Financial Analysis of IndusInd Bank

For Financial Analysis of the IndusInd bank, we first look at the Common Size &
Growth Statements, identify areas of change and then look at the relevant
rations.
The time horizon that we have taken for analysis is past 5 years, which makes it
useful for both the relevant objectives: forecasting short term trends as well as
supporting valuation.
Source of data
Data has been taken from annual reports of the bank for the relevant years,
which is available publicly on the bank website. To avoid reclassification, any
figure for a year is picked up from that years annual report.
A brief about IndusInd Bank
IndusInd Bank is a new generation post-liberalisation private bank offering
commercial, transactional and electronic products and services. The bank has
specialised in retail banking services and has continuously upgraded itself to
support newer technologies, in accordance of the essence of it being a new
generation bank.
The bank derives its name from the Indus Valley civilization. As of April 2016, it
had 800 branches and 1500 ATMs. The bank is owned by Hinduja Group, and had
total assets worth of US$ 15.7 bn by 2015.
Analysis of Common Size Statement
Common size statement is analysed to identify the key areas of changes and the
trends therein which can be taken for further analysis through ratios.
Analysis of Growth Statement
The growth statement indicates the trends in various areas and confirms our
initial understanding of the common size statements. There has been an increase
in Net Worth mainly driven by sharp increase in Reserves & Surplus, a reduction
in dependence on deposits, and an increase in dependence on ST borrowed
funds. There has been an increase in advances. In Investments, there has been a
sharp increase in Govt. Securities. The growth in interest income is decreasing,
pointing to either decreased loan-rates and/or reduced reliance on interest based
income. The growth in interest expense has been declining over the years,
pointing to reduced reliance on deposits for funds.
Provisioning for NPAs has increased sharply in the last year. This shows that the
banks recognised its past mistakes. We believe it was due to RBI forcing banks to
recognise and reclassify assets, and not undertaken by bank on their bank, as
this was common across banks in the industry.
Ratio Analysis