IndusInd in focus: Shares of IndusInd Bank hit a 52-week low at Rs 1,347.85 on the BSE in Wednesday’s intra-day trade in otherwise a firm market as the bank’s June quarter (Q1FY25) earnings fell short of expectations due to increased provisions for the quarter.
The stock of private sector bank is quoting lower for the sixth straight trading days, falling 6 per cent during the period. It has fallen 20 per cent from its 52-week high of Rs 1,694.35 hit on January 15, 2024.
IndusInd Bank’s net profit was nearly flat for Q1FY25, increasing by only 2 per cent year-on-year (YoY) to Rs 2,171 crore due to higher provisions. Sequentially, the lender’s net profit was down 8 per cent from Rs 2,349 crore in Q4FY24.
The lender’s net interest income (NII) grew 11 per cent Y-o-Y at Rs 5,408 crore in Q1FY25 while other income increased 10 per cent to Rs 2,441 crore during the same period. Net interest margin (NIM)– a measure of profitability of banks – was flat at 4.25 per cent in Q1FY25.
The bank’s gross non-performing asset (NPA) ratio inched up 10 basis points (bps) sequentially to 2.02 per cent in Q1FY25 and net NPA ratio rose 3 bps to 0.60 per cent in the period. Gross slippages of the bank stood at Rs 1,536 crore, with Rs 1,488 crore coming from the consumer book. In Q4FY24, the gross slippages were Rs 1,428 crore.
IndusInd Bank’s credit growth was muted at 1.3 per cent Q-o-Q since business was impacted in April 2024 and May 2024 owing to general elections and seasonality. However, credit flow improved in June 2024, which should sustain, according to analysts. Management retained its guidance of credit costs at approximately 110-130 bps and expects growth to rebound in rest of the quarters.
Despite increasing cost of funds (CoF) and tight liquidity conditions, IndusInd Bank has managed to adroitly protect its margins and profitability on the back of its diversification and retailisation efforts. While the stock has corrected sharply over the past few months over concerns on asset quality, the outcomes have been within acceptable range, analysts at JM Financial Institutional Securities said.
IndusInd Bank is favourably placed to capture the turning rate table argument. That said, volatility has been disappointing, according to analysts at Elara Capital.
While IndusInd Bank has built contingency buffer in addition to coverage of over 70 per cent, which may rein in credit cost, variability on these is a monitorable, especially given the challenges in certain segments. The brokerage firm believe that scaling growth, improvement in liability, consistency and better return ratios may help a re-rating.
Seasonality and external factors such as a heat wave and general elections adversely impacted the bank’s business and resulted in soft earnings in Q1FY25. PAT was lower than our estimate on account of an elevated opex and higher provisions. With external headwinds now behind IndusInd Bank, the management is confident of delivering higher (18– 23 per cent) growth and improved profitability in FY25, said analysts at Nuvama Wealth and Investment.
First Published: Aug 07 2024 | 12:22 PM IST
