IndusInd Bank To See Loan Growth Pick Up In Coming Quarters, Says Jefferies

IndusInd Bank Ltd.'s loan growth is expected to see a further uptick in the upcoming quarters after clocking a 13% rise in net advances in the July-September period, according to analysts.

Loan growth slowed further to 13%, consistently declining from 20% levels in December 2023, Jefferies said in a note on Oct. 4. This possibly reflects a need to lower loan-to-deposit, it said.

With loan-to-deposit around 86%, Jefferies sees limited need to run loan growth below deposit growth, and so expects a pickup in the coming quarters.

The bank's deposit rose 15% to Rs 4.13 lakh crore in the second quarter ended June 2024, according to an exchange filing on Oct. 4.

The CASA ratio—the proportion of deposits that come from low-cost current and savings accounts—dipped to 35.9% from 36.7% sequentially. A lower CASA ratio indicates that the bank relies heavily on costlier wholesale funding, which can hurt the bank's margin.

Acceleration in the share of higher-yielding retail loans, strong traction in retail liability franchises, and lower-than-expected asset quality stress could be upside risks to the bank, according to Morgan Stanley. Potential RBI approval for promoter stake hike, could also be an upside risk for the bank, it said.

Slower-than-expected growth, a lower fee, and higher operational expenditure could weigh on the lender, it said.

IndusInd Bank's stock fell as much as 0.85% during the day before paring loss to trade 0.54% lower at Rs 1,375.3 apiece, compared to a 0.29% advance in the benchmark Nifty 50 as of 10:46 a.m.

It has declined 3.7% during the last 12 months and 14% year-to-date. The relative strength index was at 34.

Of the 49 analysts tracking the company, 43 have a 'buy' rating on the stock, five suggest a 'hold' and one has 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential upside of 26.7%.