Motilal Oswal keeps 'buy' on IndusInd Bank

Motilal Oswal Securities has maintained a ‘Buy’ rating on IndusInd Bank with a target price of Rs 500. With about 50% of deposits wholesale in nature and high proportion of fixed rate loans on the balance sheet, the bank is most leveraged to systemic interest rates and liquidity, the brokerage said. This, coupled with the recent capital infusion, would boost its NIM.

Improving liability franchise, structural improvement in RoA and 20%+ asset growth should help IIB to post one of the highest PAT CAGR (29%) among the banks under our coverage, the brokerage said. IndusInd Bank’s third quarter FY13 PAT grew 30% YoY and 7% QoQ to Rs 2.7 billion. A strong loan growth (+31% YoY), 20bp+ QoQ improvement in margin to 3.5%, and strong fee income led to the highest-ever core income and core PPP (as a percentage of average assets) of 5.6% and 2.7%, respectively, and quarterly RoA of 1.65%. The bank’s asset quality was stable (GNPA up 3% QoQ) despite recognising one large media account of Rs 1billion as NPA, it said.