Private lender IndusInd Bank share price rose 7 percent in early trade on July 29 a day after the company declared its first quarter (Q1 FY21) numbers.
The bank registered a 67.8 percent (year-on-year) decline in Q1 FY21 standalone net profit to Rs 460.64 crore, compared to Rs 1,432.5 crore in the corresponding period of last fiscal.
Net interest income grew by 16.4 percent year-on-year to Rs 3,309.2 crore in the quarter ended June 2020.
Asset quality has seen marginal weakening during the quarter with gross non-performing assets (NPAs) as a percentage of gross advances rising 8 bps sequentially to 2.53 percent, while net NPAs fell 5 bps QoQ to 0.86 percent in Q1 FY21.
Sharekhan | Upside: 12-15 percent
The bank’s well-capitalised balance sheet and provision buffer are cushions. However, the growth outlook is tepid and credit cost outlook is likely to be elevated for FY21E, which is likely to keep any upside limited at present.
The COVID-19 outbreak and intermittent lockdowns could lead to a disruption in vehicle loans, MSMEs, unsecured and the MFI portfolio.
Sharekhan opines that the bank is in much-improved position vis-a-vis its balance sheet, and it has upgraded its view on the stock to positive and expect an upside of 12-15 percent.
Key risks include a rise in slippages and delay in recoveries from stressed corporate loan book and slower growth in retail/MFI loan book may impact earnings.
Motilal Oswal | Rating: Buy | Target: Rs 700
Motilal Oswal expects loan growth to moderate, led by a weak environment due to the COVID-19 crisis, which would result in a slowdown in consumer spending. Furthermore, it expects asset quality to remain under pressure due to stress in the Corporate/MFI/CV/CE portfolio.
The moratorium book reported a sharp decline at 16 percent of loans from 50 percent as on April-end and the bank shored up its Rs 12 billion COVID-19 provisions. Nevertheless, it estimates credit cost to remain elevated at 2.5 percent for FY21E; however, strong underlying profitability would still enable the bank to deliver FY21/FY22E RoE of 12.0%/14.4%.
Prabhudas Lilladher | Rating: Buy | Target: Rs 680
Prabhudas Lilladher has slightly increased credit cost assumptions to +200bps with 300bps slippages in FY21/FY22. Although, good capital levels, better NIMs/PPOP to absorb some of the provisions gives some comfort.
Dolat Capital | Rating: Sell | Target: Rs 460
Slippages at 3.1 percent continue to remain high, 90 percent of which came from accelerated recognition of SMA-1,2 accounts from the bank’s corporate portfolio. Consequently, SMA book declined to 35bps from 70 bps in Q4 FY20.
The company's share of retail deposits remains much below industry at 30 percent of total deposits.
Though NIM benefitted from better loan mix during Q1 FY21, Dolat Capital see margin pressures coming from muted loan growth in higher-yielding segments like MFI and increased risk aversion in the corporate book.
Lower than expected impact of COVID-19 on asset quality, growth, fee and recoveries, higher-than-expected recoveries from substandard assets ar some of the key risks.At 09:17 hrs, IndusInd Bank was quoting at Rs 548.50, up Rs 21.60, or 4.10 percent on the BSE.