IndusInd Bank Ltd. announced a stronger-than-expected net profit for the fourth quarter, attributed to effective cost management and reduced credit costs. While the bank's net interest income (NII) remained in line with expectations, the Q4 performance has led to a cautious 'Hold' rating from most brokerage firms, reflecting concerns about future loan growth.
Q4 Performance Overview and Management Outlook
The private sector lender's Q4 results highlighted lower operational expenses and credit costs as key drivers for its profit beat. Management has set ambitious targets for the fiscal year 2027 (FY27), aiming for loan growth comparable to the broader banking system and a return on assets (RoA) of 1% by Q4FY27. These goals are underpinned by anticipated moderation in credit costs and improved earnings.
Analyst Perspectives on IndusInd Bank Shares
Despite the Q4 profit beat, the outlook on IndusInd Bank shares remains mixed among analysts, with price targets showing a wide dispersion.
HDFC Securities: 'Reduce' with Rs 760 Target
HDFC Securities noted that while IndusInd Bank's Q4 results surpassed its estimates due to lower provisioning, the bank's credit book continued to de-grow by 8% year-on-year, particularly in the wholesale and MFI segments. Deposit growth was also subdued, down 3%, despite an improved CASA ratio of 31.2%. Citing multiple challenges such as a sub-par deposit franchise, inadequate provisioning buffers, and existing stress in its unsecured loan book, HDFC Securities maintained a 'Reduce' rating with a target price of Rs 760.
Nuvama Institutional Equities: 'Hold' with Rs 900 Target
Nuvama Institutional Equities acknowledged potential improvements in earnings and credit costs for IndusInd Bank. However, the brokerage expressed skepticism regarding the bank's ability to achieve normalized loan growth. Nuvama reiterated its 'Hold' rating on the stock, setting an unchanged target price of Rs 900, valuing it at 1x FY27E book value.
MOFSL: 'Neutral' with Rs 950 Target
Motilal Oswal Financial Services (MOFSL) described IndusInd Bank's quarter as decent, buoyed by stronger NII and significantly lower-than-expected provisions, driven by a reduction in slippages across various segments. This led to an improvement in RoA to 0.45% from 0.1% in the previous quarter. While other income remained modest due to subdued fee and treasury income, net interest margins (NIMs) expanded by 4 basis points quarter-on-quarter to 3.39%. MOFSL raised its earnings estimates for FY27 and FY28 by 14% and 18% respectively, projecting RoA/RoE at 0.7%/5.6% for FY27E. The brokerage maintained a 'Neutral' rating with a target of Rs 950.
As of Friday's close at Rs 850, the diverse analyst targets suggest potential upside or downside of approximately 11%, underscoring the uncertainty surrounding the stock's near-term trajectory.