IndusInd Bank Q4 Profit Meets Expectations; Brokerages Bullish, Predict 33% Upside

IndusInd Bank shares gained today on April 26, a day after the lender reported 15% growth in net profit to ₹2,349 crore for the quarter ended March 31, 2024 compared to ₹2,043 crores during corresponding quarter of previous year on account of increase in loan book and higher yield on advances. At 9:37 a.m., the stock was trading flat on the National Stock Exchange at ₹1,496.

For the full financial year, IndusInd Bank reported a net profit of ₹8,977 crores for the year ended March 31, 2024 up by 21% over the previous year at ₹7,443 crores. Provisions and contingencies for the quarter ended March 31, 2024, were 13% lower at ₹3,885 crores as compared to ₹4,487 crores for the corresponding quarter of previous year.

“One is the growth in the asset book, that contributed to the profits, and also the yield on advances,” said Sumant Kathpalia, Managing Director & CEO, IndusInd Bank. “We could also bear the cost of deposit increase and also sustainability of net interest margins (NIM),” he added.

According to analysts, improved asset quality, robust growth in retail deposits and strong loan expansion were the key positives, while a miss on net interest income (NII) and fee income were a concern.

Morgan Stanley has an ‘Overweight’ rating on the IndusInd Bank stock with a target price of ₹1,925. The private lender’s balance sheet remains robust, boasting a Common Equity Tier 1 (CET-1) ratio of 15.8% and a Liquidity Coverage Ratio (LCR) of 118%, it said. The CET1 ratio compares a bank's capital against its assets, while the LCR refers to the proportion of highly liquid assets held by lenders to ensure they can meet their short-term obligations.

According to US brokerage firm Jefferies, despite a 15% increase in profit, IndusInd Bank slightly missed estimates, as it was impacted by high operational expenses growth and reduced fees. The brokerage adjusted its estimates to reflect slower loan growth and reduced fees, emphasizing that operational efficiencies would be crucial moving forward. Jefferies has a ‘Buy’ call on the stock with a target price of ₹1,940 a share.

Retail slippage, a key variable, dipped, while assets and loans grew. NII came in softer than expected due to a surge in the quantum of borrowings. With improving asset quality and the bank moving towards balanced and granular growth,  brokerage firm Nuvama retained its ‘Buy’ call on the stock, with a target price of ₹1,800, down from ₹1,860.

“The management guided for a loan growth of 18-23% over FY23-26. Healthy provisioning in the MFI portfolio and moderation in the overall slippage run rate will keep credit cost under control,” Motilal Oswal analysts said. The presence of a contingent provisioning buffer of 0.29% of loans provides comfort, they said. "IndusInd Bank is well positioned to benefit on margins as and when the rate cycle turns. We estimate a 21% earnings CAGR over FY24-26, leading to RoE of 16.8% in FY26," Motilal Oswal said as it retained a 'Buy' rating on the stock with a target price of ₹1,850 per share.

“The bank is looking at an 18% growth in loans for the current fiscal and a mix of 55% retail and 45% corporate loans,” according to CEO Kathpalia.