IndusInd Bank share price falls over 2% after Q3 results; Time to buy the stock? Here’s what analysts say
- IndusInd Bank reported an in line performance in 3QFY24, led by healthy NII growth and controlled provisions. Healthy provisioning in the MFI portfolio and moderation in overall slippage run-rate will contribute to a further reduction in credit cost, analysts said.
IndusInd Bank share price declined over 2% on Friday after the private lender reported its earnings for the third quarter of FY24. IndusInd Bank shares fell as much as 2.8% in the early trade to ₹1,568.00 apiece on the BSE.
IndusInd Bank on Thursday reported a rise of 17.3% 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 crore. Net Interest Margin at 4.29% as against 4.27% YoY and 4.29% QoQ.
Gross NPL and net NPL ratios were largely unchanged at ~2% and 0.6%, respectively. Slippages were marginally higher at 2.2% of loans, with bulk of the slippages coming from retail loans, especially the vehicle financing 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 mix.
Here’s what brokerages have to say on IndusInd Bank Q3 results and IndusInd Bank shares:
Motilal Oswal Financial Services
IndusInd Bank reported an in line performance in 3QFY24, led by healthy NII growth and controlled provisions. Healthy provisioning in the MFI portfolio and moderation in overall slippage run-rate will contribute to a further reduction in credit cost. Additionally, the presence of a contingent provisioning buffer of 0.4% of loans provides further comfort, said Motilal Oswal.
It estimates 21% earnings CAGR over FY24-26, leading to ROE of 16.2% in FY25. The brokerage reiterated its ‘Buy’ rating on the stock with a target price of ₹1,900 per share, premised on 1.9x Sep’25E ABV.
Kotak Institutional Equities
Kotak Institutional Equities retained its ‘Buy’ rating on IndusInd Bank and raised the target price to ₹1,800 per share from ₹1,600 earlier, valuing the bank at 1.8X book and 13X FY2026 EPS for RoEs at 15%.
“We are broadly maintaining estimates and we see the near-term business environment to be quite favorable on two key fronts: (1) Cost of deposits may have peaked which eases the pressure on NIM that has been unchanged in the recent quarter. (2) The bank had chosen to shift to high-yielding retail, but there is no immediate risk of asset quality from these businesses,” said the brokerage.
The key challenge would be the relative argument. We do believe that the frontline banks, which have a better liability franchise, are giving 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 from ₹1,665 earlier. It believes the short-term price reaction to results could be mildly negative
While asset quality was a big miss, we take comfort in IndusInd Bank’s improving LCR and consistent good growth in retail LCR deposits (5% QoQ). Further IndusInd Bank is one of the few banks that benefit from a falling rate cycle, said Nuvama Equities.
The key concerns for banks are declining LCR, slow retail deposit growth and declining SA.
Equirus Securities
IndusInd Bank posted above-expected PPOP and PAT for Q3FY24 aided by stable NIMs QoQ of 4.3% and healthy loan growth of 20% YoY. The share of LCR retail deposits 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 pointed to demand softness in commercial vehicle finance, noted Equirus Securities.
It believes IndusInd Bank is largely on track to deliver 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 a C/I ratio of 46.5% and 45.2%.
The brokerage maintained ‘Long’ call with an unchanged target price of ₹1,850 per share set at 1.8x one-year forward ABV.
Antique Stock Broking
Given the IndusInd Bank’s ability to manage NIM despite the recent increase in cost of funds, continued loan growth of 20% and rising share of retail deposits bodes well for the bank. However, with fresh slippages rising in the last two quarters and further utilization of contingency provisions, IndusInd Bank needs to demonstrate consistent improvement in asset quality for a stronger valuation re-rating, especially given the current environment where the premium of larger banks has narrowed, Antique Stock Broking said.
It expects the bank to post a 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, IndusInd Bank shares were trading 2.65% lower at ₹1,570.40 apiece on the BSE.
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 decisions.
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