IndusInd Bank - Growth Outlook Steady; RoA To Reach Sustainable ~2% Mark: Motilal Oswal

Motilal Oswal Report

IndusInd Bank Ltd. has been delivering consistent performance with both asset quality and return ratios improving steadily. The bank is well poised to report further improvement in operating performance as all key vectors (credit cost, margins and opex) continue to move in the right direction, unlike for most other banks.

The steady loan growth (of 19% compound annual growth rate over FY24-26E) and a more favorable asset mix toward retail will continue to support margins, especially with the shift in the interest rate cycle.

IndusInd Bank aims to improve upon its current account and savings account mix to more than 45%, while increasing the mix of retail deposits to 45-50% of the overall deposits.

Asset quality ratios have improved, while continued moderation in slippages, dissolution of restructured assets (have declined to 0.5% versus peak of 3.6% in Q2 FY22), and contingency buffer of 0.5% of loans provide further comfort.

IndusInd Bank is well capitalized with CET-1 of 16.3% and any further capital infusion by promoters to increase the stake in the bank would further aid capitalisation levels.

We estimate IndusInd Bank to report 22% earnings CAGR over FY24-26E, resulting in a return on asset/return on equity of 2.0%/17.3%.

IndusInd Bank remains our preferred 'Buy' in the sector and we reiterate our 'Buy' rating with a target price of Rs 1,900 (premised on 1.9 times September-25E adjusted book value).

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