For the quarter ended December 31, 2019, the lender reported a sharp increase in gross slippages due to one travel account.
Shares of IndusInd Bank remained under pressure as the stock fell almost 2 percent on BSE during the morning trade on January 16.
If the stock settles in the red today, it will be its third consecutive day of losses.
For the quarter ended December 31, 2019, the lender reported a sharp increase in gross slippages due to one travel account. However, the bank registered a healthy 32 percent year-on-year growth in profit at Rs 1,300.2 crore in Q3 despite higher provisions.
Slippages increased significantly to Rs 1,945 crore in Q3, from Rs 1,102 crore in Q2FY20. In fact, slippages were much higher than the first half of FY20.
On the other hand, 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.
After the December quarter earnings, Morgan Stanley has an overweight call on the stock with a 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 a 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 operations 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 a 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 the 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.Around 10:15 hours, the stock traded 0.83 percent down at Rs 1,389 on BSE.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.