Reduce IndusInd Bank; target of Rs 1280 HDFC Securities

HDFC Securities' research report on IndusInd Bank

IndusInd Bank (IIB) reported in-line earnings, led by strong loan growth (+21% YoY), stable margins and sustained traction in fee income. However, credit costs (123bps annualised) continued to trend higher on the back of elevated gross slippages (2%), primarily from a one-off corporate account, MFI and some early delinquencies in unsecured retail segments (PL/CC). We believe IIB is likely to face near-term sub-optimal cost ratios, as the bank frontloads its investments in digital, capacity building and distribution. More importantly, for a bank of its size, we believe that IIB needs to shore up its pace of deposit mobilisation and provisioning buffer.

Outlook

We raise our FY24E/FY25E estimates by 12% each to factor in higher loan growth; maintain REDUCE with a TP of INR 1,280 (1.4x Mar-25 ABVPS) as we watch out for emerging evidence of margin of safety.

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