IndusInd Bank Q2 Results Review - Weak; Steering Through Near-Term Challenges; Reiterate 'Buy': Motilal Oswal

Motilal Oswal Report

IndusInd Bank Ltd.’s profit after tax declined 40% YoY/ 39% QoQ at ~Rs 13.3 billion (17% miss adjusted for contingent provision of Rs 5.25 billion).

Net interest income grew 5% YoY to Rs 53.5 billion (in-line), while other income declined 10.5% QoQ to Rs 21.85 billion (14% miss). Net interest margin contracted sharply by 17 basis boints QoQ to 4.08%.

Loan book grew 13% YoY (2.7% QoQ), led by corporate and commercial books. Deposits grew 15% YoY (3.5% QoQ), led by faster growth in term deposits. Growth of MFIs declined sharply by 12% QoQ.

Fresh slippages increased 17% QoQ to Rs 17.9 billion, primarily due to a rise in slippages in the consumer finance book to Rs 16.8 billion. Gross/net non-performing asset ratios increased 9 bp/4 bp QoQ to 2.11%/0.64%. IndusInd Bank holds a total contingency buffer of Rs 15.25 billion as of Sep-24.

We cut our earnings estimates by 16.7%/8.7% for FY25/26, leading to an RoA/RoE of 1.6%/13.6% by FY26. Reiterate Buy with a target price of Rs 1,500 (premised on 1.5 times FY26E adjusted book value). Progression on asset quality (MFI business) and RBI’s approval for a fresh term for the MD and CEO remain key near term events to monitor.

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