Nomura believes that the IndusInd Bank's expanding branch network, increasing branch density, increasing ticket size of SA deposits and deposit productivity should help drive the bank’s growth
IndusInd Bank reported 1QFY14 PAT growth of Rs3.35 billion, up 41.7% y-o-y versus Nomura Equity Research’s estimate of Rs3.08 billion. The PAT beat largely came in on account of better-than-expected non-interest income and lower operating costs. IndusInd Bank used its robust trading gains of Rs1 billion in this quarter to set aside floating provisions of Rs500 million, thereby increasing its provision coverage to 80% from 70% q-o-q.
Net interest income of Rs6.8 billion (up 2.8% q-o-q and up 40.4% y-o-y) was in line with the brokerage’s expected Rs6.75 billion. Net income margin (NIM) expanded marginally by 2 basis points (bps) q-o-q on the back of 27% y-o-y loan growth. Improvement in NIM was largely due to a 6 bps q-o-q decline in cost of funds compared with a 4 bps q-o-q decline in yield on assets and a 330 bps q-o-q increase in the credit-deposit ratio. Nomura expects expansion in NIM to 3.59% in FY14F compared with 3.43% in FY13.
Non-interest income came in very strong at Rs4.7 billion (up 48% y-o-y), helped by proprietary trading gains (111% y-o-y growth) and 26% y-o-y growth in core fees.
According to Nomura, IndusInd Bank will continue to benefit from the momentum in the CASA (current account savings account) deposit base built up over the past few quarters. It expects the bank to inch up its CASA ratio to 33% by FY14F (from 30% currently), driven by relatively stronger growth in savings deposits than current a/c deposits. The brokerage believes that the bank's expanding branch network, increasing branch density, increasing ticket size of SA deposits and deposit productivity should help drive this growth. Backed by CASA momentum, IndusInd Bank is expected to clock loan growth of 27.3% y-o-y in FY14F, much ahead of the expected system average growth in FY14. CASA momentum should help the bank maintain its margins in the year ahead.
Another positive to note is despite a macro-related slowdown in the CV cycle, the bank has done well to contain its credit costs at 55bps in FY13 compared to 47bps in FY12. Nomura is budgeting in LLPs of 60 bps for FY14F. Owing to these multiple levers, the brokerage has raised its FY14F earnings and maintains a Buy recommendation and has increased its target price to Rs580.
Nomura has raised its target price to Rs580 from Rs520 on an increase in its earnings estimates and roll-forward BV to 1-year forward. IndusInd Bank currently trades at 2.8x the average FY14F/FY15F ABV of Rs178 and 15.7x avg. FY14F/FY15F EPS of Rs31.6. Nomura’s target price implies 3.3x average FY14F/FY15F ABV and 18.6x average FY14F/FY15F EPS for FY14F adjusted RoE of 18.6%.
According to Nomura, IndusInd Bank’s loans grew 27% y-o-y compared to its expected 29.1%, with the consumer finance book growing 24.5% y-o-y and the corporate book growing 28.8% y-o-y. The brokerage believes that the bank will grow its loan book by 27.3% in FY14F, driven by 28.7% y-o-y growth in the retail segment compared with 26% growth in the corporate segment.
Deposits grew 23.5% y-o-y as the bank registered strong savings account deposit growth of 53.9% y-o-y. Current account deposits were relatively weak, declining marginally q-o-q CASA ratio improved q-o-q to 30% from 29.3%. This momentum is likely to continue, thus further supporting margins for the bank. Nomura expects the bank to end FY14F with a CASA ratio of 33.0% and 34.3% in FY15F.
Loan loss provisions (LLPs) came in at Rs939 million versus Nomura’s forecast of Rs491 million. This includes a floating provision of Rs50 million made by the bank to increase its provision cover to 80% from 70% in the previous quarter. Gross non-performing loan (GNPL) ratio increased to 1.06% from 1.03% and net non-performing loan (NNPL) ratio improved to 0.21% from 0.31% in the last quarter.
Total CAR was 14.85% under BIS-3 guidelines, with a Tier-1 ratio of 13.5%. Nomura believes asset quality for the bank will remain stable and will likely be able to contain its fresh delinquencies at the current run rate.
