IndusInd Bank shares in focus after clarification on PwC report

Shares of IndusInd Bank Ltd are in the spotlight today following the bank’s official statement denying the receipt of any report from PricewaterhouseCoopers (PwC) concerning alleged accounting discrepancies in its derivatives portfolio.

An IndusInd Bank spokesperson stated, “IndusInd Bank hereby clarifies that the bank has not received any report from external agencies conducting the review.”

This clarification comes in response to earlier reports suggesting that PwC had submitted a report to IndusInd Bank’s board after auditing the bank’s financial statements. It is pertinent to note that the Reserve Bank of India (RBI) had directed IndusInd Bank’s management to complete all remedial actions during the March quarter and to make the necessary disclosures to stakeholders.

The private lender has estimated the potential impact of these discrepancies at 2.35 per cent, which is expected to be absorbed through the profit and loss account, with a possible restatement of Net Interest Income (NII) currently under review.

Investors had anticipated the release of PwC’s report last week, which was expected to detail the Rs 2,100 crore discrepancy in derivatives accounting and outline the actual losses incurred by the bank. While IndusInd Bank expects to report a profit for Q4, several brokerages are predicting a potential loss.

IIFL Securities, in its Q4 banking preview, forecasted a loss of Rs 280 crore for IndusInd Bank in the March quarter, compared to a profit of Rs 2,349 crore during the same period last year. The brokerage also projected potential de-growth in deposits, citing the recently reported accounting discrepancies.

IndusInd Bank’s Net Interest Income (NII) is projected to decline by 7% year-on-year (YoY) to Rs 5,000 crore, down from Rs 5,376 crore in the previous year. Additionally, non-interest income is expected to drop 13% YoY to Rs 2,170 crore. The bank’s Pre-Provision Operating Profit (PPoP) is estimated at Rs 3,100 crore, reflecting a 24% YoY decline. IIFL Securities has also noted that IndusInd Bank’s fee income will be adversely impacted due to reduced business activity.

Motilal Oswal Financial Services (MOFSL) projects a sharper decline in NII, estimating a drop of 33.7% YoY as the bank accounts for the impact of accounting discrepancies from prior periods. MOFSL forecasts a loss of Rs 143 crore for the March quarter.

Furthermore, MOFSL anticipates modest business growth for IndusInd Bank, with asset quality expected to continue deteriorating. Margins are forecasted to come under pressure, and credit costs are likely to remain elevated. The brokerage, which maintains a neutral rating on the bank, emphasized that the recognition of the accounting discrepancies will likely result in a loss for Q4.