IIB continued its strong performance with PAT growth of 25% YoY at Rs8.80bn (PLe: Rs8.81bn) on back of controlled opex and better top line with NII growing 25% YoY at Rs18.2bn (PLe: Rs18.9bn). Margins remained steady at 4%along with loan growth of 25% YoY. Main highlight of the quarter was very strong SA accretion sequentially leading to CASA ratio of 42% (up 448bps QoQ). SA accretion was Rs86.0bn compared to Rs45.2bn in Q1FY18 and Rs46.1bn in Q3FY17 which was demonetisation period) and has been commendable. We believe, strong SA accretion to continue benefitting cost of funds which we have factored in our revised estimates. We remain positive and retain our “BUY” rating with revised TP of Rs1,952 (from Rs1,670) based on 3.9x Sep‐19 ABV (rolled over from Mar‐19).
* Steady set of performance continues: Core performance remained on track with NII growth of ~25% YoY led by stable loan growth of 26% YoY and stable margins of 4.0%. Other income was slightly on the lower side on lower capital gains, while fee income remained better mainly contributed by TPD income and banking fees. Strong traction in PPOP of 28% YoY was also helped by controlled opex growth. Management expects steadiness in all parameters to continue going ahead.
* Steady loan growth but strong SA traction on liabilities side: Loans grew by ~25% YoY continued to be stronger from Corporate segment at 26% YoY, while was 22% YoY from non‐corporate segment. Bank has seen traction in Vehicle portfolio and expect momentum to pick up in H2FY18 adding to consumer loan growth. On liabilities side, bank progressed commendably on CASA ratio touching 42% up 448bps QoQ on back of strong SA growth of 95% YoY & 27% QoQ led by multiple factors like maturity of branches and quality acquisition. This strong traction has helped bank lower cost of funds.
* Asset quality stable: Overall GNPA/NNPA were stable without large deterioration in line with estimates, while corporate slippage run‐rate remained slightly on higher side, which bank expects to reduce. Bank saw improvement in asset quality of Vehicle loans and LAP book (partly asset sale) helping improve consumer segment asset quality. Bank has exposure to 8 a/c referred by RBI to NCLT worth Rs3.85bn with an overall PCR of 65% and has provided Rs360mn in Q2FY18. We continue to retain our BUY on continued stability in operating performance.
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