The brokerage is expecting delinquencies of Rs5.4 billion in FY14F compared with Rs5.3 billion in FY13. However, it expects higher LLPs of 60 bps in FY14F (55 bps in FY13) as the management has guided towards increasing its provision cover by making floating provisions whenever non-interest income permits.
The CIC said teachers in Kendriya Vidyalaya are being treated like workers on daily wages and are not given copies of their appointment or termination letters. This is indeed a reprehensible state of affairs. This is the 132nd in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC), while dismissing an appeal, voiced its strong disapproval at treating schoolteachers in Kendriya Vidyalaya like a worker on daily wages and that too without giving a copy of their appointment letter.
While giving this judgement on 15 July 2009, Shailesh Gandhi, the then Central Information Commissioner said, “This is indeed a reprehensible state of affairs and government schools paying Rs5,000 per month to a school teacher who is treated as a daily rated worker cannot be conducive for providing education.”
Pulgaon (District Wardha, Maharashtra) resident Indrayani D Mesharam, on 9 January 2009, sought information about her appointment letter from the Public Information Officer (PIO) Kendriya Vidyalaya at Pulgaon Camp. Here is the information she sought under the Right to Information (RTI) Act and the reply given by the PIO...
1. Certified Xerox of appointment order of appellant.
PIO's reply: Offer letter was issued vide our office letter dated 26/06/2008, which was accepted by appellant after reading and understanding the terms and conditions mentioned therein.
2. Certified Xerox of termination order of appellant.
PIO's reply: As per offer letter dated 26 June 2008, terms & conditions Sr. No. 3 & 4, offer was purely on day-to-day basis. Appellant's service was terminated as her work was found not satisfactory. As the appointment is of day-to-day nature, no termination order was issued.
3. Information about payment of September 2008. Not yet paid.
PIO's reply: The payment of September 2008 had already been credited in the account of appellant on 17 January 2009, Rs1,833.
4. Certified Xerox of muster roll containing sign of appellant from 26 June 2008 to 30 September 2008.
PIO's reply: Xerox copy of muster roll of appellant was attached.
5. Experience certificate of appellant.
PIO's reply: As the work of the candidate had been found unsatisfactory, no experience certificate can be issued.
Not satisfied with the PIO’s reply, Mesharam, filed her first appeal. In the appeal, she stated that certified copies of her termination letter and experience certificate were not issued and no proper information was provided by the PIO.
There was no mention of any order passed by the First Appellate Authority (FAA).
Mesharam, then approached the CIC with her second appeal. In her appeal, she stated...
1. Wrong and objectionable information was provided.
2. Not issued appointment order. Only sign taken and order kept herself.
3. Termination order was not given.
During the hearing, the PIO stated that copy of the offer letter was sent to Mesharam on 19 March 2009. He also stated that the school did not have a practice of giving letters of appointment to the teachers. “The letters of appointment are made and the signatures are taken but the letters are not given to the teachers. And from the present session the letter are being given,” the PIO said.
Mr Gandhi, the then CIC, said, “It is a very sad comment that a school treats teachers in this cavalier manner. The Commission voices it very strong disapproval on such practices.”
The copy of the acceptance of the offer, which the teachers are made to sign states, “I shall not claim any payment over and above that. I am also aware that my services will be utilized by you on day to day basis depending upon the need which may vary on day to day basis. In case I am engaged by you for a few periods, I shall neither claim regularization in the services nor claim appointment as a teacher in KVS.”
The PIO stated that the school was under instructions from the Headquarters to ensure that certain teachers are kept on contractual daily rated basis and these teachers are not repeated next year to ensure that they cannot claim any regular job. The format for the offer letter and acceptance letter is sent by the Headquarters at the KVS, the PIO said.
While dismissing the appeal, Mr Gandhi said, the appellant had stated in her appeal that no appointment letters are issued; teachers are harassed mentally and the school gives no termination letters. “This is indeed a reprehensible state of affairs and government schools paying Rs5,000 per month to a school teacher who is treated as a daily rated worker cannot be conducive for providing education,” the Commission said.
CENTRAL INFORMATION COMMISSION
Decision No. CIC/SG/A/2009/001401/4144
Appeal No. CIC/SG/A/2009/001401
Appellant : Indrayani D Mesharam,
Pulgoan, Tal. Deoli, Distt Wardha, Maharashtra
Respondent : KA Vijaydas,
Kendriya Vidyalaya Pulgaon Camp
Distt Wardha, Maharashtra 442302