IndusInd Bank announced a stronger-than-expected net profit for the fourth quarter, attributed to reduced operating expenses and credit costs. The bank also reported in-line net interest income (NII) for the March quarter. However, despite these positive results, the banking stock has received a mixed bag of ratings from analysts, with most maintaining a 'Hold' position.
Analyst Projections and Target Prices
Brokerages have set diverse price targets for IndusInd Bank shares, spanning from Rs 760 to Rs 950. The stock closed at Rs 850 on Friday, indicating a potential upside or downside of approximately 11% based on these forecasts.
HDFC Securities' Cautious Stance
HDFC Securities noted that while IndusInd Bank's Q4 results surpassed its estimates due to lower-than-anticipated provisioning, the bank's credit book continued to de-grow. The brokerage highlighted sub-par growth, with an 8% year-on-year decline in credit growth, particularly in wholesale and MFI segments. Deposit growth was also muted, though the CASA ratio improved marginally to 31.2%.
Despite management's guidance for loan growth in line with the system by FY27, HDFC Securities expressed skepticism, citing challenges such as a sub-par deposit franchise, inadequate provisioning buffers, and existing stress in its unsecured loan book. Consequently, HDFC Securities maintained a 'Reduce' rating with a target price of Rs 760.
Nuvama's 'Hold' Rating
Nuvama Institutional Equities acknowledged potential improvements in IndusInd Bank's earnings and credit costs but emphasized that the path to normalized loan growth remains challenging. The firm reiterated its 'HOLD' rating, setting an unchanged target of Rs 900.
MOFSL's 'Neutral' Outlook
Motilal Oswal Financial Services (MOFSL) reported a decent quarter for IndusInd Bank, bolstered by robust NII and significantly lower-than-expected provisions, driven by an improvement in slippages across various segments. This led to an improvement in Return on Assets (RoA) to 0.45% from 0.1% in the previous quarter.
MOFSL observed that other income remained subdued due to modest fee and treasury income, while operating expenses declined sequentially. Net Interest Margins (NIMs) expanded by 4 basis points quarter-on-quarter to 3.39%. The brokerage raised its earnings estimates for FY27 and FY28 by 14% and 18% respectively, projecting RoA/RoE at 0.7%/5.6% for FY27. MOFSL reiterated a 'Neutral' rating with a target price of Rs 950.
Management's Future Targets
IndusInd Bank's management aims for loan growth in line with the broader banking system in FY27 and targets a Return on Assets (RoA) of 1% by Q4FY27. These goals are expected to be supported by a moderation in credit costs and improved earnings growth.