IndusInd Bank on Thursday reported a 17.3% rise in standalone net profit at ₹2,297.8 crore for the quarter ended December 2023, compared to ₹1,959.2 crore in the year-ago period.
The bank’s net Interest Income in Q3FY24 grew by 18% YoY and 4% QoQ to ₹5,296 crores. Net Interest Margin at 4.29% vs. 4.27% YoY and 4.29% QoQ.
Gross NPL and net NPL ratios were largely unchanged at ~2% and 0.6%, respectively. Slips were marginally higher at 2.2% of loans, with most of the slips coming from retail loans, particularly the vehicle finance book.
Credit costs were at 1.2%. RoA was at 1.9% and RoE was at ~15%.
Read here: IndusInd Bank Q3 Results: Net profit rises 17% to ₹2,297 crore, NII up 18% YoY; 5 key highlights
Analysts mostly remain bullish on IndusInd Bank amid steady margins and improving retail deposit.
Here’s what brokers have to say about IndusInd Bank Q3 results and IndusInd Bank shares:
IndusInd Bank reported in-line performance in 3QFY24, led by healthy NII growth and controlled provisions. Healthy supply in the MFI portfolio and moderation in the general sliding exchange rate will contribute to a further reduction in the cost of credit. Additionally, the presence of a temporary buffer of 0.4% of loans provides additional comfort, said Motilal Oswal.
It estimates a 21% revenue CAGR over FY24-26, leading to an ROE of 16.2% in FY25. The brokerage reiterated its ‘Buy’ rating on the stock with a target price of ₹1,900 per share, based on 1.9x Sep’25E ABV.
Kotak Institutional Equities
Kotak Institutional Equities maintained its ‘Buy’ rating on IndusInd Bank and raised the target price to ₹1,800 per share of ₹1,600 earlier, valuing the bank at 1.8X book and 13X FY2026 EPS for RoEs at 15%.
“We generally maintain ratings and we see that the near-term business environment is quite favorable on two key fronts: (1) The cost of deposits may have peaked, which eases the pressure on NIM, which was unchanged in the last quarter. (2) The bank has chosen to switch to high-yield retail, but there is no immediate risk to asset quality of these businesses,” the brokerage said.
The key challenge would be the relative argument. We do believe that the frontline banks, which have a better liability franchise, provide a similar risk reward framework at these levels, it added.
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Nuvama Institutional Equities
Despite a miss on asset quality, Nuvama Institutional Equities retained a “Buy” call on the stock and raised the target price to ₹1,860 per share of ₹1,665 earlier. It believes that the near-term price reaction to results could be slightly negative
While asset quality was a big miss, we are comfortable with IndusInd Bank’s improving LCR and consistent good growth in retail LCR deposits (5% QoQ). Moreover, IndusInd Bank is one of the few banks to benefit from a down cycle, Nuvama Equities said.
The main concerns for banks are declining LCR, slow retail deposit and declining SA.
Equirus Securities
IndusInd Bank posted above-expected PPOP and PAT for Q3FY24 helped by stable NIMs QoQ of 4.3% and healthy loan growth of 20% YoY. The retail deposits share of LCR increased by ~110 bps. To garner retail deposits, the bank will continue to offer a deposit rate 50-75 bps higher than peers. On the assets side, it showed demand for leniency in commercial vehicle finance, noted Equirus Securities.
It believes IndusInd Bank is largely on track to deliver on its FY26 guidance and expects FY25E and FY26E RoAs at 1.9% and 2.0% aided by stable NIMs of 4.3% each, credit costs at 125 bps each, loan growth of 19% and 18%, and C/I ratio of 46.5% and 45.2%.
The brokerage maintained a “Long” call with an unchanged target price of ₹1,850 per share pegged at 1.8x one-year forward ABV.
Read also: Nifty 50, Sensex gain almost 1% each after 3 days of losses: 5 reasons why Indian stock market is gaining today
Antique Stock Broking
Given the IndusInd Bank’s ability to manage NIM despite the recent rise in cost of funds, continued loan growth of 20% and growing share of retail deposits augurs well for the bank. However, with fresh slips increasing in the last two quarters and further utilization of contingent provisions, IndusInd Bank needs to demonstrate a consistent improvement in asset quality for a stronger rating reassessment, especially given the current environment where the premium of larger banks has narrowed, Antique Stock Broking said .
It expects the bank to post RoA and RoE of 1.8%-1.9% / 16%-17% over FY24-26. The brokerage maintained a ‘Buy’ rating with an unchanged target price of ₹1,925 per share.
At 10:15 am, shares of IndusInd Bank were trading 2.65% lower at ₹1,570.40 apiece on the BSE.
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Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 19 Jan 2024, 10:16 IST