The bank delivered impressive Q1 FY27 results with consolidated net profit surging 72% year-on-year to ₹1,037 crore, aided by lower provisions despite flat net interest income and weaker fee income. As reported by The Economic Times, advances grew ~3% QoQ to ₹3.26 lakh crore, led by wholesale banking, while deposits rose ~4% QoQ to ₹4.15 lakh crore. The retail deposit share improved to 49.5%, strengthening the liability franchise. Asset quality strengthened significantly with GNPA/NNPA improving to 3.25%/0.95%, while profitability recovered sharply as PAT surged ~88% QoQ to ₹1,003 crore. Normalised NIM remained stable at 3.35%, with annualised RoA improving to 0.78%, and management targeting 1% RoA. NIM expanded 18 basis points q-o-q to 3.57%, while adjusted NIM contracted 4 basis points q-o-q to 3.35%, as noted by Motilal Oswal.
IndusInd Bank shares fell over 6% on Thursday despite the strong quarterly performance, hitting an intraday low of ₹1,000.60 on the NSE, as investors weighed the improvement in earnings against continued pressure on net interest margins and concerns over return on assets recovery pace. Jefferies maintained its buy rating and raised the target price to ₹1,250 from ₹1,100, saying the June-quarter results indicate the bank is on track for improvements. Macquarie maintained its underperform rating with a target price of ₹625, expecting net interest margins to remain under pressure and noting the bank's ambition to improve return on assets faces a demanding road. Kotak Securities downgraded the stock to sell from reduce while CLSA also downgraded to underperform from hold, though both raised target prices to ₹850 and ₹925 respectively. Prabhudas Lilladher retained its accumulate rating and raised the target price to ₹1,150 from ₹960, citing consistent improvement in earnings trajectory.
The bank's board approved raising up to ₹20,000 crore through debt securities and augmentation of capital through a further issue of up to ₹10,000 crore through equity instruments and/or convertible debt securities. Management indicated it aims to align credit growth broadly with industry levels in FY27, while maintaining its FY27 exit return on assets guidance of 1%. The bank expects the improvement to be driven by better business momentum, lower credit costs and operating leverage. The increasing share of retail deposits is helping lower the cost of deposits, with further scope for improvement, as management noted. The transition to expected credit loss accounting is expected to have a 1-1.5% impact on loans, though management does not expect a material increase in steady-state credit costs.
Despite reporting better-than-feared results, 16 out of 42 analysts covering IndusInd Bank maintain a 'sell' rating on the stock, while only 11 analysts are bullish. According to reports from CNBC TV18, 15 others have a 'hold' rating on the Mumbai-based private lender. The brokerage highlighted that the loan growth of 3.6% sequentially was driven solely by corporate loans, raising concerns about the bank's retail lending strategy. However, Jefferies highlighted encouraging trends in loan growth, asset quality and core return on assets, expecting these improvements to continue over the next two to three years, with visibility on achieving a 1.5% return on assets being the key catalyst for a re-rating. Motilal Oswal reiterated its neutral rating and raised its target price to ₹1,125, while raising earnings estimates by 18-19% for FY27/FY28E.
Shares of IndusInd Bank have gained 17% in the last one month, which IDBI Capital considers justified given the strong quarterly performance. At 1.33 times FY28E adjusted price-to-book value, the bank's valuations are considered fair by the brokerage. The stock ended 0.8% higher on Wednesday at ₹1,072 ahead of the results announcement, with the stock up 20% so far this year. Prabhudas Lilladher has increased the target price to ₹1,150 from ₹960 owing to consistent improvement in earnings trajectory, with the stock trading at ₹1,072 as of the latest reports.
