Private sector lender IndusInd Bank reported robust results for the quarter ended March 2023. Its net profit surged 46 percent to ₹2,043 crore, crossing the ₹2,000-crore mark for the first time ever. It had posted a net profit of ₹1,361.37 crore in the year-ago period.
Its net interest income (NII) rose 17 percent year-on-year (YoY) to ₹4,669.46 crore versus in the March quarter.
For overall FY23, NII came in at ₹17,592 crore, up 17 percent YoY while its net profit for the financial year rose 55 percent to ₹7,443 crore. Net non-performing assets (NPAs) rose to ₹1,714.96 crore in Q4 against ₹1,529.83 crore in the corresponding quarter of the previous fiscal.
In the earnings meet, MD and CEO Sumant Kathpalia said that all three business verticals of the bank are showing strong growth, but disbursements in vehicle finance were slightly lower sequentially owing to the strong base in the previous quarter led by festival-led consumption.
Kathpalia said that the bank was being “optimistically cautious” and going slower because it also has a large microfinance portfolio.
Brokerages remained bullish on the stock after its earnings with a potential upside of up to 32 percent on the back of better-than-expected results.
Here's what brokerages have to say:
The brokerage has a ‘buy’ call on the stock with a target price of ₹1,400 per share, indicating an upside of 28 percent.
IndusInd Bank’s Q4FY23 earnings were ahead of its expectations. Stability in NIM on a sequential basis was driven by corporate book and utilization of excess liquidity. Asset quality performance was below expectation due to slippage in MFI and corporate book. After a period of re-adjustments, the bank is back on a growth trajectory, it said.
“The domain segment of the bank like vehicle and microfinance is expected to witness accelerated growth. Margins seem to have peaked out and are expected to moderate going ahead as liabilities get repriced. Bank carries a contingency buffer of 0.66 percent, which provides us the confidence of lower credit cost (factoring in 1.56 percent for FY24E) compared to 1.7 percent in FY23. Redeployment of excess liquidity towards loans and reduction in credit cost would drive earnings growth by 14 percent and 19 percent in FY24 and FY25 translating into RoA of 1.6 percent and 1.7 percent, respectively,” said the brokerage.
The brokerage has a ‘buy’ call on the stock with a target price of ₹1,450, indicating an upside of 32 percent.
“IIB’s operating performance remains on track, led by steady NII growth and controlled provisions. Asset quality remains steady, even as slippages increased QoQ. Overall, the outlook for credit costs remains controlled. Management is guiding for continued momentum in loan growth with 18-23 percent improvement over FY23-26E,” said MOSL.
Healthy provisioning in the MFI portfolio and contingent provisioning buffer of 0.7 percent of loans will enable a steep decline in credit cost, thus driving recovery in earnings, it added.
It estimates a PAT CAGR of 27 percent over FY23-25, leading to a 17.6 percent RoE in FY25.
The brokerage has a ‘buy’ call on the stock with a target price of ₹1,322, indicating an upside of 20 percent.
The brokerage believes that the bank has made adequate provisioning against the potential stress. However, the delinquencies from the vehicles segment and credit cost in the next quarters will be keenly watched. Moreover, a healthy retail deposit growth towards liquidity coverage ratio (LCR) is a positive takeaway, it said.
The core operating performance of IndusInd Bank remains healthy, it said, adding that a higher contingent buffer is likely to safeguard the bank from credit disruption from various restructuring schemes.
The brokerage has a ‘buy’ call on the stock with a target price of ₹1,400, indicating an upside of 28 percent.
“IndusInd Bank reported strong earnings growth in Q4FY23 with PAT at ₹2,041 crore (up 50 percent YoY/ 4 percent QoQ) led by a 30 percent on-year decline in provisions and 13 percent growth in operating profit,” noted the brokerage. It further added that the bank is guiding for the sustained improvement in earnings growth trajectory over the next three years.
It believes that strengthening retail and granular liability franchise would be the most important factor.