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Last Updated : Jan 15, 2020 11:42 AM IST | Source: Moneycontrol.com

IndusInd Bank falls 4% as gross slippages rise in Q3; brokerages remain bullish

Slippages increased significantly to Rs 1,945 crore in Q3, from Rs 1,102 crore in Q2FY20. In fact, slippages were much higher than first half of FY20.

 
 
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The stock of IndusInd Bank was trading lower by over 3 percent intraday on January 15 after the lender reported sharp increase in gross slippages due to one travel account. The private sector lender registered a healthy 32 percent year-on-year growth in profit at Rs 1,300.2 crore in Q3 despite higher provisions.

Net interest income, other income, operating income and lower tax cost boosted profitability.

Net interest income grew 34.35 percent year-on-year to Rs 3,074 crore, with loan growth of 20 percent.

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Slippages increased significantly to Rs 1,945 crore in Q3, from Rs 1,102 crore in Q2FY20. In fact, slippages were much higher than first half of FY20.

Asset quality improved in the quarter ended December 2019 with gross non-performing assets (NPA) falling to 2.18 percent in Q3 (from 2.19 percent QoQ). Net NPA also declined to 1.05 percent during the quarter against 1.12 percent in the previous quarter.

Morgan Stanley has an overweight call on the stock with target at Rs 1,800 per share. It is of the view that the core PPoP was good which was 2 percent above estimates adding that elevated slippages caused weak asset quality.

Uncertain asset quality could keep the stock volatile in the near term. Morgan Stanley sees strong returns over 1 year given strong capital, PPoP and RoE. Credit cost forecasts are already 170 bps for FY20 and 155 bps for FY21, it added.

Kotak Institutional Equities has maintained an Add rating on the stock and has cut target to Rs 1,600 from Rs 1,650 per share. It is of the view that the recent correction in the stock price offers a positive risk-reward adding that the result for the quarter underscores the importance of Bharat Financial acquisition.

Nomura has also maintained a buy rating with target at Rs 1,750 per share. It is of the view that PPoP outlook is improving, but not out of the woods on corporate credit. It will still generate 16-17 percent RoEs with elevated credit costs, the research firm said.

Any re-rating will have to be driven by structural liability side improvements and maintain PPoP estimates, but trim profit after tax by 3-5 percent, Nomura added.

Citi has a buy call as well and has raised the target to Rs 1,900 from Rs 1,800 per share. It is of the view that the core operating performance remains healthy with core operation to remain strong which can support higher provisions. Citi has changed FY20/21 PAT estimates by -2/+3 percent as it adjusts NIM and credit costs.

Macquarie has an outperform call on IndusInd Bank with target at Rs 1,850 per share. The stock trades at A 2.5x FY21E P/BV, which it believes is cheap. It is of the view that higher slippages in corporate as well as retail are the sore points while the good news is that the Bank’s exposure to three stressed groups declines further, it said.

At 09:45 hrs IndusInd Bank was quoting at Rs 1,421.60, down Rs 59.50, or 4.02 percent. It has touched an intraday high of Rs 1,469.00 and an intraday low of Rs 1,416.75.

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First Published on Jan 15, 2020 10:18 am
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