Indusind Bank’s 4QFY16 PAT of `6.2 billion was a small miss vs our expectations, driven by one-off provisioning, but PPOP growth of +35% y/y matched our expectations. FY16 has been a good year, with IIB delivering on all core metrics, and more importantly the asset quality review having no impact, implying good underwriting. For us, the FY17 outlook looks very promising, with retail momentum clearly picking up pace (+33% CV growth), large opex costs taken in FY16 and lower credit costs. We expect 28% EPS CAGR over FY16-18F with limited risks as well. Thus, we maintain our ‘buy’ with a revised target price of `1,175/share.
Retail momentum strong, to drive FY17 growth. CV growth rose to ~33% y-y, driving overall retail to 29% y-y. With LCV growth picking up also, retail momentum should remain strong in FY17F. Also, non-vehicle loans are now 30% of the retail book (15% in FY14). We calculate that together these drive loan growth and the retail mix improvement will be NIM-accretive. FY16 provides underwriting comfort. IIB’s RWA/loans (measure of risk) inched up in last 2-3 years but IIB having no impact from RBI’s asset quality review indicates robust underwriting. FY16 credit costs of ~60bp include `1.3bn of past provisioning, so FY17F credit costs will likely be lower.