Buy IndusInd Bank; target of Rs 1500: Motilal Oswal

Motilal Oswal's research report on IndusInd Bank

IndusInd Bank (IIB)’s PAT declined 40% YoY/ 39% QoQ at ~INR13.3b (17% miss adjusted for contingent provision of INR5.25b). NII grew 5% YoY to INR53.5b (in-line), while other income declined 10.5% QoQ to INR21.85b (14% miss). NIM contracted sharply by 17bp QoQ to 4.08%. Loan book grew 13% YoY (2.7% QoQ), led by corporate and commercial books. Deposits grew 15% YoY (3.5% QoQ), led by faster growth in term deposits. Growth of MFIs declined sharply by 12% QoQ. Fresh slippages increased 17% QoQ to INR17.9b, primarily due to a rise in slippages in the consumer finance book to INR16.8b. GNPA/NNPA ratios increased 9bp/4bp QoQ to 2.11%/0.64%. IIB holds a total contingency buffer of INR15.25b as of Sep’24. We cut our earnings estimates by 16.7%/8.7% for FY25/26, leading to an RoA/RoE of 1.6%/13.6% by FY26. Reiterate BUY with a TP of INR1,500 (premised on 1.5x FY26E ABV). Progression on asset quality (MFI business) and RBI’s approval for a fresh term for the MD and CEO remain key near-term events to monitor.

Outlook

We cut our earnings estimates by 16.7%/8.7% for FY25/26, leading to an RoA/RoE of 1.6%/13.6% by FY26. Reiterate BUY with a TP of INR1,500 (premised on 1.5x FY26E ABV). Progression on asset quality (MFI business) and RBI approval for a fresh term to MD & CEO remain key near-term events to watch for.