IndusInd Bank reports 72% growth in PAT in Q2, target price raised to Rs.1340 | IndusInd Q2 results

IndusInd Bank report Net Profit 72% YoY increase in net profits with a jump from Rs.647 crore in Q2 FY21 to Rs.1,113 crore in Q2 FY22. The overall collection efficiency of IndusInd Bank for September 2021 was 98% which is a 200bps improvement over the last quarter. The Gross Non-Performing assets showed a decrease of 11bps to 2.77% compared to the 2.88% in Q1 FY22. The slippages are expected to start decreasing from Q3 FY22. Of the total slippages (Rs.26.6 billion) 90.6% stemmed from the retail book.

The amount of interest earned displayed a 6.59% increase YoY to Rs.7,650 crore in Q2 FY22 from Rs.7177 crore in the same quarter of the previous year.

With a provision buffer of Rs.31.8 billion (1.4% of loans), the bank has managed to weather any more uncertainty arising as a result of the second Covid-19 wave. A 16%-18% CAGR for loan growth for the next 2 years has been estimated.

According to the bank, the interest margin decreased by 9% YoY and 4.7% QoQ due to a high amount of surplus liquidity which has been placed under repo with the Reserve Bank of India.

The bank has decided to keep on investing in new branches until the total reaches 2,500. The current number of branches stands at 2,015 as of Q2 FY22.

The current ROA stood at 1.26% as compared to the 1.12% in Q1 FY22 and 0.83% in Q2 FY22. Return on assets of 1.5% has been estimated for FY22.

The positive points-

1. A strong and positive growth in the retail segment

2. Strong liquidity and capitalization

3. The credit growth is expected to increase from Q3 FY22 and the earnings are also expected to improve further

4. The bank has a strong balance sheet with 72% coverage

5. Efficient collection rate- almost at pre-Covid levels

6. Lower provisions reported in order to drive up the growth in earnings

Analysts recommend a BUY call for this share with a target price of Rs.1340, based on the Dividend discount model method of calculation.