Moneycontrol Be a Pro
Get App
Last Updated : Jan 10, 2019 08:54 AM IST | Source:

IndusInd Bank's Q3 performance steady; should you buy, sell or hold the stock?

The lender reported a steady quarter with most parameters on expected lines. The ad-hoc provision on IL&FS exposure marred the reported performance.

Moneycontrol News @moneycontrolcom

Brokerages have largely maintained their positive view on IndusInd Bank after it reported steady financial performance for the December quarter. No divergences from the RBI inspection along with better earnings outlook ahead, analysts believe he stock could be a good bet.

The lender reported a steady quarter with most parameters on expected lines. The ad-hoc provision on IL&FS exposure marred the reported performance.

Net interest income (the difference between interest income and expenses) grew 21 percent aided by 35 percent growth in advances and a tad softening of interest margin to 3.83 percent. Interest margin was stable sequentially.


The non-interest income growth was supported by core fees that grew 18 percent and a sharp surge in treasury gains.

Operating expenses were well contained with the cost-to-income ratio stable at 43.7 percent. Consequently, pre-provision profit grew 27 percent.

Here is a gist of what brokerages said about the Q3 show.

Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 1,900

The brokerage house believes IL&FS exposure is an overhang and the negligible divergence provides comfort. It is also upbeat on continued strength in the core business. Going forward, merger with Bharat Financial Inclusion will strengthen earnings profile and boost returns ratio.

Brokerage: Emkay | Rating: Raised to Accumulate from Hold | Target: Hiked to Rs 1,850 from Rs 1,798

The research firm observed that the Q3 saw strong loan growth and stable margins, but provisions dragged overall earnings.

Subdued margins and residual provision drag on IL&FS will keep return on assets under pressure.

Further, concerns of a slowdown in CV growth & realty exposure should remain an overhang, it said.

Margin pick-up, merger with Bharat Financial Inclusion should help it reclaim return on assets of 1.9% by FY20/21.

Brokerage: Axis Capital | Rating: Buy | Target: Rs 2,000

Despite near-term headwinds, it offers decent risk-reward, the research firm said in their report. Merger with Bharat Fin will help increase the share of retail business in overall book, analysts at the firm wrote in their report. No divergence from RBI inspection is a positive sign.

Brokerage: Citi | Rating: Buy | Target: Cut to Rs 1,980 from Rs 2,090

Lowered FY19 profit estimate by 5% as we factor in additional provision for IL&FS. Further, it observed that slippages at Rs 806 crore were largely from three midcap accounts.

Brokerage: IDFC | Rating: Outperform | Target: Cut to Rs 1,820 from Rs 2,078

IDFC said that while Q3 Was in-line, see a steep increase in provisioning in Q4. It increased provisions to Rs 1,100 crore from Rs 600 crore In Q3.

Brokerage: Macquarie | Rating: Outperform | Target: Rs 1,975

The global research firm believes that one must use this weakness to buy the stock. With RBI audit completed with no divergences there is comfort on loan book transparency.

Brokerage: CLSA | Rating: Buy | Target: Rs 1,910

CLSA said that normalisation of slippage & uptick in CASA growth key. Further, it expects core earnings trend to normalise from FY20. Upside to FY19 estimates can arise from lower provisioning for IL&FS.

Brokerage: HSBC | Rating: Buy | Target: Cut to Rs 1,950 from Rs 2,028

HSBC observed that provisions for IL&FS exposure dragged Q3 earnings. Underlying operating momentum sustains, it added. Further, it expects IL&FS to be a one-off episode and it expects earnings to rebound in FY20.

The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .
First Published on Jan 10, 2019 08:52 am
Follow us on
Available On
PCI DSS Compliant