Private sector lender IndusInd Bank plunges 15% to hit an intra-day low of Rs 1088.05 on NSE after posting its Q2 FY25 earnings, with a notable 39% year-over-year (YoY) decline in net profit. The bank’s latest results, released Thursday, also show moderate growth in net interest income (NII) but miss market profit expectations.
Net Profit Falls Short of Street Estimates
IndusInd Bank reported a net profit of Rs 1,325 crore for the September quarter, significantly below analysts’ expectations of Rs 2,138 crore. This figure also reflects a sharp decline from the Rs 2,181.47 crore profit recorded in Q2 FY24.
NII Growth and Margin Contraction
The bank’s net interest income increased by 5% YoY to Rs 5,347 crore. However, the net interest margin (NIM) was reported at 4.08%, a 21 basis point (bps) drop from the 4.29% margin in the same period last year and an 18 bps decline on a quarter-on-quarter (QoQ) basis.
Strong Growth in Deposits and CASA Ratios
IndusInd’s deposits surpassed the Rs 4 lakh crore mark, reaching Rs 4,12,317 crore, which represents a 15% YoY increase from Rs 3,59,548 crore. The bank’s CASA deposits rose to Rs 1,47,944 crore.
This included Rs 52,606 crore in current account deposits and Rs 95,338 crore in savings deposits, comprising 35.87% of total deposits as of September 30, 2024.
Gross and Net NPA Ratios Show Mild Deterioration
The bank’s gross non-performing asset (NPA) ratio increased to 2.11%, up from 1.93% YoY, while the net NPA ratio rose to 0.64%, up from 0.57% in the previous year’s corresponding quarter.
Provisions and Provision Coverage Ratio
Provisions and contingencies for Q2 FY25 amounted to Rs 1,820 crore, a significant increase from Rs 974 crore in the year-ago period. The Provision Coverage Ratio (PCR) remained consistent at 70% as of September 30, 2024.
Capital Adequacy and Other Income Declines
IndusInd Bank’s total capital adequacy ratio stood at 16.51% for the quarter, down from 18.21% in Q2 FY24. Other income also saw a decrease, reaching Rs 2,185 crore versus Rs 2,282 crore last year. Meanwhile, operating expenses grew to Rs 3,932 crore from Rs 3,450 crore in the same quarter a year ago.
Brokerages on IndusInd Bank
IIFL on IndusInd Bank
IIFL has downgraded its rating on IndusInd Bank from “Buy” to “Add” and has revised the target price to Rs 1,300 from Rs 1,590. The downgrade follows a miss on all fronts in the bank’s recent performance, driven by a sharp decline in net interest margin (NIM) attributed to slower growth in high-yielding segments.
Additionally, IIFL noted a deterioration in asset quality across various segments, with expectations of elevated credit costs in the near term due to forward flows. Consequently, the brokerage has cut its earnings estimates for FY26-27 by 9-14%, reflecting lower growth and fee income projections.
Jefferies on IndusInd Bank
Jefferies has maintained a “Buy” rating on IndusInd Bank but has cut its target price to Rs 1,470. The bank’s second-quarter results were disappointing, with a profit of Rs 13 billion, reflecting a 39% year-over-year decline and missing estimates due to higher credit costs and lower net interest margins (NIMs).
Jefferies expects this pressure to persist in the second half of FY25 and moderate in FY26-27, prompting earnings cuts of 13-25%. The brokerage believes that valuing the bank at 1.3 times FY26 adjusted price-to-book (PB) is reasonable.
Motilal Oswal on IndusInd Bank
Motilal Oswal has reiterated a “Buy” rating on IndusInd Bank, setting a target price of Rs 1,500. The brokerage noted that the bank faced a weak quarter and is navigating near-term challenges.
As a result, it has reduced its earnings estimates by 16.7% for FY25 and 8.7% for FY26, projecting a return on assets (RoA) of 1.6% and a return on equity (RoE) of 13.6% by FY26.
Additionally, Motilal Oswal highlighted a sharp contraction in net interest margin (NIM) to 4.08%, alongside a decline in the microfinance institution (MFI) mix, which fell 149 basis points to 9.2% of the bank’s loans.
Goldman Sachs on IndusInd Bank
Goldman Sachs has reiterated its “Buy” rating on IndusInd Bank, setting a target price of Rs 1,430. The bank’s second-quarter performance showed weakness, with core pre-provision operating profit (PPOP) declining 8% quarter-on-quarter and missing Goldman Sachs’ estimates by 8%.
Additionally, credit costs surged, partly due to increased contingency buffers, leading to a profit after tax (PAT) miss of 40%. As a result, Goldman Sachs has revised its earnings per share (EPS) estimates for FY25, FY26, and FY27 downward by 19%, 10%, and 9%, respectively.
Stock Performance in Last One Year
The shares of Vodafone Idea have demonstrated negative returns across various time intervals. In the last month, the stock delivered a negative return of 11.15%. Over the past six months, it exhibited a significant decline, with negative returns of 14.51%, indicating a strong downtrend.
Year-to-date figures further emphasize the stock’s bearish trend, recording negative returns of 20.01%. Looking at the broader horizon, the shares have shown consistent weakness, with negative returns of 9.46% over the last year.
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