source: Bank, HDFC sec Inst Research, * Including BFI merger

Balance Sheet (Rs mn) FY17 FY18 FY19P FY20E* FY21E*

SOURCES OF FUNDS Share Capital 5,981 6,002 6,027 6,922 6,922

Reserves 200,480 232,414 260,833 343,492 401,236

Shareholders' Funds 206,461 238,416 266,860 350,414 408,158

Savings 270,372 458,883 544,860 655,535 786,548 Current 196,088 208,410 295,840 355,008 408,259 Term Deposit 799,262 849,099 1,107,979 1,473,953 1,940,274 Total Deposits 1,265,722 1,516,392 1,948,679 2,484,496 3,135,081

Borrowings 224,537 382,891 473,211 582,727 659,682

Other Liabilities 89,764 78,563 89,444 100,349 110,383

Total Liabilities 1,786,484 2,216,262 2,778,194 3,517,986 4,313,305

APPLICATION OF FUNDS Cash & Bank Balance 186,283 132,159 147,834 217,220 230,357

Investments 367,021 500,767 592,661 700,435 847,295

G-Secs 314,523 403,660 477,426 571,434 705,393 Advances 1,130,805 1,449,537 1,863,935 2,409,961 3,033,191

Fixed Assets 13,352 13,388 17,100 18,693 19,627

Other Assets 89,023 120,412 156,664 171,677 182,836

Total Assets 1,786,484 2,216,262 2,778,194 3,517,986 4,313,305 Source: Bank, HDFC sec Inst Research, * Including BFI merger

INDUSIND BANK : RESULTS REVIEW 4QFY19

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Key Ratios

FY17 FY18 FY19P FY20E* FY21E* VALUATION RATIOS EPS (Rs) 47.9 60.1 54.8 70.8 97.8 Earnings Growth (%) 25.4 25.7 (8.5) 48.5 38.1 BVPS (Rs) 338.7 390.9 437.4 501.5 584.9 Adj. BVPS (Rs) 331.3 378.5 400.1 475.8 561.3 DPS (Rs) 6.0 7.5 7.5 8.9 12.2 ROAA (%) 1.78 1.80 1.32 1.56 1.73 ROAE (%) 15.3 16.5 13.3 16.1 18.0 P/E (x) 31.7 25.3 27.7 21.4 15.5 P/ABV (x) 4.58 4.01 3.80 3.19 2.71 P/PPOP (x) 16.7 13.7 11.3 9.7 8.0 Dividend Yield (%) 0.4 0.5 0.5 0.6 0.8 PROFITABILITY Yield On Advances (%) 11.39 10.62 11.02 11.26 11.45 Yield On Investment (%) 6.97 7.09 6.73 6.90 6.90 Cost Of Funds (%) 6.25 5.77 6.21 6.10 6.34 Cost Of Deposits (%) 6.31 5.78 5.82 5.98 6.21 Core Spread (%) 5.08 4.83 5.20 5.28 5.24 NIM (%) 4.20 4.19 3.95 4.31 4.31 OPERATING EFFICIENCY Cost/Avg. Asset Ratio (%) 3.0 2.8 2.6 2.5 2.5 Cost-Income Ratio (Ex. Treasury) 48.0 47.1 46.0 43.4 43.6 BALANCE SHEET STRUCTURE Loan Growth (%) 27.9 28.2 28.6 29.3 25.9 Deposit Growth (%) 36.1 19.8 28.5 27.5 26.2 C/D Ratio (%) 89.3 95.6 95.7 97.0 96.8 Equity/Assets (%) 11.6 10.8 9.6 10.0 9.5 Equity/Advances (%) 18.3 16.4 14.3 14.5 13.5 CASA (%) 36.9 44.0 43.1 40.7 38.1 Capital Adequacy Ratio (CAR, %) 15.3 15.0 14.2 14.1 13.2 W/w Tier I CAR (%) 14.7 14.6 13.7 13.8 12.9

FY17 FY18 FY19P FY20E* FY21E*

ASSET QUALITY Gross NPLs (Rs mn) 10,549 17,049 39,469 47,013 43,545

Net NPLs (Rs mn) 4,389 7,457 22,483 17,825 16,378

Gross NPLs (%) 0.93 1.18 2.12 1.95 1.44

Net NPLs (%) 0.39 0.51 1.21 0.74 0.54

Slippages (%) 1.42% 2.58% 3.25% 2.20% 1.60%

Coverage Ratio (%) 58.4 56.3 43.0 62.1 62.4

Provision/Avg. Loans (%) 0.7 0.7 1.6 1.4 1.0

ROAA TREE Net Interest Income 3.77% 3.75% 3.54% 3.87% 3.89%

Non Interest Income 2.59% 2.37% 2.26% 2.10% 2.02%

Treasury Income 0.17% 0.18% 0.23% 0.11% 0.07% Operating Cost 2.98% 2.79% 2.56% 2.55% 2.55%

Provisions 0.68% 0.59% 1.24% 1.03% 0.80%

Provisions for NPAs 0.44% 0.45% 1.09% 0.93% 0.69%

Tax 0.93% 0.94% 0.67% 0.84% 0.84%

ROAA 1.78% 1.80% 1.32% 1.56% 1.73%

Leverage (x) 8.6 9.2 10.0 10.3 10.4

ROAE 15.27% 16.50% 13.25% 16.05% 18.00% Source: Bank, HDFC sec Inst Research, * Including BFI merger

INDUSIND BANK : RESULTS REVIEW 4QFY19

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RECOMMENDATION HISTORY

Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target 6-Jul-18 1,964 BUY 1,966

10-Jul-18 1,934 BUY 1,971 9-Oct-18 1,601 BUY 2,005

15-Oct-18 1,627 BUY 1,954 8-Jan-19 1,558 BUY 1,952

10-Jan-19 1,602 BUY 1,935 9-Apr-19 1,752 BUY 2,009

23-May-19 1,519 BUY 1,964

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IndusInd TP

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