IndusInd Bank Share Price Climbs 2% on Robust Q1, Analysts Eye Re-Rating

On July 29, IndusInd Bank share price increased by over 2% to ₹1,436 each after the private lender announced satisfactory Q1FY25 results. Despite the positive sentiment from attractive valuations, brokerages reduced their target prices as the Q1 earnings did not meet expectations.

IndusInd Bank reported a 2% year-on-year (YoY) increase in profit to ₹2,171 crore in Q1FY25, which was below Moneycontrol's forecast of ₹2,370 crore. Net interest income (NII) rose by 11.1% YoY to ₹5,408 crore, missing the estimated ₹5,533 crore.

Following this, however, Jefferies lowered the target price for IndusInd Bank stock from ₹1,940 to ₹1,750, retaining a 'buy' rating, due to slower topline growth influenced by reduced growth and margins.

IIFL Securities also revised IndusInd's target price downward from ₹1,650 to ₹1,620, citing subdued loan growth in high-yielding segments and softening asset quality. Nevertheless, they maintained a 'buy' rating, anticipating a gradual re-rating as the rate cut cycle progresses.

Nuvama Institutional Equities decreased the target price from ₹1,800 to ₹1,690 because of shortfalls in NII, fees, and increasing slippages, but continued with their 'buy' rating due to the stock's significant correction.

Nomura upheld a 'neutral' rating and reduced the target price from ₹1,650 to ₹1,580, attributing this to weaker loan and deposit growth.

Operationally, IndusInd Bank's loans increased by 15% YoY to ₹3.4 lakh crore, and deposits rose by 15% YoY to ₹3.9 lakh crore in the quarter ending in June. The loan-to-deposit ratio (LDR) was between 86.5 and 87.2%, indicating stability.

However, the bank's net interest margins (NIMs) were steady at 4.25% in Q1FY25, a slight decline of 4 basis points YoY due to higher funding costs. The management noted that the NIM contraction was moderated by high-yielding assets, and they expect margins to remain stable in the future.

Year-to-date, IndusInd Bank share price have dropped by over 12%, underperforming the benchmark Nifty 50, which has risen by 14%.

IndusInd Bank Q1 Results Overview

On Friday, July 27, IndusInd Bank reported a 2% YoY growth in net profit to ₹2,171 crore, compared to ₹2,124 crore in the same quarter the previous year. NII for the quarter increased by 11% YoY to ₹5,408 crore from ₹4,867 crore in the year-ago quarter, according to the private lender's exchange filing.

The net interest margin (NIM) for the quarter was 4.25%, compared to 4.26% in the March quarter and 4.29% in the same quarter last year.

Pre-provision operating profit (PPOP) was ₹3,952 crore, a 3% increase from ₹3,831 crore in the corresponding quarter of the previous year.

The bank reported its yield on assets at 9.87% in Q1, compared to 9.60% YoY. The cost of funds stood at 5.62% against 5.31% YoY. Other income for the quarter was ₹2,441 crore, up 10% YoY from ₹2,210 crore. Core fees increased by 11% YoY to ₹2,348 crore from ₹2,119 crore.

IndusInd Bank's balance sheet stood at ₹5,30,165 crore at the end of Q1, up 14% YoY. As of June 30, deposits were ₹3,98,513 crore, a 15% increase from ₹3,47,047 crore on June 30, 2023.

CASA deposits grew to ₹1,46,134 crore, with Current Account deposits at ₹48,475 crore and Savings Account deposits at ₹97,659 crore. CASA deposits comprised 37% of total deposits as of June 30, 2024. Advances as of June 30, 2024, were ₹3,47,898 crore, a 15% YoY increase from ₹3,01,317 crore.

Managing Director and CEO, Sumant Kathpalia, remarked that the Indian economy maintained strong momentum, though certain areas, particularly in rural segments, were affected by activities related to the general elections and a heat wave.

"The bank managed these external factors well during the quarter, and we are seeing underlying businesses returning to normalcy. The bank focused on balanced growth between loans and deposits, both growing by 15% YoY. Asset quality metrics remained within the bank’s expected range. Balance sheet metrics in terms of liquidity, capital adequacy, and NPA coverage were stable or improved during the quarter," Kathpalia said.

He concluded that the bank is well-positioned to achieve its strategic growth goals, contributing to India's vision of becoming a developed economy.