Buy IndusInd Bank; target of Rs 714: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com`s research report on IndusInd Bank“IndusInd Bank (IIB) continued it strong performance with profit growing 30% YoY to Rs 430 crore vs. our expected Rs 414 crore supported by NII of Rs 833 crore, up 19% YoY vs. 17.9% estimate. Also, other income of Rs 558 crore, growing 34% YoY boosted PAT. Credit traction remained robust growing 22% YoY to Rs 59930 crore while deposit growth came far higher at 24.4% YoY to Rs 65996 crore. NIM was marginally below expectation at 3.63% (down 3 bps QoQ), mainly due to higher deposit growth and corporate credit growth of 37% YoY while retail grew just 7% YoY. Asset quality remained stable with GNPA at Rs 654 crore (ratio -1.08%) flat QoQ and NNPA at Rs 195 crore” “The current management after taking over in early 2008 has transformed IndusInd Bank (IIB) from low and volatile B/S growth to steady and sustainable growth with strong profitability. We like the fact that the transformation has been a qualitative one (RoA up from 0.3% to 1.8% as on FY14) despite the turbulent economic scenario. The loans, deposits & PAT traction improved to 28%, 21% & 63% CAGR over FY08-14 from 12%, 13% and -35% during FY05-08, respectively. The loan & deposit base, as on Q2FY15, stands at Rs 59931 crore and Rs 65996 crore, respectively. Going ahead, considering the current weak economic outlook, growth may moderate from past trends but remain ahead of the industry. We have factored in loan & deposit CAGR of 21% over FY14-16E while PAT is estimated to increase at 24% CAGR to Rs 2180 crore. IIB maintained calculated NIM of over 3.7% in the past while Q2FY15 NIM dipped to 3.63% with the rising corporate book. The high yielding loan book & healthy CASA franchise enable IIB to maintain such strong margins. In the past six years, IIB’s NIM has improved from 1.7% to 3.7% as on FY14. Such a structural improvement is primarily on the back of a substantial improvement in CASA franchise (doubled to >30% in the past six years), helping keep CoF under control across various cycles. We expect calculated NIM to stay largely flat YoY at ~4% in FY15E.” “Despite our factoring in a moderation in asset growth coupled with largely flat margins and a rise in credit cost, our earnings estimate for IIB is healthy at 24% CAGR over FY14-16E. Expected return ratios of ~18% RoE and ~1.8% RoA provide comfort. We believe any improvement in margins and loan growth (especially post Q2FY15E as guided by management) can lead to higher-than-expected PAT growth. We maintain BUY recommendation with a target price of Rs 714,” says ICICIdirect.com research report. 

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