Neutral IndusInd Bank; target of Rs 650: Motilal Oswal

Motilal Oswal's research report on IndusInd Bank

IndusInd Bank (IIB) reported a loss of INR23.3b (vs our est. of INR1.4b loss), led by muted NII (interest reversal of INR6.7b and higherslippages) and tepid other income amid the reversal of derivative loss of INR19.6b. The bank also reversed the fee income of INR1.72b. Adjusting for all one-offs amounting to INR46.6b (refer to Exhibit 1), adj. PAT would have been INR12.4b. NII declined 41.7% QoQ to INR30.5b (our est of INR35.7b), while adjusted for all one-offs, NII would have been at INR47b (down 10% QoQ). Reported NIMs contracted to 2.25% (down 168bp QoQ), while adjusted NIMs stood at 3.47% vs our estimate of 3.78%. PPoP loss, thus,stood at INR4.9b. Management indicated an adjusted PPoP run-rate of INR30.6b after adjusting for all one-offs. Loan book declined sharply 6% QoQ to INR3.45t, led by a reduction in the corporate book for liquidity and balance sheet management efforts. Consumer book grew at a modest 2.5% QoQ, despite the MFI book declining 5.1% QoQ. Deposits book stood flat at 0.3% QoQ, while the CASA ratio declined 208bp QoQ to 32.8%.

Outlook

We cut our earnings estimate sharply by 45% for both FY26 and FY27E, and estimate the RoA/RoE at 0.6%/5.2% for FY26E and 0.72%/6.4% for FY27E. Reiterate NEUTRAL with a TP of INR650 (premised on 0.8x FY27E ABV).