IndusInd Bank to report losses in Q4? Target prices & more

Banking analysts are expecting IndusInd Bank to report losses in the March quarter and see a hit on deposit growth. They see net interest income (NII) and pre-provision operating profit (PPoP) falling year-on-year (YoY) and net interest margin (NIM) declining sequentially.  

IIFL Securities in its Q4 banking preview note forecast IndusInd Bank to report a loss of Rs 280 crore for the March quarter compared with Rs 2,349 crore profit in the same quarter last year. The brokerage expects IndusInd Bank may potentially see a de-growth in deposits following the recently reported accounting discrepancies in derivatives. 

The issue came to light during a September–October 2024 review triggered by an RBI directive (September 2023), requiring discontinuation of internal trades by April 2024. Internal trades have since been fully discontinued and unwound, with the bank now relying solely on external counterparties for hedging.

The private lender has estimated the impact at 2.35 per cent, expected to be absorbed through the P&L, with possible restatement of NII under evaluation. 

Its NII is seen falling 7 per cent YoY to Rs 5,000 crore from Rs 5,376 crore YoY. Non-interest income is seen dropping 13 per cent YoY to Rs 2,170 crore. PPoP is seen at Rs 3,100 crore, down 24 per cent YoY. IIB’s fee income shall also be impacted due to the loss of business, IIFL Securities said. 

This brokerage has 'Add' rating and a target of Rs 750 on the stock.

"For IIB, NII is expected to decline sharply by 33.7 per cent YoY as bank factors in the impact from accounting discrepancy in prior period," MOFSL said. It sees a loss of Rs 143 crore in Q4. 

MOFSL expects IndusInd Bank's business growth to be modest and asset quality to continue to see a decline. Margins are seen coming under pressure. The domestic brokerage, which has a neutral rating on IndusInd Bank, said credit costs is likely to be elevated and that the recognition of accounting discrepancy would result in a loss in Q4.

Ambit Capital has kept IndusInd Bank 'under review' due to uncertainty around current accounting issues and management stability.

CEO Sumant Kathpalia reportedly said that his bank was looking to offset the losses, arising due to accounting discrepancy in valuations of past derivatives transactions, within the March quarter itself. He suggested that the fourth quarter as well as the full year may likely have profit figures. The RBI recently extended Kathpalia's tenure as CEO by one year only against three years sought by the bank.

This marked the second consecutive instance where the RBI approved a shorter term than the three-year reappointment proposed by the bank’s board, which had submitted the latest recommendation in September 2024.

The move deviates from the standard practice of granting full-term extensions for incumbent CEOs and is being viewed as a regulatory signal of caution regarding leadership continuity and governance oversight at the Bank. It remains to be seen how the appointment of a new CEO will steer the bank back to a sustainable growth trajectory, Ventura Securities said in a note.

"The fear of unexpected negative surprises is high resulting in lower multiples for banks. The recent episode with IndusInd Bank is an example that illustrates the issue quite well. The re-rating in large private banks coincided with the development that we saw with IndusInd Bank," Kotak Securities said.  This brokearge has a 'Reduce' rating and a target price of Rs 650 on IndusInd Bank.

Kotak said its discussion with other lenders over the past fortnight suggests that the fear is not warranted. Most lenders have adequate checks and balances which implies that the risk of this event materialising with other lenders should be negligible.

MOFSL suggested a revised target price of Rs 925. ICICI Securities suggested a target price of Rs 850. Nuvama sees the stock at Rs 750 while Nirmal Bang pegged the stock at Rs 900. PL Capital sees the stock at Rs 1,000.