IndusInd Bank Q4 profit in-line; brokerages bullish, see 33% upside

IndusInd Bank's pperating expenses for the quarter ended March 2024 increased by 24 percent to Rs 3,803 crores as against Rs 3,066 crore for the corresponding quarter of previous year.

IndusInd Bank shares gained on April 26, a day after the lender reported in-line earnings for the March quarter. Its net profit (PAT) grew 15 percent on-year to Rs 2,350 crore, aided by healthy revenue growth and lower provisions.

According to analysts, improved asset quality, robust growth in retail deposits and strong loan expansion were the key positives, while a miss on net interest income (NII) and fee income remains a concern.

Morgan Stanley has an “overweight” rating on the IndusInd Bank stock with a target price of Rs 1,925. The private lender’s balance sheet remains robust, boasting a Common Equity Tier 1 (CET-1) ratio of 15.8 percent and a Liquidity Coverage Ratio (LCR) of 118 percent, it said.

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The CET1 ratio compares a bank's capital against its assets, while the LCR refers to the proportion of highly liquid assets held by lenders to ensure they can meet their short-term obligations.

According to Jefferies, despite a 15 percent increase in profit, IndusInd Bank slightly missed estimates, as it was impacted by high operational expenses growth and reduced fees.

The brokerage adjusted its estimates to reflect slower loan growth and reduced fees, emphasising that operational efficiencies would be crucial moving forward.

Jefferies has a “buy” call on the stock with a target price of Rs 1,940 a share.

Nuvama said IndusInd Bank's Q4 earnings were soft relative to peers but showed a good uptick in asset quality.

Retail slippage, a key variable, dipped, while assets and loans grew. NII came in softer than expected due to a surge in the quantum of borrowings.

With improving asset quality and the bank moving towards balanced and granular growth, the brokerage retained its “buy” call on the stock, with a target price of Rs 1,800, down from Rs 1,860.

The management guided for a 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 cost under control, Motilal Oswal analysts said. The presence of a contingent provisioning buffer of 0.29 percent of loans provides comfort, they said.

Also Read | IndusInd Bank Q4 net profit jumps 15% to Rs 2,349 crore, declares Rs 16.50 dividend

"IndusInd Bank is well positioned to benefit on 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," Motilal Oswal said as it retained a 'buy' rating on the stock with a target price of Rs 1,850 per share.

Brokerage Emkay Global trimmed earnings estimates for the private bank by 3 percent and 7 percent for FY25 and FY26, respectively, factoring in the moderate growth. It expects the bank to report healthy return on asset (RoA)/return on equity (RoE) at 1.9-2 percent/16-17 percent over FY25-27E.

The brokerage maintained its “buy” call on the stock with a target price of Rs 2,000 a share.

At 9.37 am, the stock was trading flat on the National Stock Exchange at Rs 1,496.

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