IndusInd Bank Ltd cracked 16 per cent in Friday's trade as the private lender reported the weakest September quarter results among banks so far, as leading a few brokerages cut their target prices on the stock. IndusInd Bank’s Q2FY25 earnings missed the Street estimates on account of softer margins, weak operating performance, and an additional provisional buffer.
Following the results, IndusInd Bank shares fell 16 per cent to hit a low of Rs 1,073 on BSE. With this, the stock is down 31 per cent year-to-date.
While the management has created surplus buffers, HDFC Institutional Equities said growth deceleration in high-yielding segments, high opex intensity with focused efforts on collections, and elevated credit costs are likely to keep earnings muted.
"We hack our FY25/FY26 earnings estimates by 12 per cent; retain Reduce with a revised target price of Rs 1,245 (1.2 times Sep-26 ABVPS)," the brokerage said.
PhillipCapital said stress in unsecured segment has decelerated the growth, thus impacting margin in FY25 and increasing credit cost. The stress in MFI portfolio was anticipated given headwinds in the sector.
"We believe large part of potential stress in MFI and other unsecured loan will be accounted in the current fiscal and provided adequately. Accordingly, we have cut our earnings for FY25/26 by 17.7 per cent/6.4 per cent respectively. We estimate earnings de-growth of 7 per cent in FY25 and growth of 27 per cent in FY26, translating into ROE of 12.5 per cent/14.3 per cent," it said. This brokerage maintained its 'Buy' on IndusInd Bank but cut its target price to Rs 1,560 from Rs 1,830 earlier.
Nirmal Bang has downgraded the stock to 'Hold' from 'Buy' and suggested a lower target price of Rs 1,443 from Rs 1,653.
"In our view, the stock will see an overhang in the near term due to (1) Slowdown in loan growth (2) Stress in some secured and unsecured loan segments and (3) The pending RBI approval for Sumanth Kathpalia’s tenure extension (current tenure which will expire in March 2025 was renewed for 2 years as against the expectation of 3 year extension)," it said.
IndusInd Bank's Q2 results were characterised by higher provisions, lower other income, and slower growth in higher-yielding loan growth, MOFSL said.
Deposit growth was healthy due to term deposits but NIM contracted sharply amid the rising cost and slower growth in higher-yielding assets, MOFSL said.
"IIB had previously guided for loan growth of 18-22% for FY25. However, with the bank’s cautious view on unsecured growth, we estimate loan growth at 13 per cent. While the MF and Card businesses may continue to report some stress in the near term, overall slippages are likely to remain in control and help maintain broadly stable asset quality," MOFSL said while cutting its earnings estimates by 16.7 per cent/8.7per cent for FY25/26. It suggested a 'Buy' rating with a target of Rs 1,500.