IndusInd Bank Q4 results review: What HSBC, Jefferies and other brokerages make of the lender's earnings report

IndusInd Bank shares fell 2 percent in intra-day deals today, April 26, after some brokerages cut EPS (earnings per share) estimates for the private sector lender despite it posting a 15 percent jump in its March quarter (Q4FY24) net profit.

The bank reported a 15 percent rise in net profit at ₹2,349 crore in Q4FY24 versus a net profit of ₹2,043 crore in the year-ago period. Meanwhile, net loans grew 18 percent, outpacing the 14 percent growth in deposits.

Net interest income - the difference between interest earned and paid - also rose 15 percent to ₹5,376 crore in Q4FY24 while the net interest margin of the lender stood at 4.26 percent versus 4.28 percent last year.

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Its gross non-performing assets (GNPAs) fell to 1.92 percent in Q4FY24 as against 1.98 percent logged in the same quarter last year. On the other hand, net NPAs for the quarter came in at 0.57 percent in the quarter under review, improving from 0.59 percent on a year-on-year basis.

Operating expenses for the quarter ended March 31, 2024, increased by 24 percent to ₹3,803 crores as against ₹3,066 crore for the corresponding quarter of the previous year.

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Here's what brokerages make of the lender's Q4 results:

HSBC: The brokerage maintained a 'buy' rating for the stock with a target price of ₹2,020, indicating a 35 percent upside. A significant reduction in the slippage ratio was a major positive, while other metrics matched expectations. The outlook for loan growth remains strong, and the net interest margin (NIM) is expected to stay stable, supported by a favorable loan mix and effective liquidity management. Consistently strong asset quality could lead to a re-rating of the stock, it said. The brokerage has slightly lowered its EPS estimates by 2–3.5 percent for fiscal years 2025–27.

The EPS cuts are driven by increases in operating expenses, it noted. "We increase our estimate for cost-to-income ratio for FY25–27 to reflect further investments required in branches, digital initiatives, and hiring," added HSBC.

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Emkay: The domestic brokerage has also retained its ‘buy’ call on the stock with a target price of ₹2,000, implying an over 33 percent upside.

"IndusInd Bank (IIB) posted a slight (4 percent) miss on earnings with ₹2350 crore PAT/1.9 percent RoA (reported), due to some moderation in growth (18 percent YoY), as also in the margin (down by 3 bps QoQ to 4.26 percent). Asset quality took a breather, with slippages down QoQ to ₹1,430 crore/1.75 percent of loans, leading to a nearly stable GNPA/NNPA ratio at 1.9 percent/0.6 percent of loans. The bank retains medium-term credit growth guidance at 18-22 percent, with a clear focus on diversifying its portfolio, including mortgages and non-vehicle loans. Within Vehicle loans, the bank has gradually moved away from MHCVs and thus reduced cyclicality," it noted.

Emkay trimmed its earnings by 3 percent/7 percent for FY25E/26E, factoring in the moderate growth, while it expects the bank to report healthy RoA/RoE at 1.9-2 percent/16-17 percent over FY25-27E.

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Jefferies: The brokerage maintains an 'overweight' rating with a target price of ₹1,925, indicating an over 28 percent upside. The company's asset quality has improved, showing strong growth in retail deposits and loans. The balance sheet is robust, with a Common Equity Tier 1 ratio of 15.8 percent. Gross slippages have moderated in both corporate and retail segments. The brokerage expects core pre-provision operating profit growth to remain strong, projecting a 20 percent compound annual growth rate (CAGR) from fiscal years 2024 to 2026. Jefferies also trimmed its estimates by 2 percent.

Motilal Oswal: The brokerage also has a ‘buy’ call on the stock with a target price of ₹1,850, indicating an over 23 percent upside.

"IIB reported an in-line performance, led by healthy income growth and controlled provisions. The asset quality ratios remained stable and fresh slippages moderated, primarily in the corporate book. The management has guided for loan growth of 18-23 percent over FY23-26. Healthy provisioning in the MFI portfolio and moderation in the overall slippage run rate will keep credit costs under control. Additionally, the presence of a contingent provisioning buffer of 0.29 percent of loans provides comfort. IIB is well-positioned to benefit from margins as and when the rate cycle turns. We estimate a 21 percent earnings CAGR over FY24-26, leading to RoE of 16.8 percent in FY26," it stated.

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Nuvama: Nuvama has maintained a ‘buy’ call with a price target of ₹1,800, indicating an upside of over 20 percent.

“Given IndusInd Bank’s improving asset quality, we retain ‘BUY’. The bank does not know when the promoter will increase the stake to 26 percent. IndusInd Bank clarified that investments by its promoter holding company in Reliance Capital and AMC are independent of the bank and that the bank is not going to invest in these,” said the brokerage.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.