Buy IndusInd Bank; target of Rs 1600 Prabhudas Lilladher

Prabhudas Lilladher's research report on IndusInd Bank

We trim core PAT for FY25/26E by 11.7%/8.5% driven by (1) reduction in FY25 NIM and (2) cut in fees. IIB saw a weak quarter as NII, fees and asset quality disappointed leading to 14% miss on core PAT. Reported NIM declined QoQ by 17bps due to 26bps fall in loan yields led by (1) sharp decline in higher yielding MFI (2) rise in share of lower yielding CCB and (3) LDR reduction. Muted loan growth at 13.2% YoY was a function lower CFD growth due to sharp QoQ decline of 11.7% in MFI portfolio. 30-90 DPD pool in MFI has inched up QoQ from 2% to 4%. IIB created buffer provisions of Rs5.25bn towards likely stress from MFI and ECL implementation. Bank expects disbursals in MFI to pick-up once environment improves suggesting that yield reversion to normalcy may not be immediate.

Outlook

We roll forward to Sep’26 ABV but cut multiple to 1.6x from 1.7x and trim TP to Rs1,600 from Rs1750. Retain BUY.

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