IndusInd Bank shares rise 2% after lender swings back to profit in Q2; check target prices

IndusInd Share Price Today Shares of IndusInd Bank on Monday opened unchanged at Rs 835, against the previous day’s close and rose 2.05 percent to Rs 852.10, on the BSE at the time of writing the report at around 10.10 am. IndusInd Bank Q2FY27 results IndusInd Bank reported a net profit of Rs 1,242 crore in the second quarter, compared with a net loss of Rs 437 crore in the corresponding quarter of last year.

The post-tax net profit in the second quarter was 20 percent higher than the Rs 1,037 crore it had reported for the preceding June quarter. Its core net interest income (NII) rose 4 percent year-on-year (YoY) to Rs 4,569 crore but slipped 2 per cent quarter-on-quarter, according to the bank. Its advances grew 11 percent quarter-on-quarter while the net interest margin contracted by 0.34 per cent to 3.23 per cent.

The other income was down 2 per cent quarter-on-quarter to Rs 4,569 crore. Provisions and contingencies, excluding tax, declined 54 percent YoY to Rs 1,223 crore from Rs 2,631 crore in the year-ago quarter. Fee and other income jumped 36 percent to Rs 2,248 crore from Rs 1,651 crore, while net revenue increased 12.5 percent to Rs 6,817 crore from Rs 6,060 crore. Pre-provision operating profit (PPoP) rose 40 percent to Rs 2,874 crore from Rs 2,047 crore in the year-ago period.

Operating expenses declined to Rs 3,943 crore from Rs 4,013 crore. Its chief executive and managing director Rajiv Anand said the bank's USD 3.51 billion in FCNR(B) deposit mop-up hurt the NIMs in Q2, but expressed confidence of recouping as the share of retail advances is going up, alongside RBI's rate hikes. It has chosen to replace higher-cost borrowings with the FCNR(B) money, and will deploy more on advances as and when it feels necessary, Anand said, adding that at present, the liquidity situation is comfortable to take care of loan growth.

Dismissing notions that the over Rs 16,000 crore in FCNR(B) 'related loans' banks had been given the option to lend against the deposits were the prime mover for advances growth during the quarter, a senior official said that even excluding the diaspora angle, wholesale banking was up 10 per cent quarter-on-quarter and retail was up 4 per cent. Anand said the bank does not see any stress on its rural banking portfolio because of challenges around rains, but it will be extremely cautious and calibrated in growing its microfinance book.

Its gross non-performing assets ratio improved to 2.73 per cent against 3.25 per cent in the quarter-ago period, while the overall provisions at Rs 1,223 crore were down 12 per cent quarter-on-quarter and 54 per cent year-on-year. Peers' concerns on gold lending will not prompt a review of the strategy on this aspect, he said, attributing the stance to the relatively smaller size of the book for the bank.

Brokerages on IndusInd Bank Macquarie on IndusInd Bank: Underperform, Target Price Rs 760 Brokerage firm Macquarie retained its 'Underperform' call on IndusInd Bank with a target price of Rs 760 per share. It said the bank's profit after tax (PAT) beat estimates, supported by higher non-interest income (NII). It said RoA improved despite margin compression but headwinds remain. While management retained its guidance of a 1 percent exit RoA by Q4FY27 vs reported 0.82 percent, the brokerage maintained that that achieving 1 percent appears achievable but cautioned that reaching the medium-term RoA guidance of 1.7 percent could prove challenging.

Macquarie believes sustained improvement beyond that level will depend on the bank's ability to strengthen core profitability. UBS on IndusInd Bank: Sell, Target Price Rs 870 UBS maintained its 'Sell' rating with a target price of Rs 870 per share. UBS said the lender’s Q2FY27 PAT was at Rs 1,240 crore, 12 percent above estimates, aided by stronger fee income and lower credit costs. NII grew 3.6 percent YoY, while NIM declined sequentially to 3.23 percent, reflecting FCNR(B)-related yield pressure and changes in the business mix.

Other income rose 36 percent YoY, including foreign exchange income linked to FCNR deposits and investment gains. The brokerage also highlighted an improvement in the core fee-to-assets ratio to 1.35 percent from 1.20 percent and an improvement in RoA to 0.87 percent from normalised 0.63 percent. The brokerage highlighted that GNPA/NNPA declined to 2.7 percent/0.8 percent, but weal CASA deposits and funding cost pressures could constrain margin recovery.

Bernstein on IndusInd Bank: Outperform, Target Price Rs 1,000 Brokerage Bernstein gave an ‘Outperform’ rating for the lender with a target price of Rs 1,000. It said IndusInd Bank's recovery was broadening, with stronger lending momentum and improving asset quality supporting higher returns despite continued contraction in personal loan and credit card balances. Standalone PAT grew 17 percent QoQ, taking RoA to 0.82 percent from 0.75 percent.

The improvement was supported by lower provisions and stronger fee income. However, Bernstein noted that further benefits from lower credit costs were likely to be more measured. As a result, margin recovery and sustained fee growth would become increasingly important for the bank to achieve its ambition of a 1 percent exit RoA. HSBC on IndusInd Bank: Buy, TP Rs 1180 Brokerage firm HSBC gave a ‘Buy’ call for the stock with a target price of Rs 1,180, stating that the second-quarter FY27 earnings performance was supported by a sharp improvement in asset quality and strong fee income.

In 2QFY27, IndusInd Bank’s earnings performance was underscored by sharp improvements in asset quality, strong fees. The brokerage expects lower credit costs to act as a near-term catalyst for earnings, while stronger loan growth and margin recovery could support performance over the longer term. HSBC also upgraded its earnings per share (EPS) estimates by 5-10 percent for FY27-FY29, reflecting an improved outlook for the lender.

Jefferies on IndusInd Bank: Buy, target price cut to Rs 1130 Global brokerage Jefferies gave a ‘Buy’ rating for the private lender but cut its target price to Rs 1,130. Jefferies said IndusInd Bank's Q2 profit of around Rs 1,200 crore, compared with a loss in the year-ago period, was ahead of the expectations on the back of lower credit costs and stronger fee and treasury income. The brokerage highlighted 11 percent year-on-year (YoY) loan growth, 4 percent improvement in NII and continued improvement in asset quality.

Jefferies sees levers to further improvement in profitability through stronger pre-provision operating profit (PPoP), even as it believes credit costs are nearing the bottom. The brokerage lowered its earnings estimates to factor in tighter bancassurance fee regulations and slightly higher credit costs. CLSA on IndusInd Bank: Hold with a target price of Rs 910 CLSA maintain a ‘Hold’ rating for IndusInd Bank and gave a target price of Rs 910 for the banking stock.

CLSA said IndusInd Bank's Q2FY27 PPoP was 13 percent ahead of its estimates, mainly driven by strong fee income while slightly lower-than-expected provisions also contributed to a significant beat in PAT. Fee income grew 22 percent YoY, with the fee-to-asset ratio improving by around 20 basis points QoQ. The growth was broad-based, according to the brokerage. Loan growth continued to accelerate, although wholesale lending led the expansion.

Meanwhile, core NIM declined 12 bps QoQ due to the impact of FCNR deposits and an adverse loan mix. CLSA noted that management maintained its FY27 guidance for loan growth in line with the industry and an exit RoA of 1 percent. Asset quality continued to improve, with net slippages declining 40 basis points QoQ to 1.1 percent, which the brokerage described as a steady-state level.